Consultant Zone

UK RMBS is alive and well

We have noticed recent trade press commentary stating “UK RMBS is back”.  Clearly positive news, but in our view, it has never been ‘away’.  To be clear, when commenting on UK RMBS we need to distinguish between, and consider the position of, ‘non-bank’ and ‘bank’ providers.

Certainly, the involvement of non-bank lenders has been consistent over the last few years. The structure and marketing may have changed, and as many deals are now ‘pre-funded’, they may also have sailed below the radar, but there has been a healthy stream of RMBS issuance in recent years. For example, 2022 issuance appears to have been around £7bn, depending on where you source your data, but even considering some reporting hype, this figure is not insignificant.

Either way, the market is right to expect a shot in the arm in the form of the increasing re-involvement of bank lenders.  There are several factors driving their resurgence, one of which is the pending repayment of The Bank of England Term Funding SME (TFSME) loan scheme.  Between now and Spring 2025 around £190bn of TFSME loans will have to be repaid.  Some banks, and building societies, may choose to use alternative sources of repayment, for example by increasing savers’ rates to lure back private investors, but many will utilise RMBS to provide the funds needed to meet the repayments.  That is why we see the markets predicting large scale prime issuance as banks plan TFSME repayment schedules.

Third party review firms and due diligence providers have always played a strategic role in successful RMBS transactions, and they will continue to do so.  With a focus on raising standards in governance, risk, and compliance, Rockstead continues to be an independent voice in trades.  Our involvement provides important clarity as to the accuracy of underlying loan data and related information provided by the issuer.  Our experience in these markets goes back to 2008, and the breadth of our knowledge means we are well placed to comment on current and emerging risks, including ESG and Consumer Duty issues.

Our commitment to professional business standards is underpinned and independently monitored by our FSQS accreditation, in place since 2019.

Whether you are involved as an issuer, adviser, or investor in RMBS, or any other financial services transaction, contact us to see how we can help raise standards in Governance, Risk, and Compliance.