Press about us

Comment by Andrey Suchkov, Head of Securitization at VTB Capital, for GlobalCapital

27 March 2014
Russia strengthens ABS backing with consumer repo

Russian banks will be able to use consumer loan ABS as collateral for repo
transactions, the country’s central bank has announced, providing more
encouragement to those looking to pioneer such securitizations in the market.
First deputy chairman Ksenia Yudaeva informed lawmakers in Moscow on Wednesday of the
decision, which may come into effect after July 1 this year when non-mortgage securitizations
become legal in Russia.

By Tom Porter 26 Mar 2014

First deputy chairman Ksenia Yudaeva informed lawmakers in Moscow on Wednesday of the
decision, which may come into effect after July 1 this year when non-mortgage securitizations
become legal in Russia.

“The move to accept consumer loan ABS for repo is a very positive sign,” Andrey Suchkov,
head of securitization at VTB Capital, told Global Capital.
“It broadens the spectrum of assets that can be used for repo and it will also expand the
number of banks that can use this instrument. It shows the central bank understands the
potential of ABS to provide funding for the real economy, especially for small and mediumsized
enterprises. One asset class we are now looking at more closely is SME loan
securitization.”

The Russian parliament passed a bill in December to allow the sale of bonds backed by auto
loans, SME loans and credit cards. The bill will take effect on July 1, but banks that have
experienced a recent slowdown in deposit growth are already looking to non-mortgage ABS
as an important alternative source of funding in the future.
“We have started some preliminary work on ABS structuring for non-mortgage deals but
there are some serious operational issues,” said Suchkov.
“Most Russian banks have no practical experience of issuing ABS. They need to update their
IT systems, provide the platform to service these loans and provide reporting on the collateral
performance, which takes time to build. We will probably close the first non-mortgage
securitization next year.”

The repo decision is a much-needed boost to the fledgling ABS market in Russia. The more
established mortgage backed securities market took a nasty hit in October when the
government blocked private pension funds from taking new contributions until they have been
vetted by the central bank, a process that may not be completed until later this year.
But the primary RMBS market is alive and kicking. It welcomed a debut issuer last week in
the shape of Bank Petrocommerce, which has already mandated VTB Capital for a second
deal. Bank Vozrozhdenie completed its third RMBS transaction on Wednesday, pricing a
Baa2 rated Rb3bn senior tranche with a coupon of 9% and retaining a Rb450m junior
tranche. DeltaCredit is also set to price a Rb5bn RMBS deal with a 12% coupon through
Rosbank this week.

VTB Capital

Federation Tower West, 12, Presnenskaya emb., Moscow, 123100