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PCS user guidebook. Webinar Presentation. December 2012. Introduction Summary of PCS Initiative The PCS Organisation Summary of PCS Eligibility Criteria The Label Process: High level principles  Summary of Eligibility Criteria  Key Themes of PCS Process 

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Pcs user guidebook

PCS user guidebook

  • Webinar Presentation

  • December 2012


Pcs user guidebook

Introduction

Summary of PCS Initiative

The PCS Organisation

Summary of PCS Eligibility Criteria

The Label Process:

  • High level principles 

  • Summary of Eligibility Criteria 

  • Key Themes of PCS Process 

  • Nine practical PCS Label Process Steps

    Why Apply for the PCS Label

Agenda


Pcs user guidebook

PCS is open for business as of 14thNovember, 2012

The PCS Label test run phase has been completed and the first label has been awarded to Bilkreditt 3 Limited

The PCS user guidebook is a practical guide to the process of obtaining and maintaining a PCS label

Introduction


Pcs user guidebook

  • PCS is a non profit, initiative with the purpose of creating a label for high-quality securitisations

  • The purpose of the PCS Initiative includes:

  • Revitalising the European securitisation market

  • Supporting the growth of the European real economy

  • Fostering the development of best market practices for the European securitisationmarket with agreed standards of quality, transparency, simplicity and standardisation

  • Improving market confidence for all participants including investors, issuers and regulators

Summary of PCS initiative


Pcs user guidebook

  • The PCS Association

    • The Board of PCS Association

    • The PCS Market Committee

    • Other PCS Committees

  • The PCS Secretariat

    • The Board of PCS Secretariat

    • PCS Staff

  • Other partners

    • Screening Partners

    • IT, Legal and other support

      Note: The Board of PCS Association and PCS Market Committee will meet on a quarterly basis

The PCS Organisation


Pcs user guidebook

PCS user guidebook

This is the PCS Board. 9 member Board appoints committees 12 person Market Committee will assist/advise PCS Secretariat

PCS Association (Belgian not-for-profit association)

Market Committee

External Committee

Arbitration Committee

PCS Secretariat contracts with third parties to support its work

PCS Secretariat (UK Private Limited Company)

Ian BellHead of PCS Secretariat

Screening

Partners

IT and other Advisors

Mark Lewis

Managing Director

Tris Lateward

Office Manager


Pcs user guidebook

PCS Association – Members

  • Allen & Overy

  • Allianz

  • AXA

  • Baker & McKenzie

  • Barclays

  • Bank of America Merrill Lynch

  • BBVA

  • Bishopsfield Capital Partners

  • Bloomberg

  • BNP Paribas

  • BNY Mellon

  • Clifford Chance

  • Credit Suisse

  • Deutsche Bank

  • DNB Bank

  • European Banking Federation

  • HSBC

  • HSBC Global Asset Management

  • ING

  • IntesaSan Paolo

  • J.P. Morgan

  • KPMG Advisory N.V.

  • Lewtan Technologies

  • Linklaters

  • Lloyds Banking Group

  • Mayer Brown

  • Nationwide Building Society

  • NIBC Bank

  • Obvion

  • Rabobank

  • Royal Bank of Scotland

  • RBS Asset Management

  • Santander

  • Securitisation Services

  • Swiss Re

  • SocieteGenerale

  • TwentyFourAsset Management

  • UBS

  • UniCredit

  • Weil, Gotshal & Manges


Pcs user guidebook

PCS Association – Observers

A number of other institutions and associations are “Permanent Observers” of the PCS Association:

  • Association for Financial Markets in Europe (AFME)

  • European Central Bank (ECB)

  • European Fund and Asset Management Association (EFAMA)

  • European Financial Services Roundtable (EFR)

  • European Investment Bank (EIB)

  • European Investment Fund (EIF)

  • Dutch Securitisation Association (DSA)

