The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

RMBS: UK brings first-loss innovation

Northern Rock's first-loss product marks a new step in capital management from large-scale RMBS issuers

UK bank Northern Rock is seeking to release capital via a securitization of first-loss pieces from its Granite programme. The deal, which is expected this autumn via Barclays Capital and Lehman Brothers, represents a new asset class for the European investor base. Previous transactions of this kind have been conducted privately.

"When we do a securitization the ratings agencies require we retain a first-loss/reserve fund. This acts as a drain on Northern Rock's overall capital," says David Johnson, operational director, securitization, at Northern Rock.

No calling

The retention of a first-loss piece on the balance sheet results is extremely inefficient from a regulatory capital standpoint, considering that the first-loss tranche represents 1.5% of a typical deal. Northern Rock started its securitization programme in 1995 and none of the deals has been called yet. With £25 billion ($45 billion) outstanding it could release about £375 million of tier 1 capital.

Northern Rock securitization volumes 1999 to 2005

Pricing date Deal value $m No of tranches % share
1999 963 2 1.4

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree