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  • 2010
    • July
      • Risk Retention-Germans Go Over The Top
        07/27/10
        Ask a doctor in the UK how much alcohol per week is safe to drink, and the answer "21 units" will come back faster than Pavlov's dogs slaver when they hear a bell ring. However, this number was plucked out of thin air. That's not my opinion, but a direct quote from Richard Smith,

      • Kroll Bond Ratings: Will It Work?
        07/15/10
        Just seen in the trade press that Kroll Bond Ratings has announced its management structure.

        Kroll's plan is to do more in-depth work than the usual-suspect rating agencies. There is certainly room for this in the post-crisis world, where the problems with ratings on structured prod

    • June
      • Bank of England, BIS and Banks
        06/29/10
        The BIS stated in its annual report (published 28th June 2010) that banks are "highly leveraged and still appear to be on life support". So they need to get either capital up, assets down or both. Since capital is in short supply, and the more there is the lower the return, the smart money

      • ECB, Bank Funding and Securitisation
        06/14/10
        The ECB writes in its June Stability Review:
        "Despite some improvements, euro area securitisation markets remained dysfunctional for both supply and demand-related reasons.
        On the supply side, the profit-generating potential of securitisation has not been sufficient yet, since spreads

    • May
      • European Central Bank Repos-What Next for ABS?
        05/28/10
        According to the IFR, ABS repoed with the ECB was €467bn at the end of 2009. That's an awful lot of funding. The ECB is trying to get banks back to funding in the market by tightening its criteria:

        • ABS issued from 1-3-2010 must have two AAA ratings to be eligible. The earlier requi

      • Financing for Large Companies...and SMEs
        05/17/10
        Two interesting enquiries recently, and from opposite ends of the scale. Both involve trade receivables.

        The first is from an entity which has very large sums to invest. This means, as you can probably guess, that it isn't one of the "usual suspect" banks. This investor lik

    • April
      • The Smoking Gun: Liquidity or Solvency?
        04/14/10
        Someone once observed that banks fail either because of cancer or a heart attack. That is, either assets deteriorating over time (cancer/solvency), or a sudden halt in circulation (heart attack/liquidity crisis).

        We have come to accept that the crisis since 2007 was caused by a sudden cr

    • March
      • Lending to UK Companies-"Credit Adjudication Service"
        03/25/10
        We've seen banks' lending to UK companies shrink before our eyes. Just like a kid who will promise anything to get a puppy ('Yes, I'll take it for a walk twice a day!') banks such as RBS promised to increase lending to companies when they were desperate for a taxpayer-funded

      • CMBS Offers Value-If You Know Where To Look!
        03/18/10
        This time last year, AAA RMBS was massively undervalued. Good assets were trading in the 60s. They are now trading in the 90s, so I would say are still undervalued.

        There is currently very good value to be had in CMBS. It's a market of significant size: over EUR140bn of European CMBS

      • "European Banks Need To Raise €240bn A Year"
        03/01/10
        That was the main point of a recent article based on some Citibank research. Not only are banks’ debts falling due with the obvious need for refinancing, but:

        • the central banks continue to tighten their criteria for repo lending. The Bank of England has declined to renew its Special Liq

    • February
      • CRD, 5%, and One Night Stands
        02/08/10
        The ugly phrase is “skin in the game”. Allegedly coined by Warren Buffett. Quite what the nature of the game is, or what might be the potential fate of the skin in question, is not made clear. This colourful if vague phrase means, I believe, retained risk.

        In the context of securitisation

    • January
      • ABS vs Gilts
        01/14/10
        The ABS market overreacted. Markets often do-retail investors have been seen time after time to buy near the top of a market (greed) and sell near the bottom (fear).

        Nine months ago you could buy really solid AAA UK RMBS at between 60-70% of face value. I and some others pointed out this

  • 2009
    • December
      • Keynes and Liquidity
        12/17/09
        Central banks and pundits alike keep repeating the mantra that banks should increase their holdings of liquid assets. That no doubt suits governments which have an awful lot of debt to flog over the next few years.

        But what is liquidity? The ability to sell for cash at any time? For there

      • Consultants vs Employees
        12/01/09
        There's been a lot of stuff in the press recently about banks such as RBS and HBOS losing 'vital' staff in the securitisation, structured finance or other areas due to limitations on pay and bonuses.

