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Euro Area Securitisation Sector Grows 1.7% During Q4-2019

The number of vehicles in the European securitisation sector grew by 74 (1.7%) during Q4-2019 according to data from the European Central Bank (ECB), with total vehicles reaching an all-time high of 4,380 by the end of the quarter.

Financial Vehicle Corporation (FVC) is the term used in European law for securitisation vehicles. These entities are engaged in the isolation of cash flows and transfer of risk via debt securities and are primarily different from other SPVs in that they do not engage in loan origination.

Luxembourg took the greatest market share during Q4 with 1,267 FVCs representing 28.9% of the euro area securitsation market. This is a drop in market share of -0.15% from Q3-2019.

Ireland is currently home to 1,213 FVCs with euro area market share rising by 0.45% to 27.6% in Q4-2019, placing second in terms of overall vehicle number but growing by the fastest rate during the quarter.

Data: Total euro area FVCs in Q4-2019 by country; Source: European Central Bank; Compiled by Atlantic Star Consulting

The trend in recent quarters has been that the four jurisdictions with the highest amount of vehicles have seen sustained growth, while other jurisdictions with a smaller amount of FVCs have seen their market share fall. The only jurisdiction to buck this trend has been Germany which saw a rise in reporting numbers throughout 2019, albeit from a low base.

Breaking down the data on new FVCs and deregistering entities, we can see that Ireland and Italy saw the highest amount of activity during the quarter, accounting for over half of new FVCs.

The four largest administrators in the euro area FVC market are unchanged this quarter:
Total number of new FVCs and deregistering FVCs in the euro area, by country, during Q4-2019; Source: European Central Bank; Compiled by Atlantic Star Consulting

Irish FVCs grew by a net 40 vehicles (3.4%) during the quarter to reach a total of 1,213 FVCs, while Italian FVCs rose by a net 29 vehicles (3.9%) totalling 769 by quarter-end.

Deregistrations occur when an FVC is removed from quarterly reporting to the ECB. This usually happens just prior to liquidation as the vehicle will have reached the end of its lifespan.

Although more Italian FVCs were launched than in any other jurisdiction during Q4, the net figure is lower due to more deregistrations/liquidations in Italian FVCs.

Spanish FVC numbers were hit particularly hard by deregistrations during Q4, as a total of 26 securitisation vehicles ceased reporting.

Past data collected by the ECB was revised upwards by approximately 21 vehicles this quarter, due mostly to revisions in the Irish FVC population stretching back several quarters where vehicles had previously gone unreported. The net effect of this was an increase in reported Irish market share.

Looking at the numbers of debt securities issued by euro area FVCs, as identified by their International Securities Identification Number (ISIN), the trend is significantly more jumpy than in vehicle numbers.

Total euro area FVC ISINs (Compartments) during 2019
Total euro area ISINs (Compartments) issued by FVCs during 2019; Source: European Central Bank; Compiled by Atlantic Star Consulting

Large swings may occur in vehicles which are involved in issuing short-dated securities or commercial paper, and our research has found that it is a particularly small group of entities causing most of the movement over the previous two quarters.

Our analysis of corporate administrators during Q4-2019 has found that there are approximately 21 firms operating cross-border within the euro area securitisation sector, with the top 4 firms accounting for 32.0% of all euro area FVCs under administration.

In particular, Dutch-headquartered firms represented a significant share of the administration market, with some firms having a larger share of the euro area market than their entire home country.

Several large administrators had operations only within one euro area country, but due to their large market share in this country also represented a significant share of the wider euro area sector.

Our full in-depth analysis into the euro area securitisation sector during Q4-2019 is available in our Euro Area FVC Administrator Report Q4-2019.

Dominick Barrett
Dominick Barrett
Dominick is Managing Director of Atlantic Star Consulting.

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