In the Beginning: A Timeline of EUROCATALYST Events
Note: All AMERICATALYST events will be added soon.
EuroCatalyst and AmeriCatalyst have a 20-year history as producers of the most innovative, enlightening series of think tanks focused on the state of the housing ecosystem, from Europe to the United States. Milestones along their timeline:
2000: TONI MOSS ESTABLISHES EUROCATALYST BV IN NAARDEN VESTING, NL
In 2000, I had been living and working in The Netherlands for four years. My employer, Bouwfonds/STATER, was owned by the municipalities of the Dutch government and privatized that year, being sold to ABN Amro. As the Director of Corporate and Business Development, the role that I was brought in to play was to increase the value of the company by bringing in new ideas and business models, setting strategy and grow the company by doing joint ventures and establishing cross-border operations. During my tenure, I had worked across eighteen countries and had traveled, on average, 200 days a year. Given the network and reputation that I had built across the UK and Europe as well as my ideas to help transform the European housing market, rather than stay with ABN Amro I decided to leave and start my own firm, EuroCatalyst BV.
EuroCatalyst provides hands-on advisory services to establish, acquire and/or build cross-border operations for firms engaged in housing finance and related ventures including fintech, mortgage distribution, origination, servicing and funding across EU borders. My initial clients were many startups in various countries, as well as banks, investment banks, private equity and venture capital firms. In capital markets, I represented national covered bond market issuers to increase their investor bases around the world. To really put EuroCatalyst on the map, I released a comprehensive White Paper comparing and contrasting the products, performance, processes and practices of EU and North American mortgage markets, which to my knowledge, was the first national market-to-market comparison ever done. In doing so, I became a clearinghouse for information on global mortgage markets. In preparation for the newly emerging "Single Market" for financial services in what would become the "Eurozone" in 2002, I became an advisor to the European Union to make recommendations on the harmonization of EU mortgage markets.
2001: THE TIPPING POINT
In 2001, I began to turn my somewhat involuntary clearinghouse for information into a more formal network that brought together all of the most important market players from each country to meet each other and collaborate. Hence the name, "EuroCatalyst". Prior to that time, there were twelve distinct national markets, each one having their own constellation of important firms who drove the market with their own way of doing things. In other words, they were a big deal in their own market, but on a pan-European scale they were smaller fish in a much larger pond. As a natural connecter of people and ideas, I embarked on a pan-European "road show" that brought people together to accelerate deal flow. In several financial media articles, I was continually referred to as “the tipping point” for my efforts to establish a powerful pan-European community of senior executives from all national mortgage markets for the first time. My underlying concern was the need to bring together all relevant constituents to inform and warn them about the impact of globalization and its forces on mortgage markets around the world. My hope was to establish a sound collaborative strategy in anticipation of the profound upcoming market disruptions due to the launch of the euro and Single Market.
As European lenders began to move assets off their balance sheets utilizing new securitization legislation, I was also concerned that the drive to establish a global mortgage-backed securities market would fail due to the fundamental underlying differences in each national market. Furthermore, rating agencies began to assign "harmonized" ratings on MBS issuances without compensating for those underlying market differences. Given the low interest rate environment as well as the pace of newly launched mortgage products that moved down the credit curve and up the LTV curve, I was worried that mortgage markets around the world could potentially implode. At the IMN Global Asset-Backed Securitization conference in Barclona that year, I gave a speech titled, "The Owl of Minerva Only Flies at Night," which laid out my theory. To add a bit of levity to the presentation, I played the song, "I Saved the World Today" by the Eurythmics at the end of my speech. The audience reaction to the presentation was overwhelmingly negative. When it was all over, the entire room was silent except for one person who clapped very slowly and said very loudly, "That took guts." I was told that while they did love the song, "the party" of reckless lending, borrowing and over-leverage was just getting started.
In the fall of 2001, I took my research to the IMF, the European Commission, the European Central Bank, the US Federal Reserve and the World Economic Forum hoping to convince them to produce a conference or create a think tank about how the forces of globalization were accelerating and magnifying the vulnerabilities of mortgage markets. I was told a similar story each time about how mortgages were just one of many financial services products and that as a primarily local activity, they were uninterested in getting involved. When no one expressed any concern, I decided to do the event myself.