        Seen from where I sit the answer is simple-get in the consultants!

    • November
      • Barclays Protium-One Way To Deal With Toxic Assets
        11/09/09
        Back in September, Barclays caused a stir in the markets with the Protium transaction. The FT's headline was "‘Curious’ case of Barclays assets sale". What was it all about, and is it relevant to other banks?

        Barclays sold $12.3bn of assets to a new, unrelated entity in the

    • October
      • Secured Commercial Paper Facility
        10/28/09
        The Bank of England has good intentions. It knows that the big banks are not lending where lending is really needed-to middle market companies (MMCs). So it launches initiatives to try and get money where it is needed. One of these is the Secured Commercial Paper Facility (SCPF), launched earlier in

      • Asset Protection Scheme-Dead in the Water?
        10/14/09
        The FT today reports that Lloyds Bank, 43% government owned, wants to free itself of the obligation to enter into the government-sponsored Asset Protection Scheme (APS). The suggested price is £1bn. That looks like a good deal for Lloyds.

        The APS was announced in the dark days of January,

      • FSA Liquidity Rules: How ABS Can Help
        10/08/09
        The FSA has announced new and stricter rules for bank liquidity. This will involve qualitative changes (how good the short-term assets held are), and quantitative changes (how much a bank has to hold).

        The FSA specifically mentions government bonds as a desirable asset to hold. This no d

      • Hybrid Bank Capital
        10/06/09
        I had a discussion recently with a fund manager which intends to offer hybrid bank capital to investors. Sounds good on the surface: a well-recognised name and a yield of 7-8%. And the bank gets a tax deduction as if it had issued debt. Doubles all round!

        Scratch that same surface, howeve

    • September
      • The Paradox of the Broker
        09/23/09
        I'm working on a deal where we need to get a particular type of insurance. Since this is not a field where I am up to date, we need to engage a broker. The way in which remuneration works in this world reminded me of what I term the paradox of the broker: he's officially acting for you, bu

      • RMBS and the Cost of Mortgages
        09/14/09
        There's been a lot in the consumer press recently about how mortgage lenders-'nice' mutuals as well as 'big bad' banks-have been hiking their mortgage rates. The Sunday Times on 13th Sep reported that Yorkshire Building Society now charges 5.79% for 2 years, and 6.55% for 5

      • Building Societies v RMBS
        09/01/09
        Someone recently raised with me the difference between a building society and an RMBS. Surely, they said, RMBS can't be as safe as a building society. I raised a few points:
        -Both a building society and RMBS are , or should be, simple: in both cases a bunch of residential mortgages funded

    • August
      • Master Trusts Live?
        08/24/09
        Interesting market rumours about Barclays intending to issue a 3-year UK RMBS at a yield of +150 or so. The most fascinating aspect is the proposed buy-back by Barclay's in 3 years' time. Sounds like a good deal for investors: paper backed by Barclay's at a rate higher than Barclays&#

      • Fair Value
        08/19/09
        An interesting article in the FT this week ("Disclose the fair value of complex securities") written by a bunch of academics, including one Robert Merton, who on the one hand is a Nobel prizewinner, and on the other has his name written all over the debacle which was Long Term Capital Mana

    • July
      • Smart Securitisation?
        07/17/09
        Barclay's Capital has been in the press recently with something called "smart securitisation". This is presumably to distinguish it from "dumb securitisation". Was that what BarCap was doing over the years?

        Goldman has apparently been doing something similar to &

      • Fear and Investment Banking
        07/02/09
        From today's FT highlights email:

        "Investment banking league table
        See how the world's leading investment banks are fearing"

        It looks as though the fear inadvertently referred to by the FT still has considerable hold in some sectors.

        The fi

    • June
      • When is a AAA not a AAA?
        06/24/09
        The first answer has to be "when it's an Icelandic bank". In early 2007, only a couple of years ago, Moody's had a brainstorm and rated all Icelandic banks Aaa. Fortis too, come to that. All gone now, in any recognisable form. So much for long-term ratings. And another illustatio

      • Is The Market Turning?
        06/16/09
        There was talk of the market turning at the recent IMN conference. We have to draw a distinction here between a move from ludicrous to merely silly levels of undervaluation on the one hand; and a return to the "good old days" of originating, parcelling up then flogging off the lot, includi

    • May
      • The Disclosure Myth is Back
        05/19/09
        The ECB is now pushing for more disclosure (also known as "transparency") regarding the underlying assets of securitisations. What's that all about?

