Investor Due Diligence Requirements

The EC Proposal 472 was released on 30th September 2015 and concerns Simple, Transparent, Standardized (STS), due diligence and transparency on securitisation transactions.

With its transparency criteria, the European Commission is mainly focusing on originators, however the investor is required to use the available information in its due diligence and on-going risk surveillance.

Transparency requirements:

  • Large volumes of standardized data will become available enabling the visualization of the entire securitization market, comparing data quality and benchmark across transactions, originators or countries.
  • OSIS already regularly scores the data quality of all SME and RMBS transactions published at the European DataWarehouse; these scores are freely available on this website and you already can see which SME and RMBS transactions at European DataWarehouse meet the required 95% confidence level.
  • Furthermore our online visualization tool LoanCracker™, designed for Big Data analysis, instantly aggregates data across millions of rows.
  • Finally all the data will automatically recalibrate the models in our LoanPilot™ tool, that produces PD’s, LGD’s and IRR at each confidence level for every tranche.

With this wealth of data the investor can meet the due diligence criteria, do more in-depth analysis than Credit Agencies normally conduct and run on-going risk surveillance in an easy and cost-efficient way.

Changing portfolio composition

Interactive visualisation of a Spanish SME portfolio.

Due Diligence requirements:

  • Investors should have a written policy on their due diligence framework. We have documentation on our tools to help meet this requirement
  • Investors need to focus on the underlying collateral with loan level data analysis. LoanCracker™ has been built specifically for this purpose
  • There is a requirement of monitoring during the life of the deal: roll rates, collateral types, etc. To do this, investors need to analyze loan level data; LoanCracker™ can cater for all these requirements and more.
  • Investors need to stress test cash flows and collateral values. LoanPilot™ is the OSIS solution which runs credit models at loan level. It is also possible to interface LoanPilot™ with vendor cash flow models if the investor so wishes.