Norwegian ABS poised for return
Norwegian securitisation is on track to make a comeback in 2025 with the implementation of proposed legislation that would make deals possible for the first time in 10 years, according to lawyers at Oslo-based law firm Wikborg Rein.
Banks such as Santander and Nordax used to issue Norwegian ABS in the local currency and euros until 2015, when legal developments effectively brought the market to a halt, but a new regulatory regime is expected to bring the market back to life next year.
European Union rules on securitisation were incorporated into the European Economic Area agreement on Wednesday and the legislative process is underway to implement them in Norwegian law, including amendments to overcome obstacles in existing laws covering bank licensing and loan transfers, according to an article published by Wikborg Rein.
“We think that auto loans would probably return as a relevant asset class," Ole Andenaes, a partner at the law firm, told IFR. "And then you have some interest from the more consumer-lending players and even NPLs – that’s another tranche of interested parties. Having talked to the larger banks, we think perhaps they would start off with less controversial transactions; with auto loans perhaps. And then we also see interest from large Norwegian industrial companies that have large receivables; so for example the large telecoms, the large seafoods players – those could be interested.”
Before the old regime was repealed in 2015, Santander Consumer Bank was one of the few issuers that made use of securitisation. In November 2015, it priced the seventh instalment of its Bilkreditt Norwegian auto ABS programme, placing €500m of Triple A rated Class A notes with investors while retaining two Norwegian krone-denominated tranches, via joint leads Santander (arranger), Barclays and HSBC. Nordax Finans was another issuer, securitising consumer loans through its Scandinavian Consumer Loans programme, which was denominated in kroner.
“It’s difficult to compare the experience up to 2015, because there were only one or two banks that did securitisations under the old regime, and it wasn’t very practical – that’s one reason the rules were repealed in the first place,” said Jens Christian Werring-Westly, who recently joined Wikborg Rein from the Norwegian Ministry of Finance.
“The large Norwegian branches of the Nordic banks are probably more ready to go than the local banks," added Andenaes. "In Norway, you have over 100 banks and some of them are more prepared than others.”
The new regime will also allow synthetic securitisation, including provisions for such transactions to qualify as simple, transparent and standardised, which would make this an attractive tool for Norwegian banks to manage their capital requirements.
“Synthetic securitisations will be part of the same package and when I discussed this with some of our contacts in the banks, that is definitely something they will look into," said Werring-Westly.