        It seems to be based on the assumption that data and information are the same thing. They are not. Just as you have to mine

    • April
      • More on (In)efficient Markets
        04/28/09
        The International Financing Review reports this week that "Triple A CLO prices are below liquid loan prices, which makes little sense given the subordination, excess spread, and event of default control rights afforded to the AAA noteholder". In other words, you can buy AAA bonds based on

      • Physicists Tried to Outwit Wall Street. They Failed
        04/20/09
        That was a headline in a recent edition of the New York Times. The article is about very clever scientists who thought they could reduce markets to formulae, and beat the markets as a result. There were, of course, more things in heaven and earth than were dreamed of in their philosophy. I gave some

      • "BoE Keeps Rats Steady"
        04/09/09
        That's the headline in a newsletter from Another Financial Portal, received today. Whatever can they mean?

      • Buying Back Bonds
        04/07/09
        These is an increasing trend for issuers to buy back bonds at a discount. In the banking world, Macquarie Bank is offering between 50 and 60 cents on the dollar for $340m of its own subordinated bonds.

        This is a good deal for the bank-if I borrow $10 from you, and you agree to extinguish

    • March
      • It Was Twenty Years Ago Today...
        03/20/09
        ...that the first securitisation deal I put together was signed. It was a £165m financing of a large “trophy” building by the Thames. There were several tenants of differing credit quality and leases of various maturities. The rights to the lease payments and the building were transferred to a Liech

      • Efficient Markets?
        03/12/09
        Fitch, the rating agency, held a seminar on the commercial paper (CP) market yesterday. CP, which is a short-term IOU, was very popular until 2007.

        In the asset-backed world it was a bit of a capital dodge: if you put AAA assets on your bank balance sheet, you had to set aside 8% in capi

    • February
      • Another Brick in the Wall
        02/20/09
        Email received from one of the monoline insurers-they've split their business into guaranteeing municipalities (the original business), and structured finance (the business which caused the problems). A sort of good bank/bad bank approach.

        What struck me was the picture of what I thi

      • Looking Back on 2008 in Numbers
        02/16/09
        The European Securitisation Forum (ESF) published its updated market report today. There are some interesting points in there:
        -Total European issuance in 2008 was EUR 711bn. The highest ever: 57% higher than 2007! This brings outstandings to a huge EUR 1.74trn.
        -CDOs were down EUR40bn at

      • Crack and Cassandra
        02/05/09
        There are some good soundbites in the FT at the moment. One writer says "Investment banks and hedge funds turned financial risk into financial crack with leverage." Leverage was, of course, one of the chief culprits of the 1929 crash too. Lex writes "Bankers, mourning their slashed bo

    • January
      • Quis Custodiet Ipsos Custodes?
        01/27/09
        “Who shall guard these guardians?" Rating agencies, that is. They’ve had a rough time, poor fellows: pilloried for giving high ratings on billions of structured notes based on defective models (one agency is alleged to have discovered fundamental flaws in one model and covered it up for a year!

  • 2008
    • December
      • Why Property is Poor Security
        12/30/08
        The anglo-saxon mentality loves property. But there have been several spectacular busts, from the secondary banking crisis in the mid-70s, through the crash of the early 90s to the latest manifestation of “this time it’s different” (it wasn’t, of course) in more recent times.

        Why is this

      • Reports Of My Death Have Been Greatly Exaggerated
        12/15/08
        So wrote Mark Twain when a prematurely published obituary was brought to his attention.

        I attended a briefing on the economy and markets last week. Some of the content was good if gloomy (maybe realistic!).

