Principia's article explores regulatory initiatives and what investors now require to gain value from increased disclosure in the market. More information is one thing, but a sound footing for securitization requires a level playing field.

The industry is connecting some of the dots between what has been done already and what still needs to be done for a sustainable investor base to return in earnest.

Commentary in ASR regarding the FDIC Safe Harbor Proposals.

Structured Credit Investor profiles Principia in this in depth interview covering the operational challenges facing investors today.

Principia's Mark Kahn provides an insight into the events of the ASF's major securitization conference for Credit magazine.

Structured Credit Investor profiles Principia in this in depth interview covering the operational challenges facing investors today.

Principia spoke with Credit magazine in response to the ECB's initiative to improve transparency into the collateral performance of ABS, RMBS and CMBS investments.

Douglas Long speaks to ASR about the potential impact of capital regulations, the end of the US TALF program and the outlook for ABS, MBS and other structured finance transactions.

Asset managers with a long-term commitment to structured finance investments are coming under increased pressure to respond to recent regulatory directives relating to infrastructure.

According to Doug Long, EVP of business strategy at Principia Partners, the new IOSCO guidelines are a reflection of what investors are demanding – i.e. that structured finance investors must have established, well-documented and proven operations in place to manage their investments on an ongoing basis.

Banks are now required to meet specific operational criteria so they can use the risk weights specified in the Basel II securitization framework. These criteria are intended to ensure that banks perform their own due diligence and do not simply rely on rating agency credit ratings.

"Before the crisis these requirements were forced upon only the specialist investment managers and SPVs," Long said. "Now everyone investing in structured finance will need to have that level of sophistication to be able to prove that they really know their investments."

Principia Partners, a company that provides dedicated software to banks and asset managers in the structured finance markets, has helped credit investment managers satisfy stringent rating agency criteria to help achieve the ratings their businesses required.

"Investors should watch out for the longer-term viability of their asset manager's business, maintenance of process continuity, focus and quality," states Manuel Arrive of Fitch Ratings.

"Our development focus is to continuously build out the depth and breadth of the platform, centred on the requirements of structured finance participants. That is where we see the unique challenges and where we have the expertise.

"There's a real sense that changes in the securitization market will flow from regulation - from changing accounting standards, to Basel II it will impact on nearly all aspects of business"

"From an internal perspective, the challenge is to find ways to easily disseminate data across the enterprise in a consistent way. Having such a controlled and flexible structured finance operation allows structured finance participants to adapt to market changes and quickly capitalize on new opportunities."

"Regulatory changes are influencing the new definition of transparency and organizations must be agile enough to adapt"

"Tracking counterparty risks can be more complexfor structured finance deals because there are often other counterparties embedded within the transactions"

"Political risk and protectionism is delaying recovery in the European ABS markets”

“Until there is greater clarity and more unity across the European initiatives, investors will be wary of making a wholesale return.”

The interpretation of transparency takes on a different meaning depending on your perspective or involvement in the day to day management of structured finance operations.

Too much information, in many different formats, has made it a challenge at the portfolio management level to interpret collateral information from multiple sources in standardized ways.

The financial crisis has highlighted shortcomings in bank valuation practices for complex securities.

"History is never a good indicator of future performance, which is a warning everyone used but no-one ever believed."

Principia's EVP Sales Mark Kahn gives an exclusive 'man on the ground' account of keynote sessions and developments of the 2009 ASF Conference in Las Vegas.

"Governments, policymakers and industry working groups are understandably eager to redesign and reregulate the global financial system.

There is an opportunity to take a proactive lead from recommendations that have already been made and prepare for the market of the future."

Government guaranteed debt will appeal to a broader spectrum of investors that would not be picking up secondary debt, helping to broaden the base and provide alternative ways of distributing new issuance without having to rely on central banks.

Reworking distressed structures has become an increasingly complicated--and constantly evolving--process as the macro-economic environment has continued to be challenging into 2009.

"It's a harsh view to say that the securitisation markets are dead... "

Attempts to restore securitisation continue to move forward, one way or another, and the efforts seemingly gain momentum daily.

"The barrier to entry for people who need to manage these products has changed across the board. The move to on-balance sheet management has broadened our market considerably: credit investment desks within bank treasuries, opportunistic distressed debt funds and insurance companies with investment portfolios they need to manage. Before they either relied on internal development - databases they built themselves - or their existing treasury systems. The market needs what we've been providing for years."

…those who are in structured finance for the long term desire more transparency in valuations, and [Principia’s] latest platform provides the means to bring all the necessary data sources together to best assess fair value and generate appropriate accounting. And it’s a challenging task.

“The future will dictate that structured finance managers need to have much greater flexibility to report on the valuation of their securities effectively.”

"The key is going to be educating your management, getting comfortable, having the right controls and risk processes put in place."

Principia is one vendor that has updated its offering in an attempt to address such demands, by introducing Principia SFP V6. The offering is expected to be implemented by a range of organisations - managers within bank treasuries, off-balance sheet operations and investment funds, and especially those that have to quickly adapt themselves to the new environment.

“Principia’s operational processing platform is designed for structured finance institutions who are required to have on-demand sophisticated portfolio management and portfolio risk reporting for their structured credit investments..."

“But investors will not be given mandates to invest in this area unless they have the appropriate controls and sophisticated risk management techniques in place.“

“ The only way to manage this change effectively and make the most out of new opportunities will be to have a strong and flexible operational infrastructure securely in place. “

Shortage of supply in the structured finance business?

“ The intensive operational challenges in managing these structured finance portfolios are compounded by the increased surveillance and risk oversight being performed by internal management. ”

ABCP Begins to Thaw

“… the levels of transparency, risk management, IT infrastructure and sponsor support that issuers have historically demonstrated would be indicative measures to their prospects of participating in the market of the future. “