A partner of Standard & Poor’s
綜合座談會2-金融海嘯後的全球財富重分配－宏觀流年 2011
(2011 Global Wealth Redistribution after Financial Tsunami)
張華平
Hwa-Ping Chang
July 8, 2011
保密且專屬
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Market Highlights in Local Securitization Market
• The credit quality of the majority of structured finance securities rated by Taiwan Ratings was
stable or improved in 2010, and the number of upgrades outweighed that of downgrades,
reversing the 2009 trend. This reflects the continued stabilization of asset performance and
the macro economy. We expect such credit stability or improvement in rated securities to
continue during 2011.
Sources: Taiwan Ratings’
“Taiwan Ratings Corp.'s Structured Finance Default And Rating Transition Study 2003-2010: Credit Trends Improve In 2010”, published on
May 4, 2011.
2.
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Potential Developments in Local Securitization Market - I
• The recent stagnancy in new transaction issuance coupled with several
deal enquiries that we have received, allowing us to envision several
potential developments in the local securitization market. These factors
could help to define the future of Taiwan-originated structured finance
instruments in the short to mid term, including:
– The capital market generally recognizes the benefits of securitizations;
 Taiwan Ratings' and Standard & Poor's Ratings Services observations show that, investors,
sellers, and regulators generally recognize the helpful role that securitization provides in the
functioning of capital markets, despite continuing criticism of securitization.
 Certainly this is true in Taiwan's securitization market, where transaction arrangements place
greater importance on the fundamental needs of the originators.
 This is supported by the findings of a report from the International Monetary Fund in October
2009, titled "Global Financial Stability Report: Navigating the Financial Challenges Ahead" (see
http://www.imf.org/external/pubs/ft/gfsr/2009/02/index.htm).
 The majority of Taiwan securitization transactions aim to provide market liquidity for assets and
alternative funding channels for sellers. In other words, they are designed to serve the
fundamental needs of the originators and sellers.
Sources: Taiwan Ratings’
“Has Market Confidence Returned To Taiwan's Securitization After The Recent Stagnancy?”, published on Dec 30, 2010.
3.
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Potential Developments in Local Securitization Market - II
•
The recent stagnancy in new transaction issuance coupled with several deal enquiries that we have received, allow us to
envision several potential developments in the local securitization market. These factors could help to define the future of
Taiwan-originated structured finance instruments in the short to mid term, including:
– The capital market generally recognizes the benefits of securitizations;
– The structure and behavior of the future securitization market will reflect
what has been learned from recent years' experience, as well as the
impact of more rigorous regulation at present;
 Investors become more involved in deal arrangement, reviewing the credit underwriting
process, and paying closer attention to the underlying credit exposure.
 There were the proposals or actual implementations of new securitization regulations globally,
such as the requirement on risk retention, minimum disclosure and reporting, and information
disclosure to non-hired rating agencies. Several additional measures are also under discussion
including a change to accounting rules and an amendment to the capital accord governing
securitization transactions.
 We anticipate more of such to come over the next few years, and predict that many of these
measures will go beyond traditional jurisdictional borders.
 These regulations could strengthen market discipline, but also complicate the deal process and
affect the willingness of participants to securitize assets if not duly clarified and addressed.
4.
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Potential Developments in Local Securitization Market - III
•
The recent stagnancy in new transaction issuance coupled with several deal enquiries that we have received, allow us to
envision several potential developments in the local securitization market. These factors could help to define the future of
Taiwan-originated structured finance instruments in the short to mid term, including:
– The capital market generally recognizes the benefits of securitizations;
– The structure and behavior of the future securitization market will reflect what has been learned from recent years'
experience, as well as the impact of more rigorous regulation at present;
– Constrained asset yields could constrain new deal activities;
 A typical characteristic of many Taiwan originated assets is that they tend to have constrained
yields.
5.
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Potential Developments in Local Securitization Market - IV
•
The recent stagnancy in new transaction issuance coupled with several deal enquiries that we have received, allow us to
envision several potential developments in the local securitization market. These factors could help to define the future of
Taiwan-originated structured finance instruments in the short to mid term, including:
– The capital market generally recognizes the benefits of securitizations;
– The structure and behavior of the future securitization market will reflect what has been learned from recent years'
experience, as well as the impact of more rigorous regulation at present;
– Constrained asset yields could constrain new deal activities;
– The lower asset overlap in Taiwan-based transactions brings stability, but
limits market liquidity;
 Taiwan-based transactions have less asset overlap than transactions in other
securitization markets. Most local structured transactions are the result of originators'
practical needs on asset liquidity and funding.
 the liquidity of securitization notes could be constrained as assets tend not to be
standardized or comparable, and that could curb investor interest in the long term if asset
details are not well disclosed.
6.
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Potential Developments in Local Securitization Market - V
•
The recent stagnancy in new transaction issuance coupled with several deal enquiries that we have received, allow us to
envision several potential developments in the local securitization market. These factors could help to define the future of
Taiwan-originated structured finance instruments in the short to mid term, including:
– The capital market generally recognizes the benefits of securitizations;
– The structure and behavior of the future securitization market will reflect what has been learned from recent years'
experience, as well as the impact of more rigorous regulation at present;
– Constrained asset yields could constrain new deal activities;
– The lower asset overlap in Taiwan-based transactions brings stability, but limits market liquidity;
– Asset backed securities in their simplest form are likely to gain favor first.
 like global markets, asset-backed transactions in their simplest form repacking a variety of
assets for the purpose of funding and risk management will make the first comeback.
 A recovery of this nature has already begun in sectors including some commercial
mortgage-backed securities (CMBS) and residential mortgage-backed securities (RMBS),
and global asset-backed securities (ABS) (see following two figures).
 In Taiwan, similar transaction types share two additional features: (1) they are issued for
funding and risk management purposes as previously mentioned; and (2) they have
performed well during the recent period of global financial market dislocation and
economic recession.
 Taiwan Ratings and Standard & Poor's have upgraded the notes in 12 Taiwan-based
transactions since 2003, leaving the ratings on 17 transactions unchanged. In contrast,
we've only taken negative rating actions on four transactions despite the multiple
downgrades involved, all of which are related to foreign corporate credits and residential
mortgage-backed securities affected by the adverse global credit cycle in 2008 and 2009.
7.
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Potential Developments in Local Securitization Market - VI
8.
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Discussion and Q&A
9.
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