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TREATMENT OF INTERNALLY SECURITISED PAPER IN ABS STATISTICS


The decision by the Reserve Bank of Australia (RBA) in December 2008 to expand the eligible securities it was willing to hold through repurchase operations to include internal Residential Mortgage Backed Securities (RMBS) has stimulated internal securitisation among Australian banks. Internal securitisation involves a bank selling a pool of mortgages to a related securitiser or special purpose vehicle (SPV). The securitiser 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 with the RBA.

Following consultation with major users, the Australian Bureau of Statistics (ABS) considers the sale of these mortgages from the bank to the securitiser as a 'clean sale', even though the underlying credit risk is not transferred outside the group. The ABS also considers the securitiser issued debt securities to meet the System of National Accounts definition of a 'debt security'. The ABS treats these securities as securitised debt securities or RMBS on the basis that the security issuers have a requirement to make payments, while the holders do not have a residual claim on the underlying assets (ABS, cat. no. 5216.0, Paragraph 15.89).

Since the implementation of the System of National Accounts 2008 in the Australian System of National Accounts, the bank sector is separate from the securitisers sector.

The treatment of internally securitised paper in Australian National Accounts: Finance and Wealth (cat. no. 5232.0) is:

• In the sector tables, the amount issued under internal securitisation is recorded against issuance of bonds (debt securities - RMBS) by securitisers (Table 24). An equal amount of loan assets is recorded against securitisers. This reflects the purchase of loan assets from the mortgage originator by the related securitiser. Asset holdings of RMBS by banks (Table 16) and a reduction in loan assets by banks are recorded.
• These same treatments are reflected in the instrument tables. Under Table 43, issuance of bonds by securitisers are recorded as held by banks. In Table 46, long term loans are recorded as borrowed by households from securitisers.
• A significant portion of internally securitised paper is used by banks in repurchase agreements with the RBA. The holdings of internally securitised paper for both RBA and banks are adjusted to reflect the ABS treatment of repurchase agreements.
• The ABS treatment of internally securitised paper creates differences between sub-sectoral loan aggregates published by the ABS, the Australian Prudential Regulation Authority and the RBA. However, total loans remain equal for the series.