Sector developments and company hires

AFME ceo Adam Farkas has written to the European Commission, calling for better proportionality in the securitisation framework. The letter points out that despite its importance for the Capital Markets Union project, the European ABS market remains “subdued”, its size having shrunk from 75% that of the US securitisation market in 2008 to just 6% in 2020.

The letter highlights the considerable potential of securitisation to be used as a tool to both transfer credit risk away from the banking sector and to recycle capital into new lending to support SMEs and corporates. Securitisation can also be a powerful tool to allocate capital in supporting the green transition, given that 44% of the funding required to meet the Paris 2C agreement will be in the form of loans to businesses and households.

Indeed, AFME points out that the contribution that green securitisation makes in relation to the total financing of the EU green transition is dwarfed by its contribution in both the US and China - 1% versus 50% and 11% respectively.

While multiple factors have contributed to the decline of the European ABS market, AFME reports that there is a broad consensus within its membership that the lack of proportionality in aspects of the framework has been a significant factor in securitisation becoming unviable for many market participants. As such, the association believes that Europe needs an open debate about the importance of securitisation and how it can function properly to meet the region’s economic needs. This debate should consider the many fundamentally sound elements of the framework, but also aspects which require fine-tuning to better reflect the risk profile of securitisations.

From AFME’s perspective, there are three important areas of focus, the first of which is the current review of the prudential framework for securitisation. The association believes there is a strong case for the EU to consider adjustments to the treatment of securitisation under the CRD/CRR and Solvency 2 frameworks to introduce more proportionality and risk sensitivity, taking into account Europe’s unique risk-mitigating safeguards.

The second area of focus is the transparency and disclosures framework, where there is a need to review template-based reporting to enhance proportionality, practicality and usefulness for all parties. Finally, it is vital that the EU Green Bond Standard framework accommodates the characteristics of securitisation transactions, reflecting European market practice.

In other news…

EMEA

Funding Circle has promoted Dipesh Mehta to co-head of global capital markets, based in London. He was previously head of UK structuring at the firm and head of ABS, UK before that. Before joining Funding Circle in September 2015, Mehta was a European ABS research strategist at Barclays, having also worked at Moody’s, Genworth Financial and PwC.

The Algorand Foundation has named former JPMorgan md, Eric Wragge, as new global head of business development and capital markets. Wragge joins the firm to assist in its mission to boost its global development and expand the Algorand ecosystem. Wragge will lead the Algorand Foundation’s global initiatives and strategic partnerships in traditional capital markets and decentralised finance, and will report to company ceo, Staci Warden. He will serve as chair of the foundation’s investment committee and will work to establish Algorand as the blockchain platform of choice. Wragge brings extensive industry expertise to the new role, having spent 20 years working on JPMorgan’s structured credit team where he most recently served as head of ABS for northern Europe, as well interest and understanding of how crypto and blockchain can be used to improve performance.

North America

Barings has appointed Tom Edwards as md, private asset-backed finance. He was previously a structured products trader at Wells Fargo and an md at Bear Stearns.

Anjana Mohan Ravani has joined Redding Ridge Asset Management as an md in New York. She was previously a director in the CLO primary origination, structuring and syndicate team at Citi.

Reed Smith has recruited structured finance lawyer Joseph Suh as a partner in its New York office. He was previously a partner at Greenberg Traurig, which he joined in January 2017, having worked at Schulte, Roth & Zabel and Clifford Chance before that.

Sculptor Capital Management welcomes Michael Lin to the firm, where he will take on the role of head of CLO structuring and origination. Lin joins the firm from Sound Point Capital Management where he served as the director of CLO structuring. Lin will be based in Sculptor’s New York office, and will report directly to head of US CLO management, Josh Eisenberger.