2002: EUROCATALYST LAUNCHES SIGNATURE EVENT IN MADRID
Mid-year, I convinced Shirley Jackson, then the Deputy Managing Editor of The Japan Times in Tokyo, to be one of the first partners in the event. At that time, the Japanese were one of the largest investor bases for both MBS and European covered bonds. Having such an influential Japanese publication behind gave immediate traction to the event. When I literally began passing out from the pressure of doing everything myself, Shirley took a 6-month leave of absence to join me in The Netherlands with the hope of helping me succeed in that first year. Overnight, I had doubled my capacity and now, there were all two of us. The event would be an invitation-only, electronically interactive peer-to-peer think tank for 350 senior European mortgage executives, institutional investors, investment banks, NGOs, regulators, analysts and rating agencies. I decided to hold the first event in Madrid because I thought that when mortgage markets imploded, Spain would get hit the worst.
Our theme that year was, "Will European Markets Survive Globalization?". The favorable response to the event, its format and its program was so overwhelming that sessions on the first day did not end until 9 pm. This was not just because the Dutch blocked the door to the conference room where their session was being held and refused to leave the stage. While it was very hard not to laugh, I stood outside the ballroom fuming with the Italians, whose session was now running late. From that point forward, each year the Dutch market session was held I would begin their session by playing a film clip of the famous Michael Caine line from Austin Powers: "Son, there are two things I cannot stand in this world: People who are intolerant of other cultures, and the Dutch!", immediately followed by the song "Windmills of Your Mind" by Sting. The Dutch were shameless. They loved it.
The EUROCATALYST 2002 event was the first time in history that all major trade organizations in every EU country supported a single event. However, the friction among and between national market trade organizations was so potent that Shirley and I made the decision to keep the event entirely independent and neutral moving forward. Much of the friction stemmed from historic and mutual cultural bias as well as the European Union's intent to harmonize EU mortgage markets as a key step in creating a Single Market for financial services across the EuroZone. In an October, 2002 op-ed for the London-based publication Structured Finance International, I referred to navigating the substantial differences in European mortgage markets as "Playing scrabble without the vowels" (Credit to Duke Ellington). Given those differences, national market trade organizations were in fierce competition for the EU to choose their market standards for harmonization and thereby gain a substantial advantage in cross-border competition.
In the same op-ed, I attempted to bring attention to the vulnerability of and investor over-reliance upon rating agencies. I wrote,"Within rating agencies, for example, there are naturally methodological differences between how structured finance and bank analysts view certain risks, and how they should be guarded against or provisioned for. Some say these differences offer potential for ratings arbitrage." From a commercial perspective, it was not the smartest thing I could have done. My integrity, however, remained intact.
2003: NATIONAL MARKET ROAD SHOWS + EUROCATALYST 2003 | LISBON
In 2003 we once again undertook a series of national market "road shows" throughout the year to promote the event and discuss its upcoming program topics. EUROCATALYST 2003 was held in Lisbon, Portugal, to highlight the fact that Portugal had the highest volume of mortgage-backed securities issuance in Europe that year. The event theme was "Competition and Convergence in European Housing Finance and Fixed-Income Investments", and the opening speaker was Karin Lissakers, the former U.S. Executive Director of the International Monetary Fund. One of the most interesting sessions was the very heated Champagne Debate between U.S. and European market players over what entities and which countries should be regarded as the authority on global benchmarks. The U.S. team overwhelmingly argued that as the largest mortgage market in the world, it was they who set the standard. In turn, Europeans argued that despite the innovation of Silicon Valley, European markets were more technologically advanced with newer operating systems and early online lending adoption. They also cited the inherent longevity, investor security and stability of covered bonds as a superior funding tool to that of securitization. In that same session, a representative of an American mortgage insurer referred to the new expansion of non-conforming and sub-prime loans in Europe as not only innovative, but patriotic. He stated, "We're performing a public service by democratizing access to credit." I responded, "True. But in democratizing access to credit, you're also democratizing the risk."
2004: INVESTMENT FOCUS | NORDIC COVERED BONDS
By 2004, mortgage-backed securities and covered bonds (issued by European institutions in each country) were in fierce competition to win over the global investor base for fixed-income securities. At the same time, national market covered bond issuers were in fierce competition with each other. In 2004, EuroCatalyst was hired by all covered bond issuers in the Nordic countries (Denmark, Sweden, Norway and Finland) to help differentiate Nordic issuers from their counterparts in other EU countries, as well as raise the profile of the Nordic issuers to global bond investors. The one-year market positioning mandate concluded with a new event, the EuroCatalyst IN(vestment) FOCUS series. Held in Frankfurt, Germany, (home of the largest and most dominant covered bond product, the Pfandbrief), the event brought together 132 fixed income investors from 13 countries, including 12 sovereign wealth funds.