        However, one speaker blithely said that "the originate to distri

      • Back to Basics
        12/08/08
        It's not often I speak up in defence of big banks-what's the mission of Robin Hood Finance after all?-but the attitude of the government and the press to rate cuts is not, shall we say politely, very intelligent or considered. "Banks Fail to Pass On Rate Cuts" thunder the papers,

    • November
      • Manufacturers Hanover
        11/25/08
        I worked for this bank with the strange name in the 1980s. Of course, it didn't manufacture anything, and wasn't based in Hanover. What brings it to mind is that fact that it was brought low over 20 years ago because of exposure to bad assets. ("Bad" has somehow become "toxi

      • Plus ca Change...
        11/05/08
        I have received a headhunter's email. They are looking for a Head of Research for Commercial Mortgage Backed Securities. Amongst the requirements are a PhD and 15 years of research experience, plus a load of stuff about publishing, publishing...

        This would be understandable if the he

      • Hedge Clipping
        11/03/08
        "How do you give God a good laugh?" "Tell Him your plans!".

        That was told to me as a child, and I have never forgotten it. There have been plenty of illustrations of hubris throughout the ages, from the mythical-Icarus flying too close to the sun-to the fall of the mu

    • October
      • Irish Independent Article- who is Robert Senior?
        10/26/08
        I do quite a lot of work in Ireland. On a recent visit I was speaking to a contact in the public sector, who was disappointed that some members of the press and others were sloppily and indiscriminately condemning securitisation en bloc, rather then taking the trouble to disentangle the positive sid

      • Nietzsche and Monolines
        10/06/08
        I chaired a panel at a German conference five years ago, and introduced the session by saying "Voltaire once said that if God did not exist, it would be necessary to invent Him. Can we, ladies and gentlemen, say the same about Landesbanks?". The panellist from a Landesbank did his best to

    • September
      • The Stranglers
        09/18/08
        The Stranglers were one of my favourite bands from college days. In "Hanging Around" they sang "There's a million of them selling/And a buyer can't be found". Sounds like current markets.

        I'm concerned that accountants (and I am one) have played a signif

      • ECB Tightens the Rules- What About Covered Bonds?
        09/08/08
        The ECB announced last week a significant increase in haircuts for ABS used as repo collateral to 12% from a minimum 2%. In addition, there is a further 5% haircut (5% of 88% being 4.4%) on ABS created and kept on balance sheet, making a total of 16.4% in such cases.

        The amendments were c

      • Financing SMEs
        09/03/08
        Most of us (especially those with school-age kids!) have now had our holidays and are back in the saddle.

        There were no big surprises over the summer: most issuance was "structure and hold" either for ECB repo fodder or to speed up future issuance when liquidity returns.
        <

    • August
      • Lending vs AAA RMBS Redux
        08/19/08
        I spoke to somebody the other day who is engaged in buying distressed UK properties. Fair enough; I was involved in setting up and running a similar business in the early 90s, and it was successful.

        How is he funding this? A thin layer of capital plus "a loan from a major bank at Ba

      • Central Bank Repos
        08/12/08
        An email arrived from Fitch today: "The first half of 2008 has confirmed the Italian market to be one of the most dynamic for structured issuances in Europe. This has been mainly driven by funding from the ECB via repos backed by structured notes and the question is how long it will last".

    • July
      • Mortgage Lending vs AAA RMBS
        07/21/08
        Sir John Templeton, the legendary investor, died this month at 95. He made many memorable observations on markets, such as: "'it’s different this time' are the most expensive words in the English language". More appropriate to current ABS markets is his "To buy when others a

      • "Corporate Credit Hard to Find"
        07/15/08
        That was the headline in the Financial Times of 14th July. Apparently, according to directors polled by Deloitte, over three quarters of directors said that credit was hard to obtain.

        There does seem to be a case for funding companies, especially those which are smaller and medium-sized,

      • Someone who is actively lending in current markets: Factoring vs ABCP
        07/07/08
        An interesting enquiry from a factoring company: they are currently putting together for a corporate customer a EUR100m transaction based on trade receivables.

        The interesting part is that the customer is currently funded via an Asset-Backed Commercial Paper conduit at a far lower rate t

      • Russian Leasing
        07/04/08
        I recently spent a day with a group of Russian leasing companies. They were visiting London, and wanted to know more about raising funds in the West via securitisation and other techniques. Leasing in Russia does look like a significant growth area which will require a lot of funding.

        On

      • Welcome to the RHF Blog!
        07/02/08
        This blog is a new addition to the website. These are interesting times in the market, and we intend to post news and views here. Feel free to comment-within the bounds of politeness and decency!-or to get in contact directly on enquiries@robinhoodfinance.com.