Prospectus - Notowania

1. Structured Credit Products
177
>> Condensed Consolidated Financial Statements
Part E) – Information on risks and related risk management policies
A detailed description of the Group’s business in structured credit products is provided below, i.e. information on the Group’s
role as Originator, Sponsor and Investor, according to the definitions given by the Basel II framework and the already
mentioned Banca d’Italia’s Circular 263 (see also the Glossary in the Annexes).
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 over-collateralization.
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.
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 accounts for approximately
17.10% of the Group’s credit portfolio. This percentage, net of self-securitization decreases to 10.58%.
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. Seven tranches of OBG totaling €7.5bn were issued, of which 5bn retained in the Group.
As at 30 September 2009 similar covered bonds under German law (Pfandbriefe) amounted to €37,338,200 thousand, of
which €30,150,300 thousand were backed by mortgage loans and €7,187,900 thousand by loans to the public sector.
Under traditional securitizations the Group retains the first loss in the form of junior bonds or similar exposure and in some
cases provides further credit enhancement as described above. This enables the Group to benefit from the portion of the sold
receivables’ yield in excess of the yield due to the senior and mezzanine tranches.
1 We refer to loans sold, also synthetically, but not derecognized from balance sheet.