GENERAL MEETING DRAFT - Bankier.pl

1. Structured Credit Products
A detailed description of the Group’s business in structured credit products is provided below. We firstly
analyze the Group’s activity as “originator” (through SPVs) of the assets underlying securitization
transactions and then the activity of other consolidated and non-consolidated SPVs, which have different
underlying assets.
Information on the exposures to monoline insurers and leveraged finance, as well as details on the
methods to calculate the fair value of structured credit products are also given below.
1.1 The Group as Originator
The Group’s origination consists of the sale of on-balance sheet receivables portfolios to vehicles set up
as securitization companies under Law 130/1999 or similar non-Italian legislation.
The buyer finances the purchase of the receivables portfolios by issuing bonds of varying seniority and
transfers its issue proceeds to the Group.
The yield and maturity of the bonds issued by the buyer therefore mainly depend on the cash flow
expected from the assets being sold.
As a further form of security to bondholders, these transactions may include special types of credit
enhancement, e.g., subordinated loans, financial guarantees, standby letters of credit or overcollateralization.
The Group’s objectives when carrying out these transactions are usually the following:
� to free up economic and regulatory capital by carrying out transactions that reduce capital
requirements under current rules by reducing credit risk
� to reduce funding costs given the opportunity to issue higher-rated bonds with lower interest rates
than ordinary senior bonds and
� to originate securities that can be used to secure repos with Banca d’Italia and the ECB (i.e.
counterbalancing capacity).
The Group carries out both traditional securitizations whereby the receivables portfolio is sold to the SPV
and synthetic securitizations which use credit default swaps to purchase protection over all or part of the
underlying risk of the portfolio.
The Group makes limited use of this type of transactions. The amount of securitized loans 1 , net of the
transactions in which the Group has acquired all the liabilities issued by the SPVs (the so-called selfsecuritizations),
accounts for approximately 10.59% of the Group’s credit portfolio. Self-securitizations in
turn account for 6.46% of the loan portfolio.
In 2008 the Group also initiated a Covered Bond (OBG – Obbligazioni Bancarie Garantite) Program
under the provisions of Italian Law 130/99. The underlying residential mortgage loans were transferred to
an SPE set up for this purpose and included in the Banking Group. Eight tranches of OBG totaling
�8.5bn were issued, of which 5bn retained in the Group.
As at 31 December 2009 similar covered bonds under German law (Pfandbriefe) amounted to
�36,929,700 thousand, of which �29,873,900 thousand were backed by mortgage loans and �7,055,800
thousand by loans to the public sector.
1 We refer to loans sold, also synthetically, but not derecognized from balance sheet.
2009 CONSOLIDATED REPORTS AND ACCOUNTS
398