First securitisation fund in Spain categorized as STS (Simple, Transparent and Standardized).
On 8 July 2019, Europea de Titulización did incorporate the consumer loans securitisation fund BBVA Consumo 10 FT; two days after the Incorporation, the deal was included in the European Securities and Markets Authority´s (ESMA) list for securitisations, that comply with the simple, transparent and standardised criteria.
The deal, with an issuance amount of EUR 2,010 million, is the first securitisation fund originated by BBVA under the new Regulation (UE) 2017/2402, which came into force on 1st January 2019, laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation, and amending Directives 2009/65/CE, 2009/138/CE and 2011/61/EU and Regulations (UE) nº 1060/2009 and (UE) nº 648/2012.
In the wake of the financial crisis triggered by the US subprime mortgage market in 2007, the financial authorities have been focusing on securitisation transactions originated with low quality standards, questionable underlying collateral and in a non-transparent mannner. In this context, the new regulation aims to solve those problems with a general framework and goes one step ahead with the specific framework, by doing a positive differentiation for those securitisation funds that achieve additional quality requirements, more stringent homogeneity criteria and a greater commitment of reporting and transparency. These deals are distinguished by the STS status and they need to accomplish not only with the general requirements of the Securitisation regulation but also with the Articles 19 to 22 (Non-ABCP) or 23 to 26 (ABCP) of the Regulation.
Although, at the date of Fund’s incorporation, in Spain it has not been designed a National Competence Authority (NCA), while the majority of the countries of the Union have that entity and its relevance in the STS designation is crucial, Europea de Titulización was always very clear about that this situation could not be an obstacle to securitise STS deals, bearing in mind that in Europe more than 20 STS deals have normally came to the market . In this point resides the relevance, or necessity, of a first Spanish deal with these characteristics, being a reference for the upcoming Spanish deals and a clear message to Europe of normality in our market.
Even though the responsibility of the STS qualification resides only on the Originator side, the Fund, according to Article 27.2 of the Regulation, has benefited from the advising of the authorized third party verifier, PCS (Prime Collateralised Securities), who has guided and checked, point-by-point that the securitisation complies with Articles 19 to 22. On the other hand, Deloitte España has reviewed a sample of the underlying assets and has checked its accuracy and veracity, as required by Article 22 of the Regulation.
The Originator, BBVA, being aware of the importance of originate and place this type of securitisations, that with no doubts will improve the safety of the securitisation market and will benefit financial entities from more favorable regulatory capital treatment, has worked closely with EdT to make BBVA Consumo 10 FT possible.
On this way, we would like to recall the words of BBVA’s Spain Head of Securitisation after the issuance:
“…this first STS issuance in Spain entails a big step for the recuperation of the securitisation market, which has been negatively affected by the global financial crisis of 2008. The STS framework allows securitisation deals with clear, recognizable and secure characteristics that improve their transparency, reduce their risk exposure and benefit the performance of an efficient and secure European financial system”.