Implementation of FVC defintion specific cases NL

1. Implementation of FVC defintionspecific cases NL WPFS Workshop on Securitisation 27-28 May 2010 Banco de España - Madrid Eric Klaaijsen De Nederlandsche Bank

2. Introduction • Background • Definition of originator • Specific cases • Concluding remarks

3. 1. Background • ECB Regulation on Financial Vehicle Corporations (FVCs) engaged in securitisations  FVC statistics for monetary policy purposes • Implementation on a national level  interpretation problems and borderline cases • Still, decisions to be made and therefore clarifications needed

4. 2. Definition of originator • Transferor of assets or credit risk should always be identifiable, also for CDO/CLO • Assumes assets already created before securitising actually seller of assets or credit risk

5. 3.1 Case 1: Issuing company pass- through bonds • Issuance of bonds for financing non yet existing loans No first lender and no transfer of already created assets • No FVC (issuing company is first lender and a specialised lending corporation rather than FVC)

6. 3.2 Case 2: Funding corporation US and purchasing company NL • Funding corporation in US issues short-term securities • Proceeds as bilateral loans to purchasing company in NL which purchases the assets  Multi-vehicle cross-border securitisation structure consisting of two companies • Both FVCs, but US funding corporation no euro area resident (and therefore not included in euro area FVC statistics)

7. 3.3 Case 3: Real estate loan fund • Fund has taken over real estate loans by CDS. • Financed by private loans by two investors, < EUR 500 million. Issuance of notes if sufficient interest. • To be considered as issuance of “other debt instruments”?  Guidance ECB: depends on number of creditors, ranking and amount  No FVC since < 5 creditors and < EUR 500 million

8. 3.4 Case 4: Issuing company UK, holding company and originator NL (i) • Issuing company UK issues CMBS  proceeds lent to holding company in NL lent loan proceeds to two companies in NL owning real estate in UK  Transfer of credit risk of existing and owned real estate to investors  securitisation • No purchaser, but holding company grants loan financed by CMBS  multi-vehicle securitisation structure • Counterargument: holding company is first lender and originator, so no FVC

9. 3.4 Case 4: Issuing company UK, holding company and originator NL (ii) • Economic reality: real estate owning companies issue (secured) liability to holding company, which in the end is securitised • However: could originated liability be securitised according to FVC definition from a legal point of view?  Still, preliminary: issuing company and holding company FVCs (but issuing company resident in UK and, therefore not included in euro area FVC statistics)

10. 4. Concluding remarks • Application of uniform interpretations of definitions important for harmonised and consistent FVC statistics • Guidance from ECB to be followed • Aware of possible differences with market practices and supervisory sources • When interpretating definitions, taking into account market practices and economic realities