  • Insurance Europe

  • KfW

  • True Sale International (TSI)


Pcs user guidebook

  • Key PCS documents

  • The PCS Rule Book

  • The PCS Procedures Manual including appendices

  • The PCS Application Form

  • The PCS Terms and Conditions

  • The PCS Checklist

  • The Originator Certificate

  • The PCS Label Certificate

  • The PCS Compliance Certificate

    The PCS website

    www.pcsmarket.org

The PCS Organisation


Pcs user guidebook

PCS will only include asset classes that have performed well, are important to the real economy and meet investor needs on simplicity, transparency, quality and liquidity

PCS is not a credit rating and is not intended to replace credit analysis

Rating eligibility criterion will be the highest achievable credit rating in the relevant jurisdiction provided that it is investment grade

Process is substantially algorithmic (enabling for a quicker and simpler process)

On-going loan level reporting requirements

Dynamic over time to accommodate market and regulatory developments

The PCS Label can be awarded to both “market” and “retained” transactions

Retrospective eligibility – label can be awarded to existing bonds

Recognising existing market practices (e.g. country specific and asset class specific) provided they are consistent with investor need

The PCS Process – High Level Principles


Pcs user guidebook

Eligible Asset Classes

  • Auto Loans and Leases, Consumer Loans, Credit Cards, Dealer FloorplanLoans, Non-auto Leases, Residential Mortgages, SME Loans

  • All other asset classes and some products are excluded: such as “sub-prime” mortgages (self-certification products, equity release products), CMBS, re-securitisations and synthetic transactions

    Quality

  • Strict criteria exist regarding such credit components such as loan-to-value.

  • The issuing vehicle must be incorporated in the EEA (or Switzerland)

  • The securitised assets must be originated in the the EEA (or Switzerland)

  • Only the most senior tranche of any securitisation is eligible for the PCS Label.

  • Strict criteria exist to deal with the quality of underwriting
(e.g. underwritten residential mortgages)

    Simplicity

  • Re-securitisations and synthetic transactions (such as CDO squared) are not eligible for the PCS Label

  • Eligibility criteria deal with the issue of granularity with minimum number of assets in a transaction

The PCS Process - Summary of Eligibility Criteria


Pcs user guidebook

Transparency

  • The originator must provide (where required) loan level and cash flow data

  • The originator must provide ongoing information on the performance of the transaction throughout its life

    Liquidity

  • Transactions must meet minimum size requirements

  • The originator must provide information on the proportion of any issue that is not sold to third party investors

    Please see the PCS rule book and PCS Checklist for full details which can be seen at:

    www.pcsmarket.org/the-label/downloads

The PCS Process - Summary of

Eligibility Criteria


Pcs user guidebook

The PCS Label is awarded based on explicit and public criteria

Deal by deal approval process

The PCS Label process is centered on the prospectus, Checklist and Originator Certificate

The PCS Label is “binary”: all the criteria need to be met or the Label will not be capable of being awarded

Complete accuracy in responding to the Checklist questions is critical; “near” or “almost” or “substantially” or “missing” or “partial” replies are not accepted. The wording in the Checklist and Originator Certificate responses must 100% match that of the Checklist questions.

The PCS Eligibility Criteria are designed to remove or minimiseany subjective process

PCS Secretariat will support the Applicant by advising upon and, for certain questions, interpreting issues that may arise in relation to the Checklist (and Label process)

The PCS Process – Key Themes


Pcs user guidebook

The Checklist and Originator Certificate may be subject to amendment over time for reasons including market relevance and accuracy. The board of the PCS Association will have sole discretion over any changes to criteria but will have the ability to consult with the Market Committee over any changes. The Market Committee may propose changes to the Board of the Association

The PCS Process is fundamentally driven by the transactional law firm i.e. the law firm advising the Applicant

The transactional law firm prepares the central document: “the PCS checklist”

