The road to simple and transparent securitisation

The road to simple and transparent securitisation

Alex Campbell, partner, and Gonzalo Fernandez, consultant, in the structured finance and debt capital markets group at FieldFisher, consider the recent BCBS-IOSCO consultation on simple, transparent and comparable securitisations structures.

Original news

The Basel Committee on Banking Supervision (BCBS) and the International Organisation of Securities Commissions (IOSCO) have set out criteria for identifying, and to assist the financial industry’s development of, simple, transparent and comparable securitisations structures in a new consultation. The criteria also aim to help parties involved in a securitisation transaction evaluate the risks of a particular securitisation as part of their due diligence on securitisations. Those wishing to comment on the criteria should do so by 13 February 2015.

A number of major international financial institutions have broadly welcomed the criteria for identifying simple, transparent and comparable securitisations put forward in a consultation by the BCBS and IOSCO.

What is the background to this consultation?

The volume of term securitisation issuance declined significantly following the onset of the financial crisis in 2007. While issuance levels have begun to rally in some jurisdictions and asset classes recently, activity generally remains below that of pre-crisis levels. The BCBS-IOSCO consultative document dated 11 December 2014 (the CD) identifies two principal reasons for the slower market:

  • a lack of investor confidence in securitisation as an asset class following losses in mortgage-backed and collateralized debt obligation transactions during the credit crisis, and
  • the difficulties investors face when trying to assess the credit and other risks of securitisations, particularly with more complicated transactions, such as resecuritisations

The CD sets out the results of extensive market research, undertaken by a BCBS-IOSCO taskforce established to identify the factors that may be hindering the development of sustainable securitisation markets and to help encourage the development of simple, transparent and comparable securitisations. Fourteen criteria for simple, transparent and comparable securitisations have been identified across three risk types, which are asset risk, structural risk and fiduciary/servicer risk.

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About the author:

Meet Emma:

1.Banking and finance lawyer with experience in derivatives, debt capital markets, securitisation and structured finance in London and Paris

2.Likes ballet, playing the harp and holidays

3.Thinks the law is always changing!

Emma trained and qualified at Allen & Overy LLP and worked in their derivatives and structured finance teams in London and Paris.  She then joined the foreign exchange prime brokerage legal team at Deutsche Bank before spending 4 ½ years with Crédit Agricole CIB advising the fixed income and derivatives desk.