The PCS Securitisation Symposium, held on 4 September 2024 in Helsinki, highlighted the growing momentum of securitisation in the Nordics, a region garnering significant interest from both investors, banks and non-bank lenders. With a focus on expanding lending capacity, managing capital efficiency and risk as well as non-performing loans (NPLs), the symposium emphasised securitisation as a vital tool for financial institutions across the region. Jonas Bäcklund, CEO of Revel Partners, along with several other key figures in the securitisation market, delivered a keynote address, shedding light on the future of the industry in Europe and the Nordics.
Interest in securitisation continues to rise among Nordic banks and non-bank lenders, particularly smaller institutions keen to expand their lending capabilities. By transforming assets like loans and facilities into securities, these lenders can increase their capacity to lend, especially in a regulatory environment where capital requirements are stringent. Securitisation also provides non-bank lenders with a critical funding tool, enabling them to sustain and grow their lending operations.
For these smaller lenders, securitisation is an effective solution for securing the long-term funding and an efficient capital base necessary to support a growing loan book, while maintaining a stable balance sheet and managing capital requirements.
From 1 January 2025, Norway is likely to fully implement the EU Securitisation Regulation, marking a significant step forward for the country's financial markets. This regulatory shift will allow Norwegian securitisations to meet EU standards, including STS (Simple, Transparent, and Standardised) criteria, and will provide banks and non-bank lenders with greater flexibility in managing assets and raising funds.
The regulatory change is expected to attract substantial interest from both domestic and international investors, further strengthening the Nordic securitisation market. Norway's entry into the securitisation landscape will likely lead to a surge in transaction volume, particularly as Norwegian institutions seek new funding sources and methods to manage risks.
A central topic at the symposium was the increasing focus on NPL securitisations in the Nordics. As regulatory frameworks like the NPL Backstop require banks to more rigorously provision for underperforming loans, securitisation offers a flexible and efficient tool for managing these assets.
Traditionally, NPL buyers have played an important role, but as their funding costs rise, banks are increasingly looking at securitisation as an alternative to a straight divestment of the portfolios. NPL securitisations allow institutions to sell portfolios of defaulted loans to a special purpose vehicle (SPV) and share the risk with a wide range of investors. This not only helps manage the NPLs, but also ensures compliance with regulatory requirements while preserving the ability to continue lending. With NPL buyers facing tighter financial conditions, the potential for NPL securitisation to take on a larger role in managing defaulted loans is growing.
The symposium highlighted a significant increase in investor interest in Nordic securitisations. Investors from a broad spectrum, including credit funds, asset managers, pension funds and insurers, are showing keen interest in Junior and Mezzanine tranches from securitisations by Nordic institutions. The combination of stable economic conditions, diversification and robust legal frameworks makes Nordic securitisation transactions particularly appealing.
Investors are also looking closely at NPL securitisations, which offer higher yields while maintaining a structured risk profile. This trend indicates that the Nordic securitisation market is well positioned to attract diverse and global investor interest, particularly as the market continues to develop and mature.
At the symposium, securitisation was highlighted as a crucial tool for both funding diversification and risk management in the Nordics. For banks and non-bank lenders alike, securitisation offers the ability to access broader pools of capital and manage their funding more effectively, all while reducing reliance on traditional banking channels
Securitisation is also increasingly used to manage maturity mismatch, as it allows banks traditionally reliant on short-term deposits to convert longer-term assets into liquid securities, aligning their asset-liability profiles and reducing the risk of funding gaps.
The PCS Securitisation Symposium in Helsinki underscored the growing importance of securitisation in the Nordic region. With rising interest from investors and increasing adoption by both banks and non-bank lenders, securitisation is becoming a critical tool for expanding lending, managing risk, and diversifying funding sources. Norway’s upcoming regulatory changes and the growing focus on NPL securitisations are set to further fuel the market’s growth, making the Nordics a key area to watch in the European securitisation landscape.
