For the 5th consecutive year, ARC Ratings was pleased to partner with Information Management Network (IMN) and the Association for Financial Markets in Europe (AFME) as an associate sponsor of the Global ABS 2022 conference, which returned to Barcelona after a two-year hiatus. A common consensus amongst participants was the fact it has been a year of two halves since June 2021. H2 2021 saw booming new issuance activity across underlying loan markets and securitisations as the uncertainty prevalent due to Covid-19 began to subside and borrowing costs remained extremely low. Facing rising interest rates and a slowdown of economies has fostered a challenging environment throughout H1 2022 and caused many market participants to take pause. Co‑Head of Structured Finance at ARC Ratings, Stefan Augustin, was invited to join a panel on fintech advancements, offering insights from various market participants such as lenders, fintech companies and rating agencies. ARC takes this opportunity to share the key highlights and perspectives of the panellists and other attendees across the conference.
- Global inflation and interest rate rises are fuelling a ‘cost of living crisis’ globally, with Europe remaining particularly vulnerable to developments of the Russia-Ukraine conflict amid fears of recession.
- Rising interest rates and the withdrawal of asset purchase programmes may see big banks return to securitisation as a funding source, whilst financial institutions are likely to consider fund structures to reduce cost of equity as warehousing becomes unviable.
- Regulatory divergence following Brexit remains a key talking point, whilst ESG featured in the bulk of panel discussions given the need for clear and harmonious regulatory definitions to encourage investment and alleviate fears of ‘greenwashing’.
- The viability of fintech advancements to improve the ability to identify risk drivers, transaction efficiency and reduce risk was considered in depth, with the lack of historical data and cost of implementation being raised as barriers to entry at present.