ABS TREATMENT OF INTERNALLY SECURITISED PAPER
TREATMENT OF INTERNALLY SECURITISED PAPER IN ABS STATISTICS
Since March quarter 2008 a number of banks have engaged in the practice of internal securitisation, where a bank sells a pool of mortgages to a related special purpose vehicle (SPV), and the SPV in turn issues debt securities, which are held entirely by the bank which originated the mortgages. These securities are eligible for use as collateral in repurchase agreements (repos) with the Reserve Bank of Australia(RBA).
Following consultation with major users, the ABS considers that the sale of these mortgages from the bank to the internal trust represents a 'clean sale', even though the underlying credit risk is not transferred outside the group. The ABS also considers the issue of debt securities by the trusts satisfies the System of National Accounts definition of a 'debt security'. Furthermore, these securities are treated as securitisation debt securities, that is residential mortgage backed securities (RMBS), as they are backed by a pool of mortgages, use existing SPVs which issue RMBS to the market, pass through the principal and interest payments to the security holder, and the securities are rated.
The amount issued under internal securitisation is recorded against issuance of debt securities (RMBS) by securitisers in the Financial intermediaries n.e.c sector, Table 12. An equal amount of loan assets is recorded against securitisers in the Financial intermediaries n.e.c sector, Table 12. Asset holdings of RMBS securities by bank licensed entities (Table 6) and a reduction in mortgages held by bank licensed entities (Table 6) are recorded. Flows can be seen in the corresponding transaction tables.
To the extent that internal securitised paper is used by banks in repos with the RBA, the holdings of Financial intermediaries n.e.c sector paper for both RBA and banks are adjusted to reflect the ABS treatment of repo security trades.
The ABS treatment of internally securitised paper creates differences between sub-sectoral loan aggregates published by the ABS, APRA and the RBA. However, total loans remain equal for the series.