Fintech PR
Focus on Funds for G20 Securitization Reform
The Financial Stability Board (FSB) has published a consultation on the impact of the G20 regulatory reforms on securitization. Here, John McGrath and Aaron Scott, partners at global law firm Dechert, summarize its findings.
Key Takeaways
- Funds have overtaken banks as the largest issuers of securitizations in the U.S. and Europe.
- The Financial Stability Board will concentrate on funds in its securitization regulatory review.
- CLO risk retention and leveraged loan criteria are identified as areas of risk.
- Specific areas for reform in EU securitization rules have been highlighted.
LONDON, Oct. 31, 2024 /PRNewswire/ — The Financial Stability Board (FSB) has published a consultation report on the impact of the G20 regulatory reforms on securitization. 1 The report finds that these reforms have shifted securitization issuance from banks to non-bank financial intermediaries (NBFIs) in Australia, Europe, and the U.S. since 2011.
For the FSB, the growing role of NBFIs in securitization is a double-edged sword. Transferring risk outside the banking sector could diversify and strengthen the financing ecosystem if managed prudently. However, the FSB questions whether NBFIs can handle securitization risks given their funding structures and ability to withstand losses during stress events. It acknowledges that the diverse nature of these entities and their regulatory and funding frameworks suggests there is no one-size-fits-all answer. The FSB plans to continue its work on NBFI resilience and apply these principles to the securitization sector.2
Likely impact on CLO market of an increased focus on funds
The FSB’s analysis of the CLO market shows the likely impact of an increased focus on funds.
First, NBFIs are seen as responsible for increased complexity and opacity in both the leveraged loan and CLO markets. In particular, the FSB finds that weaker underwriting standards in the leveraged loan market may lead to higher defaults on loans held by CLOs, which will ultimately lead to lower CLO recovery rates. To address this, the FSB encourages the adoption of the recently published IOSCO good practices for leveraged loans and CLOs.3
Second, CLO managers’ preference for “light balance sheets” has led to the creation of risk retention vehicles to attract third-party investors. The FSB’s main concerns are that this practice may:
- Not fully align with the goals of risk retention regulation, as the vehicle often isn’t part of the CLO manager’s corporate group, thereby shifting risk to parties not originally envisioned.
- Complicate authorities’ efforts to determine who is exposed to risk retention-related losses.
- Result in leveraged risk retention vehicles subject to high asset volatility, especially where the retained risk consists of first-loss tranches.
- Lead to concentration risk given the niche nature of these vehicles.
The FSB does not propose any specific remedy for this issue. In this context, it is noteworthy that the FSB finds no material adverse effects from the lack of retention in U.S. open-market CLOs. It may be that the larger concerns are opacity and concentration risk.
Critique of regulatory regime for securitization in Europe
Another focus of the report is the regulatory regime for securitization in Europe. In Europe, some FSB stakeholders attribute a perceived decline in issuance to the implementation of the securitization regulatory regime, which has increased costs for issuers and investors. Although the FSB says there is no empirical evidence to support this claim, it highlights several issues with the European regulatory regime:
- Burdensome due diligence and disclosure requirements.
- Overly restrictive Simple, Transparent and Standardized (“STS”) securitization regime.
- Adverse treatment of securitizations under the capital framework for insurers.
- Bank capital calibration for securitization exposures, which is viewed as overly prudent and exhibiting too high a degree of non-neutrality.
Fund industry organizations such as AIMA have been vocal lobbyists for changes to the EU disclosure regime and for an expansion of the STS label to CLOs. It may be that with the increased focus on funds there is now an opportunity to reset these parts of the framework.
Next steps
The FSB plans to publish its final report by the end of the year. Proposals adopted following the consultation will likely shape the next round of G20 securitization reform.
Dechert & Private Credit
Dechert has advised private credit clients for over 30 years, helping them to innovate and thrive as the industry has grown into a complex and diverse US$1.7 trillion market. We create value on the full spectrum of strategies and sub-strategies, including asset-based, distressed debt, permanent capital, direct lending, subordinated debt, specialty financing, special situations and venture debt. With more than 80% of Private Debt Investor’s top 100 private credit firms as clients, we offer market-leading fund formation, financing, regulatory, M&A and tax expertise across the U.S., Europe, the Middle East and Asia.
