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Nearly seventeen months after the introduction of the Funding for Lending Scheme (FLS) by the UK Government, the program allowing banks and building societies to borrow from the Bank of England is slow to have an impact and market results have been mixed.
FLS has been a catalyst for record low mortgage rates directly impacting individual homeowners, while also providing opportunity for small and medium sized UK businesses. FLS has also had an effect on the issuance levels of RMBS and UK covered bonds. Although the link is difficult to accurately pinpoint, the Bank of England has expressly mentioned the FLS when explaining the significant drop in issuance levels in these markets.
Chart 1.0 below highlights the significant fall in issuance since January 2012.
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As of November 2013
Wider European analysis suggests further amendments to the draft of new regulation is expected on new CRDIV proposals, EMIR, the Solvency II Directive and the proposed financial transaction tax. Not all will have a negative impact on new issuance levels. Indeed many should be positive, but the uncertainty surrounding the final forms will certainly be a challenge for the market into 2014.
U.S. Bank Global Corporate Trust services continues to support the RMBS and covered bond market and is providing the full range of trustee and agency services on several deals that closed in 2013 including Virgil Mortgage No.1, ALBA 2013-1 and Rochester Financing No.1. “We continue to monitor the RMBS market and the impact of the FLS closely; we expect a modest pick up next year due to continued portfolio sales and further securitisation by banks in search of capital relief” said Emma Hamley, VP European Business Development.
Interested in learning more about U.S. Bank Global Corporate Trust Services? Visit us online at usbank.com/coporatetrust.
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