2005: EUROPESERVICING | AMSTERDAM
At EUROCATALYST 2002 in Madrid, the audience was so averse to discussions about servicing that pillows were jokingly thrown onstage during the servicing session in protest of the lack of excitement in the topic. By 2005, so little attention was paid to servicing in Europe that EuroCatalyst created a new event, EUROPESERVICING, to motivate underappreciated servicers and drive improvements in the sector throughout Europe. It is the first time that an event dedicated to servicing in Europe was ever held. One of the main advertisements for the event (see left) stated, “Sure, Europe has witnessed unprecedented growth in mortgage lending over the past 5 years. But portfolios are seasoning and operational losses can no longer be offset against rising house prices. Where will you run to maximize your growth and minimize your risk?” At the bottom of the advert, EuroCatalyst included a reference to Madrid, including the line "If we can make covered bonds sexy, imagine what we can do for servicing".
In opening comments, Toni Moss delivered a "Servicing Manifesto" that called for a redefinition of servicing from "the originator's back office" to the "homeowner and investors' front office". Moss pointed out,
"It is ridiculous that the most compensation in mortgage lending always goes to those on the front end - the loan officers and originators who lend the money - or in essence, give the money away. Those who are the least compensated - the servicers - are the ones actually getting the money back by collecting the payments. Servicers are not the originators' back office. That concept is outdated, diminishes the role and value of servicing and de-motivates the entire sector. Servicers are the front office for investors and homeowners" .
One of the most compelling speakers was Rik Douwes, the pioneering CEO of STATER, based in The Netherlands. Douwes was the architect of and was responsible for creating the world's first completely electronic originator, servicer and funder - in 1997. STATER was also known as "The EuroServicer" for its revolutionary cross-border capabilities.
EUROCATALYST 2005 | ROME
In 2005, EUROCATALYST was held in Rome with the support of the Italian Banking Association. The opening session, "Retail Markets at Wholesale Prices: Gauging the Impact of Globalization on Mortgage Markets" directly questioned the rationality of commoditizing high-risk mortgage assets on a global scale. In the mortgage funding session entitled, "Securitization and Lending Anarchy: How Much Are Investor Expectations Driving Lending Standards", the discussion got heated with regard to European regulators vs. rating agencies. Regulators argued that they should enforce capital markets standards and criteria, while rating agencies countered that they were better positioned with investors to "harmonize" criteria with bond ratings. As brought up in Lisbon in 2003, once again rating agencies were questioned about the fact that MBS structurers and arrangers were engaging in ratings arbitrage, which they continued to vehemently deny.
One of the more notable sessions featured four top economists discussing house prices around the world, which were now at all time highs. Session hosts Toni Moss and Tim Skeet walked onstage wearing T-shirts emblazoned with the caption, "Mr. Housing Bubble. When I pop, you're screwed!" There had never been a time in history when borrowers/homeowners all over the world were so over-levered on their homes. Even the respected Economist magazine brought attention to the inevitable decline in house prices and the resulting economic devastation with their June 2005 cover story, "After the Fall". Despite this, lenders throughout the US continued to originate sub-prime loans with no documentation (and no equity) and in Europe, sub-prime lending continued to proliferate - particularly in the UK, Netherlands and Ireland. With regard to the risk/reward ratio of sub-prime lending, Alan Boyce commented on the U.S. market, "in the 4th quarter of 2006, the sh*t is really going to hit the fan". Indeed, it would. By now, the "American invasion" of Europe was in full throttle, including the entry of Countrywide as a service in a joint venture with The Woolwich in the UK. Plot spoiler: the venture failed spectacularly.
The most fun session of the event was titled, "The Dating Game" in which the top Italian bankers posed as mortgage borrowers in a variety of credit profiles, in competition for a fictional "date" with the Head of Genworth Mortgage Insurance in Italy. At the end of the session, the audience decided which borrower profile they would fund, thereby naming the winning "bachelor". Who won? The charismatic soccer player with inconsistent income.
2006: EUROPESERVICING | LONDON
In 2006, EUROCATALYST was not held due to Toni Moss's concerns that mortgage markets were on the verge of implosion and that all efforts and attention should be focused on servicing in anticipation of a potential collapse. This year, AmeriCatalyst placed ads in European industry publications with tongue-in-cheek advertising that said, "Who Says Servicing Isn't Sexy?"