Footnotes
- See “Evaluation of the Effects of the G20 Financial Regulatory Reforms on Securitisation: Consultation report“. The current regulatory approach to securitization is largely based on the G20 reform agenda set by, among others, the FSB, International Organization of Securities Commissions (IOSCO) and the Basel Committee on Banking Supervision (BCBS).
- See “Enhancing the Resilience of Non-Bank Financial Intermediation: Progress report“.
- See “Leveraged Loans and CLOs Good Practices for Consideration“.
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Fintech PR
WSPN Appoints Former EY Global Chief Innovation Officer Jeff Wong as Independent Director
SINGAPORE, Dec. 26, 2024 /PRNewswire/ — Worldwide Stablecoin Payment Network (WSPN), a leading stablecoin infrastructure company, announces the appointment of Jeff Wong as Independent Director. Mr. Wong brings over 25 years of experience in technology innovation and enterprise transformation to WSPN. He most recently served as EY’s Global Chief Innovation Officer from 2015 to 2024, where he spearheaded the firm’s global innovation initiatives and established EY’s advanced technology labs focusing on Artificial Intelligence, Blockchain, Quantum Computing, and Web3.
Prior to EY, Mr. Wong held leadership roles at eBay and JPMorgan Partners. He is a member of the Council on Foreign Relations, the Forbes Technology Council, and the founding Chair of Asia Society’s Technology and Innovation Council, helping drive the innovation and transformation agenda. He was also a member of the World Economic Forum’s Global Future Council on Innovation Ecosystems. He has previously served on the Oxford Foundry Board at Oxford University and the Advisory Board for AI4All. Mr. Wong is a recipient of the Outstanding 50 Asian Americans in Business award and an honoree of the A100 List by Gold House, recognizing individuals with Asian Pacific heritage who have made a significant impact on American culture and society.
“Joining WSPN at this pivotal moment in the stablecoin industry is incredibly exciting,” said Mr. Wong. “I look forward to contributing my experience in emerging technologies and enterprise transformation to help WSPN build the next generation of digital payment infrastructure.”
“Jeff’s appointment represents a significant strategic addition to WSPN,” said Raymond Yuan, Founder and CEO of WSPN. “His deep expertise in innovation management, enterprise transformation, and emerging technologies, combined with his leadership experience at global institutions, will be invaluable as we accelerate our market expansion and global development.”
About WSPN
WSPN is a leading provider of next-generation stablecoin infrastructure, committed to building a more secure, efficient, and transparent payment solution for the global economy. Their flagship product, WUSD stablecoin, is pegged 1:1 to the U.S. Dollar and aims to optimize secure digital payments for Web3 users. WSPN’s Stablecoin 2.0 approach prioritizes user-centricity, community governance, and accessibility, paving the way for widespread stablecoin adoption.
Learn more: www.wspn.io | X | LinkedIn
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Refining Capacity of the Base Surpasses 50 Million Tons per Year
NINGBO, China, Dec. 26, 2024 /PRNewswire/ — China Petroleum & Chemical Corporation‘s (HKG: 0386, “Sinopec”) recently announced the mechanical completion of the second-phase expansion and advanced materials project at its Zhenhai Refinery. This milestone sets new benchmarks for innovation, smart manufacturing, and energy efficiency in large-scale projects. The refinery’s capacity has now been upgraded to 40 million tons per year, contributing to the Zhejiang Ningbo Petrochemical Industrial Base surpassing a total refining capacity of 50 million tons annually. The achievement solidifies its position as China’s largest, most advanced, and globally competitive petrochemical industrial base.
Located in the Yangtze River Delta, a key downstream product consumption hub, the Zhejiang Ningbo Petrochemical Industrial Base plays a vital role in Sinopec’s value chain. The second-phase expansion and advanced materials project, with a total investment of CNY 41.6 billion, incorporates 18 production units, including atmospheric distillation, catalytic cracking, polypropylene, and propane dehydrogenation units. By emphasizing chemical-focused processes, the project creates multiple high-value-added supply chains.
The facility’s expanded production capacity supports the development of high-end polyolefins, advanced materials, and specialty chemicals. It is expected to provide approximately 8 million tons of petrochemical products annually, significantly boosting the overall capacity of supply chains for industries such as automotive, home appliances, and textiles in the region. This expansion is forecast to generate trillions of yuan in upstream and downstream industrial value.
The project achieved remarkable progress in technological innovation and sustainability. Highlights include:
- Localization of 10 core technologies, including the world’s highest-load vertical labyrinth compressor.
- Extensive deployment of smart technologies, enabling simultaneous delivery of digital and physical factories.
