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This report outlines the implementation of the new ECB statistical regulation concerning securitisation vehicles in France, including the modernization of the legal framework and the new statistical reporting requirements. It provides the first results and identifies different types of securitisation vehicles already in place.
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OECD Working party on financial statistics 2 November 2009 Implementation in France of the new ECB statistical regulation concerning securitisation vehicles Dominique Durant
Outlines • Modernization of the legal framework from the 1988 law until the 2008 law • A new statistical reporting is put in place • First results • Results of the previous reporting • Different types of FVCs already identified • First statistical results
1. Modernisation of the legal framework (1) According to the 1988 law: • One legal form for securitisation vehicles (SVs): a common securitisation fund (FCC or ‘fonds commun de créances’) without legal personality. • …managed by a common securitisation fund management companies authorized by the market regulatory authority (AMF). • … their assets being limited to loans of maturity > 2 years. • …only issuing ‘FCC unit shares’ which don’t provide to their ownerthe right to control the entity. In case of public issuance, the FCC must be be listed by the AMF. • Credit enhancement: limited to insurance contracts, guarantee deposits, oversized collateral, subordination.
1. Modernisation of the legal framework (2) Developmentsbetween 1998 and 2008 • FCC allowed to buy loans of maturity ≤ 2 years • FCC allowed to buy loans in subsequent transactions after the initial one (reloading) • FCC allowed to securitise receivables • FCC allowed to buy doubtful and impaired loans • FCC allowed to issue commercial paper • FCC may enter into derivative contracts for hedging purposes • Credit enhancement extended to guarantees directly attached to the purchased loans
1. Modernisation of the legal framework (3) According to the 13 June 2008 law: • Enlargement towards new players: • Common funds (FCT) without legal personality but also incorporated companies • The managing company may be a common fund management company or a portfolio management company • Broader range of securitised assets: SVs may buy insurance risks (transposition of the reinsurance directive) ; liquid assets may be of any kind, no longer restricted to deposits or T-Bills • Active management allowed : SVs may sell purchased loans, borrow cash, enter into derivative contracts for any purpose provided that the maximal loss does not exceed the total asset Potential development in the future due to new legal framework
2. A new statistical reporting is put in place (1) A new legal framework well suited to statistical reporting: • Definition of SVs in French Law as large as the ECB’s one (L214-42-1): • Including any type of legal structure (common fund, company) • SVs engaged in any type of securitisation operation and assuming various risks: insurance risks, loans, receivables, derivatives, impaired loans, securities issued by SVs • SVs may issue equity shares, common fundshares, debt securities; they may use loans or any other type of financing as well as derivatives • SVs required to report to the Banque de France for the purpose of monetary statistics (art. L214-45)
2. A new statistical reporting is put in place (2) • ECB regulation on statistical reporting of FVCs dated 19 December 2008 at the stage of IT implementation: • all French SVs will report • accounting data, plus security by security portfolio and issues, plus identification information (ISIN code, type of securitisation, sector of the seller…) • quarterly reporting as from 1rst January 2010 • timeliness: T+10 working days regarding identification information, T+28 working days for accounting data
3.1. Results of the previous reporting • Previous quarterly reporting on public SVs (49 out of 178 as at end June 2009)
3.2. Different types of SVs already identified (1) • True sale of loans from CIs: 85% of issuances as at end June 2009 • True sale of impaired /doubtful loans are recorded in the SV at transaction price and not at nominal value. A few cases.
3.2 Different types of SVs already identified (2) • Synthetic securitisation will materialise by a deposit and an entry in the P&L account, as credit default swaps are not recorded in the balance sheet. 5 SVs out of 178 as at end June 2009
3.2 Different types of SVs already identified (3) • Securitisation of insurance risk, explicitly allowed by the 2008 law, is accounted for as receivables
3.3 Preliminary results as at end June 2009 (1) • 6 FCC management companies, 5 portfolio management companies allowed to manage SVs • 178 SVs for a total amount of securitised assets of 121.7 € billion • 175 common funds (118.3 € billion) • 3 conduits (3.4 € billion) • During H1 2009: • 15 funds were created with a total amount of 27.4 € billion. All were cash securitisation. • 24 funds were terminated with a total amount of 29 € billion • Assets securitised by resident CIs represent less than 4.3% of total loans to resident private sector as at end June 2009 (overestimation due to inclusions of cases where the residents CI are only one of multiple originators)
