Global securitization enroute to pre-Covid heights

– Abhirup Ghosh (

The pandemic disrupted life economies across the globe, and so did it to securitization transactions. However, increase in vaccinations across the globe has had a positive impact on the most of the structured finance markets world-wide, but potential new variants continue to be a threat.

This write-up reviews the performance of securitization across the major jurisdictions.

Securitization in USA

Despite the disruptions caused due to pandemic, the year 2020 reported the best performance ever. Agency RMBS was star performer. The momentum was carried forward to 2021, with the more than half of the 2020 volume already reached by the end of first half. The major reasons for the sudden uptick in the volume of Agency RMBS were – first, the low mortgage refinancing rates, and second, reduced documentation and fast processing of loan transactions through the use of technology.

The graphic below shows the issuance of Mortgage Related Securities (including CMO) in USA between 1996 and H1 2021.

Source: SIFMA[1]

In the ABS market however, the performance has been subdued since the pandemic. Auto loans have been the most dominant asset class this year, however, in general, CDOs/ CLOs is the major driver of ABS market in USA.

The graphic below shows the issuance of Asset Backed Securities in USA between 1996 and H1 2021.

Securitization in Europe

The securitization volume in the Europe were strained since the beginning of the pandemic, with the trend likely to continue during the current financial year too. The graphic below shows the quarter wise issuance of securitized papers in Europe since 2010.

Source: AFME[2]

The first quarter of 2021 reported issuances worth EUR 48.9bn which is a drop of 25.9% from Q4 2020 and an increase of 18.7% from Q1 2020.

In terms of collateral, residential mortgages continue to be the main driver. In terms of jurisdictions, UK represents the lions share of the total issuances in Europe.

Securitization in China

The securitization market in China has been performing buoyantly despite the pandemic. The year 2021 is also off to good start, with the 38% y-o-y growth in the first quarter of 2021.

Source: S&P Global[3]

The major drivers of the market are auto loans and residential mortgages. The residential mortgages reported a y-o-y growth of 138% in the first quarter of 2021. Another key asset class which has shown a strong run so far is supply chain finance and trade receivables.

The graphic below shows the asset class-wise issuances in the Chinese market.

Source: S&P Global[4]

Securitization in India

The Indian securitization market came under a lot of heat due to the pandemic, with the annual issuances in FY 2021 being slashed down to half of the issuances in FY 2020. This fall in the issuances was majorly during the first half of the year, which recovered strongly in the third and fourth quarter. The trend continued in the first quarter of FY 2022 too, which posted a volume of INR 17.5 billion which is 2.3 times the volume of issuances in the first quarter of FY 2021.

The figure below shows the volume of direct assignment and securitization transactions in the recent times.

Source: CARE Ratings[5], VKC Estimates

The share of securitization, as compared to direct assignments has also improved in Q1 FY 2022, as compared to Q1 FY 2021. In the Q1 2021, of the total issuances, direct assignments (bilateral assignments) represent 2/3rd, and only 1/3rd is securitization.  The volumes are now shared equally by the two.

The graphic below shows the share of direct assignments and securitization transactions over the years:

As per the estimates, unless the situation worsens due to COVID, the market is likely to report a volume of INR 120,000 crores by the end of FY 2020.








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