EUROPESERVICING held that year at the British Academy of Film and Television Arts (BAFTA) in London. In honor of the venue, all sessions were themed (and highly editorialized) with movie titles, and began with film clips from famous movies. The primary focus of the event was on default, or distressed servicing, which was a relatively unknown skill set and practice in Europe, particularly as prior to 2003, with the exception of the UK and Netherlands, all European lending was done on balance sheet and risk was paramount to bank concerns. The final session of EUROPESERVICING 2006, “ ’Crash’: When High Street meets Wall Street in The City, which way do you turn?” was the most obvious editorial of all, previewing events the following year that would permanently alter the global economy.
2007: EUROCATALYST | MADRID
EUROCATALYST returned in 2007 to Madrid, where it all started. The theme that year was "Burning Down the House". On July 29, 2007, President George W. Bush stated, "the fundamentals of our economy are strong...I'm told there is enough liquidity in the system to enable markets to correct". Two weeks later, the Deutsche Bundesbank (German Central Bank) put together a $10.8 billion emergency rescue fund for IKB Deutsche Industriebank, Europe's first large casualty of the U.S. subprime crisis. The following week, due to massive losses in MBS and derivatives, the collapsing German regional bank Sachsen LB was rapidly sold to Germany's largest regional bank. This signaled the beginning of the global liquidity crisis which, in turn, drove the global mortgage market implosion. By early September, banks and mortgage originators in the U.S. and Europe began to fall like dominoes.
The opening video montage of the event featured the trailer from the film "Chicken Little", which builds up Chicken Little as a hero: "He tried to warn us...and now, in our darkest hour, he's got a plan to save us all". At that point, Chicken Little yells "run" and smashes the camera. In the opening session, "After the Deluge", Pat Butler, the Head of Global Financial Services Practice at McKinsey, delivered an aptly titled presentation, "From the Subprime to the Ridiculous: What the F*ck Happened?"
The most provocative session of the event, "The Shadow Banking System and Financial Dislocation of the New Non-bank World" made a deep dive into the rapidly evolving system of "shadow banking" operating beyond the reach of regulators. In the session description, which was written in July of that year, Toni Moss wrote:
"This 'non-bank' world is comprised of alpha-hungry investors driving highly complex and levered investment conduits, vehicles and structures that have risen in conjunction with the global housing boom. The return/yield formula has led to an appetite for risk that the traditional financial system cannot digest. The result is a gradual loss of control by central banks, and panic-driven chaos...The speed at which the contagion has spread has equally shocked market participants and the regulatory sector, proving once again that the new world of financial innovation is no more than grand experiments of trial and error that lead to uncertain and severe consequences on a global scale. If evolution provides no other options than to evolve or die, the choice is clear. The question is, what are we evolving toward?"
When Moss announced that this would be the last time that the EUROCATALYST series would be held in Europe, the event ended with a lot of tears both onstage and in the audience. The emotional scene prompted one very senior, legendary and notoriously egocentric investment banker to quip afterwards, "EuroCatalyst has built one hell of a community over the years. I just got hugged. Seven times. What the hell is that about?"
2008: EUROPESERVICING | LONDON
In 2008, servicing finally became sexy. While no one created any calendars of bare-chested servicing executives, that year servicers became the first responders on the front lines of a full-blown economic firestorm. In its advertising for EUROPESERVICING 2008, EuroCatalyst re-purposed their EUROPESERVICING 2005 advertisement, "Do I Really Need to Care About Mortgage Servicing?" The 2008 ad scratched out the title quote and replaced it with, "We know the answer to that one now!!!!"
Held at the British Film Institute, once again all sessions were themed to films and the event was aptly titled "VERTIGO: Servicing in a World Off-Balance". The event opened with the session, "To Kill a Mockingbird", referencing racial injustice (minorities were disproportionately hit by the mortgage market implosion) and destruction of innocence. McKinsey Director Charles Roxburgh ran with the theme in his presentation, "Subprime: Canary in a Coal Mine".
The following session, "Running With Scissors" referenced the breakdown of counterparty boundaries and trust in structured finance and reinforced Moss's longstanding insistence on the urgency of transitioning the focus of servicing from the originators' back off to the investors' front office. Given the catastrophe at hand, it finally hit home. The final session was "BLOWUP: When Servicing Counts: Whole Loan Sales and Asset Disposition".
EUROPESERVICING 2008 was the last event that EuroCatalyst featured in Europe. The following year, the event was held as EUROCATALYST one last time in Austin, Texas with the theme, DISTRESSED SERVICING.
In a BBC radio interview, Toni Moss was featured alongside a very well-known chief economist from one of the world's largest banks. When both guests were asked to comment on the unfolding economic catastrophe, the economist referred to current events as "the perfect storm" that would ultimately pass. In turn, Moss referred to the events as "economic climate change that will continue to alter the global economy from this point forward."