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PGGM to agree loans deal with Santander

Euros, PGGM Agree Loans Deal with Santander - Santander UK

Dutch pension fund manager PGGM will today complete a €2.3bn trade to insure loans of Santander, in a deal that underlines the growing appeal of exotic financial instruments in an ultra-low interest rate environment. The two parties are finalising a so-called 'synthetic securitisation' deal, by which PGGM will sell credit insurance against potential losses on a portion of over 6,000 Santander loans to small and medium-sized enterprises. The deal shines a spotlight on attempts to revive Europe's securitisation industry. The European Commission is proposing 'simple, transparent and standardised' (STS) securitisation, which will make the products cheaper for investors. Synthetic securitisations were not included in the original draft, and don't stand to benefit from cheaper capital charges for STS deals. However, the European Banking Authority has recommended that the asset class be included in the drive. Steve Gandy, head of debt capital markets solutions at Santander, said: 'Both issuers and investors in this market have been engaging with regulators and policymakers to include the benefits of STS for synthetic deals – it is an important way for banks to share the risk and free up capital for re-lending. This is a stated goal of the regulators and policymakers, and a way for them to promote financing to the SME sector.' He added that the financial technique could suffer if it is not eventually included.

 

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