Risk Assessment of

Securitization and Bank

Lending in Spain
A Case Study of 2011's Credit
Quality Trends

Presented by:
Ruth Catherine R. Oquialda
Abbygail Faith C. Maagma
Timothy R. Baliad

August 25, 2023

Introduction

The 2011 Spain securitization case was a significant financial

event that unfolded within the Spanish banking sector. It
revolved around the practice of securitization, wherein banks
packaged and sold assets such as mortgages as securities to
investors.
Introduction

This report delves into the case of Spain, focusing on a critical

juncture in its financial history in the year 2011. This period
marked a pivotal point in Spain's journey through a complex
web of securitization practices, bank lending decisions, and
credit quality assessments.
 STRUCTURE ANALYSIS

SECURITIZATION DEAL

The structure of the Spanish Case’s

securitization deal has said to have
been explored little because of the
housing bubble that the country
housing costs in Spain rose by
more than 18% from 1997 to 2007
01
provided, and with that being said
before the years of crisis this affected
its credit growth. In numerous
European countries, housing prices
rose sharply in the years before the
crisis
 STRUCTURE ANALYSIS

SECURITIZATION DEAL

In numerous European countries,

housing prices rose sharply in the
years before the crisis. This includes
the housing costs in Spain rose by
In their 2008 study of securitization
trends in Spain from 1999 to 2006 02
more than 18% from 1997 to 2007. The
issue over mortgage financing has
also been centered on these nations,
which greatly affected their economy.
In their 2008 study of securitization
trends in Spain from 1999 to 2006.
 STRUCTURE ANALYSIS

SECURITIZATION DEAL

Obtaining legal permission to create

SPVs and securitize assets other than
According to Royal Decree 926/98, Obtaining legal permission to create
mortgages were issued in 1998. It's securitize assets other than According
to Royal Decree 926/98, mortgages
03
important to note that a lot of ratings
were issued in 1998
changed over this time. In instance,
there were 871 downgrades compared
to 43 upgrades, which illustrates the
decline. This decline is related to how
loans have changed throughout time.
 Underlying Assets
The Spanish securitization market experienced
rapid growth between 2000 to 2010.

Consumer Loans

Commercial Real Estate Loans

Mortgage Loans
Mortgage Loans

Issued to borrowers with subprime credit

scores

Under the riskier asset classification

Increase in the credit risk for banks

Looser lending standards

Housing bubble in Spain

Credit Risk Implications

Market & Regulatory Changes

04 Global efforts were made to strengthen risk
management procedures and modify financial
legislation in the wake of the crisis.

Government Intervention and

05 Bailouts
By offering rescue packages to numerous struggling
banks, the Spanish government intervened to stabilize
the banking industry.
Credit Risk Implications

Legacy of Pre-Crisis
01 Mortgage and real estate-related risks were offloaded
through securitization, which resulted in developing
sophisticated financial instruments with underlying
assets connected to the housing bubble.

Asset Quality Deterioration

02 The fallout of real estate crash was a problem for Spanish
banks. Although many securitized assets were initially
classified as high-quality, they ended up being far riskier
than expected.

Funding Challenges
03 The funding strategy used by Spanish banks had been
impacted by equities trading. These banks largely
depended on securitization to obtain capital before the
financial crisis.
Conclusion
The 2011 Spanish case of securitization stands as a
notable example of the complexities and challenges
that can arise within the realm of financial innovation
and risk management

Banks must carefully evaluate

the creditworthiness

Stricter Risk
Assessment Standards

Standardization and Best

Practices
REFERENCES:

Securitization in Spain: Past developments and expected

future trends. (2014, September 8). BBVA Research.
Retrieved August 24, 2023, from

Carbo, S., Loutskina, E., & Strahan, P. (2011, April 25). Securitization, Bank
Lending and Credit Quality: The Case of Spain. SSRN Papers. Retrieved
August 24, 2023, from https://papers.ssrn.com/sol3/papers.cfm?
abstract_id=1802358

Ashcraft, A., Schuermann, T., (2008, March). The impact of monetary policy on asset
prices: Evidence from the United States. Staff Report No. 318. Retrieved August 24,
2023 from
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr318.pdf