- Integration of a fully localized industrial operating system and a self-developed industrial internet platform to enhance decision-making and management.
- Implementation of comprehensive energy-saving measures, achieving an overall reduction in energy consumption of 11.7%.
- Safety and quality were paramount during construction, with over 90 million consecutive safe man-hours recorded and a 100% quality pass rate for all units, setting a new industry benchmark.
Zhenhai Refinery, Sinopec’s largest integrated refining and chemical enterprise, boasts an ethylene production capacity of 2.2 million tons per year. It is also the only enterprise in China consistently ranked in the top performance group of the Solomon Global Ethylene Performance Evaluation.
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Fintech PR
2025 Will See Increased QR Code Payments but Payment Card IC ASPs Will Not Return to Pre-Covid Levels
ABI Research’s 5th annual Trend Report identifies the key Digital Payment Technologies trend that will come to fruition —and the 1 that won’t—in 2025
NEW YORK, Dec. 24, 2024 /PRNewswire/ — As 2025 kicks off, predictions abound on the technology innovations expected in the year ahead. In its new whitepaper, 101 Technology Trends That Will—and Won’t—Shape 2025, analysts from global technology intelligence firm ABI Research. ABI Research analysts identify 54 trends that will shape the technology market and 47 others that, although attracting vast amounts of speculation and commentary, are less likely to move the needle over the next twelve months. In the Digital Payment Technologies space, 2025 will see increased QR code payment acceptance but little growth for payment card IC ASPs.
“2024 has been marked by challenges, from global conflicts and inflationary pressures to political uncertainty. These factors have strained enterprise and consumer spending, leading to market inertia, short-term technology investments, sidelined capital, and the exposure of vulnerable suppliers,” says Stuart Carlaw, Chief Research Officer at ABI Research. “From a technology perspective, many industries and end markets are in that awkward stage of technology adoption where they are formulating implementation strategies, assessing solutions and partners, and trying to see if they have the resources needed to roll out solutions at scale. This is a particularly sensitive time, which tends to suggest 2025 will have tech implementers and end users on the brink of a period of a massive technology shift as they work through these issues.”
What Will Happen in 2025:
QR code payment acceptance will continue to increase with use cases expanding
Although QR code payment acceptance is prevalent in countries such as China and growing in emerging digital payment markets, including in India, use cases and potential growth areas are not limited to these countries. Significant and continued investments by vendors, including PayPal, Stripe, and SumUp, are setting the foundation for increased adoption in other mature and established economies with use cases expanding. Although QR codes are already being used by many Small and Medium Enterprises (SMEs) and pop-up retail businesses, 2025 will mark the year when the technology begins to shift from one niche to partial mainstream.
What Won’t Happen in 2025:
Payment card IC ASPs will not return to pre-COVID-19 levels
Since the COVID-19 pandemic, chipset pricing has been on a continual rise, driven by increased pricing in myriad manufacturing areas, including energy, raw material, transit pricing, and inflation, driving up wages. The chip shortage further compounded this, and according to ABI Research, the Average Selling Price (ASP) for a payment card Integrated Circuit (IC) increased by approximately +30% between 2020 and 2023. However, despite pricing pressures returning, the cost of payment ICs is some years away from matching pre-COVID-19 levels. Although 2025 will mark another year of pricing deprecation, it will not be until around 2028 when pricing is expected to drop to levels similar to those achieved in 2019 steadily.
For more trends that will and won’t happen in 2025, download the whitepaper, 101 Technology Trends That Will—and Won’t—Shape 2025.
About ABI Research
ABI Research is a global technology intelligence firm uniquely positioned at the intersection of technology solution providers and end-market companies. We serve as the bridge that seamlessly connects these two segments by providing exclusive research and expert guidance to drive successful technology implementations and deliver strategies proven to attract and retain customers.
ABI Research是一家全球性的技术情报公司，拥有得天独厚的优势，充当终端市场公司和技术解决方案提供商之间的桥梁，通过提供独家研究和专业性指导，推动成功的技术实施和提供经证明可吸引和留住客户的战略，无缝连接这两大主体。
For more information about ABI Research’s services, contact us at +1.516.624.2500 in the Americas, +44.203.326.0140 in Europe, +65.6592.0290 in Asia-Pacific, or visit www.abiresearch.com.
Contact Info:
Global
Deborah Petrara
Tel: +1.516.624.2558
[email protected]
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