Market Developments Allan Tomas, Chief, Financial and Wealth Accounts November 2 nd 2009 Securitization Activity in Canada.

Market Developments

Allan Tomas, Chief, Financial and Wealth Accounts

November 2nd 2009

Securitization Activity in Canada

23-04-18Statistics Canada • Statistique Canada2

Evolution of activity in Canada

Phase I: inception, NHA MBS Phase II: moderate growth, IABS Phase III: strong growth, traditional assets Phase IV: strong growth, layering and synthetic Phase V: credit crunch, no growth except for

NHA MBS (strong growth)


Investors

Canada Mortgage and

Housing CorporationDebtors

principal and

interest

proceeds

NHA MBS

principal and interest


may sell NHA MBS

Central Payor and Transfer

Agent

Investment Dealer

guarantee

Lending Institution

National Housing Act Mortgage Backed Security (NHA MBS) Program


Debtors Lending Institution(s) Investment Dealer

Special Purpose Vehicle (SPV)

Servicing Agent(s)

Investors

Ratings Agency

principal and

interest

usually the same

receivables proceeds

structure securities

ABS


credit evaluation

servicing fee

Proceeds

Traditional asset-backed security transaction: using a Special Purpose Entity/Vehicle (SPE/SPV)


Total financial assets of Issuers of Asset-Backed Securities

0

100000

200000

300000

400000

500000

600000

700000

$mill

ion

s

II III IV V


0

50000

100000

150000

200000

250000

300000

1990

I

1990

IV

1991

III

1992

II

1993

I

1993

IV

1994

III

1995

II

1996

I

1996

IV

1997

III

1998

II

1999

I

1999

IV

2000

III

2001

II

2002

I

2002

IV

2003

III

2004

II

2005

I

2005

IV

2006

III

2007

II

2008

I

2008

IV

$mill

ion

s

non-NHA MBS securitzed mortgages NHA MBS securitized mortgages

II III IV V

Securitized mortgages


Securitized consumer credit receivables

0

10000

20000

30000

40000

50000

60000

70000

1990

I

1990

IV

1991

III

1992

II

1993

I

1993

IV

1994

III

1995

II

1996

I

1996

IV

1997

III

1998

II

1999

I

1999

IV

2000

III

2001

II

2002

I

2002

IV

2003

III

2004

II

2005

I

2005

IV

2006

III

2007

II

2008

I

2008

IV

$mill

ion

s

II III IV V


0

5000

10000

15000

20000

25000

30000

35000

40000

1990

I

1990

IV

1991

III

1992

II

1993

I

1993

IV

1994

III

1995

II

1996

I

1996

IV

1997

III

1998

II

1999

I

1999

IV

2000

III

2001

II

2002

I

2002

IV

2003

III

2004

II

2005

I

2005

IV

2006

III

2007

II

2008

I

2008

IV

$mill

ion

s

II III IV V

Securitized commercial loans and leases


Non credit market financial assets of Issuers of Asset-Backed Securities

0

50000

100000

150000

200000

250000

1990

I

1990

IV

1991

III

1992

II

1993

I

1993

IV

1994

III

1995

II

1996

I

1996

IV

1997

III

1998

II

1999

I

1999

IV

2000

III

2001

II

2002

I

2002

IV

2003

III

2004

II

2005

I

2005

IV

2006

III

2007

II

2008

I

2008

IV

$mill

ion

s

II III IV V


Outstanding debt of issuers of asset backed securities

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1990

I

1990

IV

1991

III

1992

II

1993

I

1993

IV

1994

III

1995

II

1996

I

1996

IV

1997

III

1998

II

1999

I

1999

IV

2000

III

2001

II

2002

I

2002

IV

2003

III

2004

II

2005

I

2005

IV

2006

III

2007

II

2008

I

2008

IV

short-term asset-backed securities long-term asset-backed securities

II III IV V


Phase V: Financial crisis & credit crunch

Shutdown in Asset-Backed Commercial Paper (ABCP) market

Increase in NHA MBS issuance Government policy reaction: Insured Mortgage

Purchase Program


-10

-8

-6

-4

-2

0

2

4

6

8

IV I II III IV I II III IV I II III IV I II III IV I II

Other short-term paper liabilities, Issuers of asset-backed securities (flows)

billions of dollars

2008 2007 2006 2005 2009 2004

In Canada, the asset-backed securities short-term paper market shuts down in 2007


Quarterly flows: Change in investor demand

-20000

-10000

0

10000

20000

30000

40000

50000

60000

2004 II 2004III

2004IV

2005 I 2005 II 2005III

2005IV

2006 I 2006 II 2006III

2006IV

2007 I 2007 II 2007III

2007IV

2008 I 2008 II 2008III

2008IV

2009 I 2009 II

$mill

ion

s

short-term asset-backed securities liabilities NHA mortgage-backed securities liabilities

IV V


-3000

-2000

-1000

0

1000

2000

3000

4000

2004

II

2004

III

2004

IV

2005

I

2005

II

2005

III

2005

IV

2006

I

2006

II

2006

III

2006

IV

2007

I

2007

II

2007

III

2007

IV

2008

I

2008

II

2008

III

2008

IV

2009

I

2009

II

$mill

ion

s

IV V

Mortgage asset flows: securitized outside of the NHA MBS program


Quarterly asset flows: securitized consumer credit and commercial loans and leases since mid 2007

-4000

-3000

-2000

-1000

0

1000

2000

3000

4000

5000

6000

2006 IV 2007 I 2007 II 2007 III 2007 IV 2008 I 2008 II 2008 III 2008 IV 2009 I 2009 II

$ m

illio

ns

consumer credit commercial loans and leases

IV V


Future Strong growth in securitization in Canada, to the point

where financial activity significant … securitization likely to continue and evolve

Continuing data challenges: evolving survey design to capture overall activity and avoid any possibility of double counting

As securitization activity is increasingly consolidated on originators’ balance sheets (IFRS), would SNA recommend a securitization sector or sub-sector?

Coordination of groups looking into on securitization issues – credit market side and securities side

Question: how has securitization activity evolved in other OECD countries, before/result of the financial crisis?

Market Developments Allan Tomas, Chief, Financial and Wealth Accounts November 2 nd 2009 Securitization Activity in Canada.

Documents

canada slide

canada phase

investors canada mortgage

securities slide

leases slide

nha mbs strong growth

security nha mbs program

nha mbs phase