The Financial Times today reported that mortgage-backed debt will be now issued by the Britain's state-rescued lender, Royal Bank of Scotland (RBS). It will be the very first time after the monetary crisis that the mortgage-backed debt will be issued by RBS.
Over the next few weeks, it is expected that an agreement to vend debt worth 4.7 billion Pounds (5.6 billion Euros, 7.24 billion Dollars) will be agreed upon. This step will help the bank to get on the path of recovery and will mark a revival for the asset-backed markets also.
This deal of RBS is supported by numerous new prime residential mortgages that have originated through RBS and NatWest Homeloans. Since the credit crisis, the asset-backed securities market has been going through an irregular recovery, in Europe. But in spite of this recovery, it is lacking a broad investor base that can drive a flow of further new deals.
It is to be noted that RBS that is involved in the deal is 83% state owned, after world's leading banking bailout worth billions of Pounds. Now, for the wider economic recovery, securitization is very essential to return, which is the bundling of individual mortgages into new bonds that are supported by the home loan repayments.