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Tracing European structured finance counterparty networks

Author

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  • Amzallag, Adrien
  • Blau, Maximilian L.

Abstract

Asset-backed securities (ABSs) and covered bonds (CBs) are structured finance instruments that require a range of key services, which may be provided by many firms. However, despite the prevalence of structured finance instruments in Europe, the network between issuers and service providers has to date remained unexplored. This paper traces and describes these connections, using a new database covering the majority of public ABSs and CBs outstanding between August 2008 and March 2017. It appears that ABS and CB issuers are highly reliant on affiliated counterparties (“close links”) to provide the above-mentioned key services, especially when programmes are larger and/or are retained by the issuer for use as collateral with the Eurosystem. When only “non-close links” across banking groups are considered, instances of reliance on just a few service providers have gradually decreased in number, with a more balanced system developing over time. The paper finds similar results for networks based on the use of securities as Eurosystem collateral. These findings help demonstrate the importance of the Eurosystem’s risk management framework for ABSs and CBs, and support the orientation of recent regulatory efforts at the European level. JEL Classification: G32, D85, G21, G23

Suggested Citation

  • Amzallag, Adrien & Blau, Maximilian L., 2017. "Tracing European structured finance counterparty networks," Occasional Paper Series 199, European Central Bank.
    • Handle: RePEc:ecb:ecbops:2017199
    Note: 2215900
    as

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    File URL: https://www.ecb.europa.eu//pub/pdf/scpops/ecb.op199.en.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    asset-backed securities; collateral; covered bonds; financial regulation; network analysis; structured finance;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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