The American Securitization Forum returned to its old haunt in Las Vegas this year for the first time since 2009. With north of 4,500 delegates in attendance, it was hardly an intimate gathering but the facilities at the ARIA City Centre were first class and there was certainly ample opportunity for participants to re-connect with their industry colleagues. The mood of the conference was similar to last year's conference in Orlando which I would describe as "cautiously optimistic". While there are encouraging signs in some sectors (in particular in the auto space), it would be difficult to conclude that the industry at large is close to regaining its old form.

So what did I take out of this year's conference? Here are a few of my observations:

  • Auto ABS in the US market appears to be alive and functioning quite well
  • RMBS continues to be dormant while CMBS has a very faint pulse (the RMBS market is hampered in part by the uncertainty surrounding GSE reform and what the future holds for Fannie Mae and Freddie Mac)
  • The regulatory reforms that have been put into effect (including mandated issuer review of assets and reporting on issuer representations and buyback history) don't appear to be having any material adverse impact on the level of issuance activity
  • There remains concern over pending regulatory reform including in particular the proposed rules on risk retention and whether the next phase will be the publication of final rules or a re-proposal of revised draft rules; many observers are hoping for the latter and an asset class-specific approach (as opposed to a one size fits all solution across all asset classes)
  • The proposed Volcker rule could have unintended consequences when it comes to the trading of securitized products; in particular it may limit the ability of banks to provide liquidity or other support to their bank-sponsored ABCP conduits; it could also have an adverse effect on the ability of banks to hold or make a market in ABS – there is a push from market participants to exempt ABS transactions from the Volcker rule entirely
  • The Eurozone debt crisis may actually be a positive for the European securitization market as investors flock to securitization as opposed to senior unsecured debt
  • There is little harmony between the regulatory reform approach taken by regulators in the U.S. and Europe which is leading to a rising level of frustration for global players with a presence in both markets

Stay tuned for further developments on these issues and future developments affecting the Canadian ABS market.

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