Trade receivables securitisation programmes on the rise - report

According to a research from working capital solutions provider Demica conducted amongst 30 European banks, along with a small selection of US-based global banks active in Europe, more than 80% of bank respondents have seen growth in their TRS business or an increase in customer enquiries in the last 12 months. Main drivers of this positive development are the requirement for corporates to diversify working capital sources and the recovering economy, according to the survey respondents.

High demand is expected to originate in particular from sub-investment grade/non-rated companies who find it increasingly expensive to borrow from banks. Also helping to fuel the demand are highly leveraged companies. The increased requirement for TRS from the corporate constituency is equally matched by banks’ growing appetite for this credit facility, due to its safer profile and lower consumption of capital compared to unsecured financing. More than 65% of the surveyed banks see TRS as “very important”. Respondents also confirm that their banks are set to further expand TRS business in the next 12-24 months.

Finally, the study revealed that successful implementation of TRS programmes depends on various factors, with “accurate reporting” and “quality of banking partner” being considered the two most crucial conditions. Two thirds of respondents regard frequent asset performance reporting as a vital pillar of a TRS programme.