French Covered Bonds

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Blaise Shepherd
5 years ago
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1 1 Dubai, December 15th, 2010 DIFC Conference Center Thierry Dissaux Former Special Adviser for Financial Affairs, French Treasury

2 A new legislation : what for? Offer investors a new legal covered bond market segment: the obligations à l habitat Capitalizing on the success of the obligations foncières created in 1999 Capitalizing on the success of the contractual covered bonds issued by French banks since 2007 Opening the scope of accessible prime quality products for investors Widening investor base for issuers (compliance with UCITS European directive) Granting banks with a powerful refinancing tool Reinforcing Paris market in the Eurozone 2

3 A new legislation : what for? Strenghten the legal features of the bonds in a best in class approach Extended overcollateralization Extended liquidity requirements within the law Extended tool kit for liquidity managament including a self issuance feature for ECB refinancing Same liquidity instruments for both obligations foncières and obligations à l habitat 3

4 A new legislation : What is it in an OH? Same legal framework than for obligations foncières Same assets than in contractual covered bonds Same type of residential loans pool guarantee than in contractual covered bonds Strenghthened liquidity and collateralization features compared to previous OF 4

5 A new legislation What is it in an OH? Same legal framework than for obligations foncières Same assets than in contractual covered bonds Same type of residential loans pool guarantee than in contractual covered bonds Strenghthened liquidity and collateralization features compared to previous OF When? Beginning

6 Sociétés de Crédit Foncier SCF Sociétés de Financement de l Habitat SFH Securitization SPV Issued securities Obligations foncières OF (Covered Bonds) Obligations à l habitat OH (Covered Bonds) Bonds for each tranche of the SPV Underlying assets Asset pool Guarantees granted to investors Liquidity management 1. Residential loans backed by a mortgage or, up to 35% of the pool, by an external mortgage insurer 2. Public entities (including local authorities) Assets above, sold by the originator All residential loans (mortgages, external mortgage insurers, internal mortgage insurers) Loans granted to the originator, backed by assets above Legally : Privilege granted by law to bond owners on the asset pool, with an over collateraliozation + banking license (regulated credit institution) and specific supervisorship Embedded in the structure, in call order : 1. Residential loans in the asset pool 1. Sponsor/ originator 2. Back up (implicit guarantee) from creditworthiness as main debtor of the the sponsor/ orginator as issuer shareholder of the issuer 2. Residential loans backing the loans to the sponsor/ orignator Same for SCF and SFH, in particular : 1. market and ECB refinancing on assets 2. promissory note issuance 3. credit lines from sponsor 4. self-issuance for ECB refinancing Residential mortgages Assets above, sold by the originator Legally : None Issuer is not a regulated credit institution In the structure : 1. Residential loans in the asset pool 2. Tranching and slicing/ waterfall NB : no guarantee from the sponsor/ originator (off balance sheet vehicle) 6

20 October 2010 EUROPEAN COVERED BONDS (CB) MARKET

20 October 2010 EUROPEAN COVERED BONDS (CB) MARKET EUROPEAN COVERED BONDS (CB) MARKET 20 October 2010 Covered bonds are debt obligations that are backed by a dedicated underlying assets portfolio. These assets give to the bearers of these debt obligations