As history continues to unfold, the recent covered bond transactions undertaken by our Canadian counterparts represents an important step in enabling the world’s capital markets to return to normality. 

The evolution of covered bonds as an investment haven during periods of instability and uncertainty is not new, however the technology behind enabling an issuer to select, administer and support continuous investor and regulatory disclosure requirements during COVID-19 has.  This leads us to an important conundrum; how equipped are our largest financial services providers to respond to the challenge relative to our next generation of lenders?

The use of automated treasury systems to support a bank’s covered bond / RMBS programmes is not new.  In fact, the origins of introducing automated securitisation treasury platforms have been in existence for decades.   What has changed in recent times, is the ability to introduce (i) an enterprise system to all market participants at a price point that eliminates the use of in-house development, third-party outsourcing and bespoke excel modelling; (ii) cloud-computing enables vendors to provide solutions to customers without the need to include additional IT infrastructure and speed their time to market; (iii) advancements in technology to provide the required flexibility for issuers to address market requirements without the need for complex in-house coding or problematic rigid protocols; and finally (iv) the ability for securitisation treasury platforms to truly address treasury’s operational and funding requirements whilst providing material operational efficiencies including optimising cost of funding.

TAO Solutions securitization and funding software platforms address all of these issues, and more specifically for covered bond issuers, provide complete end-to-end capabilities that starts with optimized asset selection, through to Covered Bond Label approved reporting and complex monthly portfolio valuation and testing.  Empowered with these capabilities, TAO Solutions clients were able to efficiently issue more than US$30 billion (A$46 billion) into international markets in the month of March 2020 alone.

Counterparty risk can be considered to apply in the IT world, and you know pretty quickly if you have partnered with the right vendor in how their platforms can adapt to materially changing circumstances and their ability to respond to your requests during times of crisis.  Uncertainty does not necessarily need to introduce operational complexity as we continue to navigate these unchartered waters, it is important to provide staff with the appropriate tools and resources to respond to challenges as they arise and introduce best practices for all concerned.

At TAO Solutions, our dedication to the structured finance industry during this period of crisis is demonstrated by our agility to support and respond to the current challenges through the following activities:

  • having supported two of the major issuers who have recently issued Covered Bonds into the Australian market.  Specifically, they use our software to fully administer their covered bond programmes;
  • building native support for the Government of Canada’s Insured Mortgage Purchase Program (IMPP) which is specifically designed to inject $150 billion of liquidity into the Canadian mortgage for our clients, of which constitute 85% of the domestic market;
  • developing specific functionality into our LeaseSpark (credit origination) application over the next two months that will aid in the efficiency and processing times of loan applications in an effort to assist lenders to deploy funds to small to medium sized business as quickly as possible to reduce the solvency impact of COVID-19; and
  • building specialized functionality to support the funding and securitization of loan pools backed by private and government entities designed to increase lending to small and medium sized businesses.

The above is not exhaustive.  As our business continues to grow internationally, we look forward to preparing our new customers with the tools and resources to respond to these uncertain times.  Stay well and safe.