Germany’s securitization market experienced a 60 per cent drop in risk transfer during 2003, according to a report by Standard & Poor’s. The total volume of public German risk transfer fell to €18.7 billion last year from €50.5 billion in 2002. Germany ranks fifth in Europe in terms of total risk transferred. ‘The decline in risk transfer reflects the considerable changes going on in the German securitization market,’ said credit analyst Torsten Althaus, a director in Standard & Poor’s Structured Finance Ratings group in Frankfurt. ‘However, the legislative and regulatory reforms now underway should help fuel growth in 2004 and onward, and we’re optimistic about seeing the first transactions under the True Sale Initiative this year.’ The report noted that obstacles to true sale securitizations remain. ‘The first attempts at true sale transactions show that a combination of tight loan margins and heightened counterparty risk within the German financial industry represents a real challenge to the economics of true sale transactions,’ said Althaus. Last year’s lower risk transfer levels follow a record 2002, when Germany’s aggregate risk transfer volume was the second highest in Europe, due mostly to synthetic transactions.
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