Sector developments and company hires

Euro ABS ‘game changer’ recommended
The European High-Level Forum (HLF) on the capital markets union (CMU) has published its final report, which proposes 17 inter-connected “game changers” – measures that the EU needs to implement to remove the biggest barriers in its capital markets. The European Commission stresses that completing the CMU has become particularly urgent in order to speed up the EU’s recovery from the coronavirus pandemic. One of the proposed measures is the growth of the European securitisation market, including improving the significant risk transfer process, incorporating synthetic securitisations in the STS regime, improving CRR and Solvency 2 calibrations and improving access for securitisations to LCR pools. The Commission welcomes feedback on the report by 30 June.

In other news…

Climate guide ‘credit positive’
The ECB’s draft guide on climate-related and environmental risks – which it released last month - is credit positive for mortgage collateral in RMBS because it will require banks to proactively manage and disclose such risks, according to Moody’s. Proactive management and disclosure of climate and environmental risks is, in turn, expected to reduce the likelihood that these risks will devalue mortgage collateral. The guide states that banks should set key performance indicators on climate and environmental risks and consider them in the credit granting process, as well as disclose key information on these risks. Moody’s suggests that such disclosure will increase transparency, foster better risk management and improve data capture.

Rapid amortisation event triggered
A rapid amortisation event has occurred in connection with the Kabbage Asset Securitization Series 2019-1 small business ABS, caused by an asset deficiency after the collateral pool balance fell below the required amount. KBRA notes that the revolving period will terminate as a result and the notes will switch to sequential principal payments. As a result of the Covid-19 crisis, Kabbage has temporarily paused originations of new small business loans, which directly impacts the ability of Kabbage 2019-1 to purchase collateral. KBRA notes that the event will not prompt immediate rating actions, although watch downgrade placements on the transaction’s class A through E notes remain in effect and will be resolved pending further evaluation of the transaction’s performance data.