The transactional law firm must also draft the prospectus and Originator Certificate so that it allows the eligibility criteria/checklist to be screened against the prospectus and Originator Certificate

The prospectus is a document subject to securities law and supervision of listing authorities; the checklist will therefore have a sound legal underpinning

The PCS Process – Key Themes


Pcs user guidebook

The nine practical PCS Label Process steps are:

  • Intention to make an Application

  • Label Application

  • Screening Partners

  • Checklist, Originator Certificate and Prospectus

  • Checklist Changes and Checklist Interpretations

  • Issues and Disputes with the Checklist, Originator Certificate and/or Prospectus

  • Awarding the Label

  • PCS Label Fees

  • On-going Label maintenance

The PCS Label Process – Steps in the Process


Pcs user guidebook

  • Intention to make an Application

    • Early notice is encouraged especially where new label applicants, new asset classes, new jurisdictions or updated Checklists are involved

    • A place in the queue, if any, for Screening Partner checklist work will be determined by date of notice of an intention to make an application or Application, whichever is the earlier

    • A notice of an intention to make an application should be sent by email to [email protected] together with a telephone call to PCS UK staff

The PCS label process – Step 1


Pcs user guidebook

  • Label Application

    • An application form may be downloaded from the PCS website, filled in with the necessary details, signed and returned to [email protected]

    • PCS will review the application and confirmation that the application, if accepted, will be sent within one London business day

    • In the case of material issues or new technical issues, assets, jurisdictions, applicant or arranger, a verbal conversation may be necessary to discuss and review those issues and/or check that all initial checklist points have been checked and are in order or will be checked and will likely be in order

The PCS label process – Step 2


Pcs user guidebook

  • Screening Partners

    • The Screening Partners are the Irish Stock Exchange, KPMG and the TSI

    • Screening Partners will be chosen for a transaction according to certain rules including country of asset and currency although as far as possible in strict rotational order

    • The choice of Screening Partner is the Secretariat’s and not the Applicant’s.

    • The Applicant will be notified of the chosen Screening Partner following confirmation that the Application is accepted

The PCS label process – Step 3


Pcs user guidebook

  • Checklist, Originator Certificate and Prospectus

    • A checklist may be downloaded from the PCS website at www.pcsmarket/the-label/checklist

    • The transaction lawyers would typically fill in the checklist indicating for each question in the prospectus page/ref box where the relevant information can be found in the prospectus and/or Originator Certificate

    • The completed checklist should then be sent to the Screening Partner with a copy to [email protected] together with the transaction Prospectus and Originator Certificate

    • Good examples of completed Checklists, Originator Certificates and Prospectuses can be found at www.pcsmarket.org/pcs-transactions

    • If the Application and full documentation is in acceptable form, an Applicant should expect to receive a positive response from the PCS Secretariat within 4 days from submission of documentation

The PCS label process – Step 4


Pcs user guidebook

  • Checklist Changes and Checklist Interpretations

    • Changes to the Checklist are subject to review by the PCS Market Committee and review and approval of the Board of PCS Association which meet on a quarterly basis

    • An updated PCS Checklist is expected to be published in the next few days (after a review of the existing Checklist subsequent following a number of Checklist “test” and “live” runs)

    • The PCS Secretariat may provide interpretations of the Checklist for Applicants subject that interpretations of a material nature will be passed to the PCS Market Committee and Board of PCS Association

    • Please see www.pcsmarket.org/the-label/interpretations for a full list of PCS Checklist interpretations to assist the Applicant to correctly complete the Checklist and Originator Certificate

    • A selection of relevant and recent interpretations of the checklist can be found in the following slides of this presentation

The PCS label process – Step 5


Pcs user guidebook

  • Issues and disputes with the Checklist, Originator Certificate and/or Prospectus

    • An Application may be rejected for a number of reasons including:

