Banks sell novel package of obscure trade finance assets Citigroup and Santander have sold $1bn of trade finance assets in a securitisation designed to pave the way for more obscure assets to move from bank balance sheets to institutional investors. New capital rules, named Basel III after the Swiss city where the international regulations were written, hurt the profitability of assets that banks would have typically held. At the same time, pension funds and other investors hunting for yield in a prolonged low interest rate environment are more amenable to investing in new asset classes. The US bank and its Spanish counterpart have spent two years trying to get the securitisation, named Trade Maps 1, off the ground. The deal, which priced at 83 basis points over one-month Libor, was beset by legal challenges of what the banks say is the first trade finance securitisation involving more than one bank and in more than one country. "While I think we're leading the industry there's a lot of noise around trying to bring trade paper to the institutional market," said John Ahearn, head of trade at Citi. What was fairly obscure on-balance-sheet assets that not many institutional investors knew very much about all of a sudden starts to become a more understood asset class. That I think is interesting. BNP Paribas launched a commodity trade finance securitisation in August called Lighthouse, which issued paper backed by the short-term loan advances that the French bank offers to companies shipping oil and metals. Such financing, typically used in trade finance, covers the period between payments to suppliers and payments from the final buyers. BAFT-IFSA, an industry trade association whose members range from Barclays to Bank of America, is trying to standardise securitisations for trade finance assets in an initiative called the London group. Other banks and trading houses are said to be looking at following suit. Mr Ahearn said a second securitisation was in the works and Citi had already received "seven or eight" enquiries from potential partners. "We're looking at driving this to an industry standard," he said. Fabio José Fagundes, of Santander, said: "We have invested considerably in a platform that will allow a sustainable future for the financing of global trade flows." Citi has already met its capital requirements under Basel III but the bank, like rivals around the world, is trying to release capital and boost its return on equity by shifting assets off its books. Mr Ahearn said: "These assets are considered a true sale so it helps with the Basel III ratio. That's why we did the transaction - this is a way for us to grow our business without just growing the balance sheet. Citi and Santander sold $875m of triple-A rated notes, $78m of single-A rated notes, $31m of triple-B rated notes, and $17m of split-rated double-B/single-B notes. The banks retained an unrated equity tranche. Morgan Stanley joined Citi and Santander as book runners on the transaction.