      • Checklist not in acceptable form

      • Originator Certificate not in acceptable form

      • Prospectus not in acceptable form

      • Reputational issues

    • PCS Secretariat, the Screening Partner will discuss, in good faith, solutions to the problem/s with a view to amending the documentation into an acceptable form

    • Matters relating to the interpretation of the labeling criteria will be determined by the Head of the PCS Secretariat

    • If the Applicant does not accept the determination of the Head of the PCS Secretariat, it shall be entitled to lodge an appeal with the PCS Market Committee

The PCS label process – Step 6


Pcs user guidebook

  • Following the judgment of the PCS Market Committee, the Applicant may make a final appeal to the but only on grounds of procedure or natural justice

  • Please see full process in relation to problems and appeals in the PCS Procedures Manual or go to www.pcsmarket.org/the-label/downloads

The PCS label process – Step 6


Pcs user guidebook

  • Awarding the label

    • When the Screening Partner has completed its checks, it will send a letter to PCS Secretariat advising that the checklist has been fully and correctly filed out or there certain issues that cannot be resolved

    • PCS will review the application and confirmation that the application, if accepted, will be sent within one London business day

    • In the case of material issues or new technical issues, assets, jurisdictions, applicant or arranger, a verbal conversation may be necessary to discuss and review those issues and/or check that all initial checklist points have been checked and are in order or will be checked and will likely be in order.

The PCS label process – Step 7


Pcs user guidebook

  • PCS Label fees

  • The fees for the PCS Label shall be payable in Euros or Pounds Sterling depending on the currency in which the securities are denominated

  • The fees become payable as soon as a checklist is received by a Screening Partner irrespective of whether the PCS Label is awarded. Payment should be made by the Applicant within 30 days of receiving an invoice which is typically sent around closing date

  • The PCS Label fee, if denominated in Euros is: Euro 9,650 + VAT (if applicable); The PCS Label fee, if denominated in GBP is: GBP 7,500. + VAT (if applicable)

  • From the start of 2015, an annual maintenance fee will be charged for each transaction receiving the label after April 30, 2013 of GBP 5,000 or Euro 6,000 + VAT (if applicable)

  • For the full terms and conditions regarding fees and the PCS Label, please consult the PCS Terms and Conditions and the PCS policies and procedures manual or visit www.pcsmarket.org/the-label/application-forms-fees

  • Please note that PCS reserves the right to increase the fees in the circumstances set out in the PCS Terms and Conditions

The PCS label process – Step 8


Pcs user guidebook

  • On-going label maintenance

    • On an annual basis, no later than one month after the award of the PCS Label, the Applicant will be required to send to the PCS Secretariat a Compliance Certificate in the form of Appendix 6 of the PCS policies and procedures manual

    • The Compliance Certificate form may be found at www.pcsmarket.org/the-label/downloads

    • Failure to send in the annual compliance Certificate will result in a withdrawal of the label

The PCS label process – Step 9


Pcs user guidebook

  • Support for the return of a broad and strong European securitisation market

  • All-industry initiative with support across the European spectrum

  • Help establish the PCS Label with European investors, regulators, central banks and policy makers; stronger participation will lead to stronger attention to the PCS Label

  • Low cost of access to the PCS Label

  • Significant potential future benefits of the PCS Label; leveling the regulatory playing field

Why Apply for the PCS Label ?


Pcs user guidebook

Ian Bell, Head of PCS Secretariat

Tel:+44 (0) 20 3440 3721

Mob:+44 (0) 7500 558 040

E: [email protected]

Mark Lewis, Head of PCS Operations

Tel:+44 (0) 20 3440 3722

Mob:+44 (0) 7500 448 833

E:[email protected]

Tris Lateward, Office Manager

Tel: +44 (0) 20 3440 3723

Mob:+44 (0) 7780 333 895

E:[email protected]

[email protected] (for general enquiries)

[email protected] (for the label applications)

www.pcsmarket.org/contact-us

Contacts at the PCS Secretariat


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