The securitisation process in Spain. Developments and practical issues Miguel Ángel Menéndez and Beatriz Sanz STATISTICS AND CENTRAL BALANCE SHEET DATA OFFICE DEPARTMENT OECD. WORKING PARTY ON FINANCIAL STATISTICS Paris, 9 October 2006

STATISTICS AND CENTRAL BALANCE SHEET DATA OFFICE DEPARTMENT 2 The securitisation process in Spain Contents 1. Types of securitisation regulated in Spain 2. Characteristics of the FVCs created to securitised assets in Spain 3. Reform of the accounting standards for credit institutions and its effect on securitisation 4. Recording of securitisation transactions in the Financial Accounts of the Spanish Economy 5. Sources of information necessary to measure the different aspects of the securitisation process. Reference to Spanish sources 6. The work of the European System of Central Banks to obtain European Union securitisation statistics

STATISTICS AND CENTRAL BALANCE SHEET DATA OFFICE DEPARTMENT 3 1. Types of securitisation regulated in Spain Since 1982, credit institutions can raise funds issuing mortgage-backed securities, backed by their mortgage loans which remained on their balance sheet (a)(a) In 1992 the Fondos de Titulización Hipotecaria (Mortgage Securitisation Funds) are regulated (b)(b) In 1994 the Fondos de Titulización de Activos (Assets Securitisation Funds) are regulated (c)(c) In 2003 the synthetic securitisation is regulated (d)(d)

STATISTICS AND CENTRAL BALANCE SHEET DATA OFFICE DEPARTMENT 4 2. Characteristics of the FVCs created to securitise assets in Spain The FVCs are autonomous portfolios of assets without independent legal status whose purpose is to assemble groups of financial assets and other receivables FVCs are set up by FVC management companies which perform the functions of administration and legal representation of the FVCs They raise funds issuing securities other than shares and borrowing from credit institutions (e)(e) There are open and closed FVCs The FVCs and their management companies are supervised by the National Securities Market Commission where the incorporation prospectuses is registered and, where applicable, the issue prospectuses are also registered Under the synthetic securitisation the counterpart of the credit derivative has to be a credit institution or a securities dealer company (resident or non-resident)

STATISTICS AND CENTRAL BALANCE SHEET DATA OFFICE DEPARTMENT 5 3. Reform of the accounting standards for credit institutions and its effect on securitisation In 2005 new accounting rules for credit institutions enter in force to meet the IAS, for consolidated accounts and for individual credit institutions Under the new rules the conditions to derecognise financial assets from the balance sheet are more strict: the risks or the control of the assets should be fully transferred These accounting rules have been applied to the securitisation originated since January Thus, some assets previously derecognised from the balance sheet had to return to it The assets transferred to the FVC and the assets returned to the balance sheet of the credit institutions have an effect on the analysis of the credit aggregates: it is necessary to analyse the credit evolution taking into account the credit that has been derecognised from the balance sheet of the credit institutions (f)(f)

STATISTICS AND CENTRAL BALANCE SHEET DATA OFFICE DEPARTMENT 6 4. Recording of securitisation transactions in the Financial Accounts of the Spanish Economy The originator derecognises the asset The originator keeps the asset on its balance sheet Originator Financial assets Reduction in loans Increase in liquid assets Increase in liquid assets for the funds transferred by the FVC Synthetic: reduction in liquid assets (premiums) and increase in derivatives LiabilitiesNo entriesIncrease in deposits for the funds transferred by the FVC FVCs Financial assets Increase in loans No change in liquid assets (funds raised transferred to the originator) Increase in deposits for the funds transferred by the FVC Synthetic: increase in liquid assets (premiums) Liabilities Increase in securities other than shares and loans Syntethic: increase in derivatives Counterpart sectors of credits LiabilitiesChange the counterpart from originator to FVC No entries

STATISTICS AND CENTRAL BALANCE SHEET DATA OFFICE DEPARTMENT 7 5. Sources of information necessary to measure the different aspects of the securitisation process. Reference to Spanish sources (g)(g) SourceInformation suppliedUseProblems Credit institutions (Originators). Outstanding amounts of on- balance sheet securitisation. Outstanding amounts of off- balance sheet securitisation, with details of the counterpart sectors. Measure credit aggregates. Measure securitisation process. Exclude originators other than credit institutions. Currently, only outstanding amounts are available FVCs. Audited annual financial statements. FVC formation prospectuses and, where applicable, securities issue prospectuses. Measure the activity of FVCs and the securitisation process. Include FVCs in the Financial Accounts in the Other financial interemediaries sub- sector. Heterogeneous accounting. Dificulties when originator derecognises assets. Not very detailed information. Difficulties for some securities issued: early redemptions and issues without prospectuses Securities markets and s-b-s information on securities portfolios. S-b-s data for securities issued by FVCs. S-b-s data on the portfolios of institutional investors and non- residents. Measure the activity of FVCs in securities markets. Obtain the counterpart sector for inclusion in the Financial Accounts. This information is not available for FVCs that issue their securities abroad. Currently s-b-s data are not available for all institutional sectors

STATISTICS AND CENTRAL BALANCE SHEET DATA OFFICE DEPARTMENT 8 6. The work of the European System of Central Banks to obtain European Union securitisation statistics (h)(h) The objective is to measure the activity of FVCs and the true path of euro area credit aggregates Currently the National Central Banks of the European System of Central Banks send to the European Central Bank data on sub-sector Other Financial Intermediaries on the basis of the available information: the statistics are detailed by type of intermediary, mainly Investment Funds and FVCs To improve the data and the aggregates the intention is to introduce a homogeneous statistical framework: a guideline to produce national statistics on these financial intermediaries For Investment Funds the work is very advanced and a draft regulation is pending endorsement. For FVCs the contents and details of the new guideline are now under discussion

STATISTICS AND CENTRAL BALANCE SHEET DATA OFFICE DEPARTMENT 9 Types of securitisation: chart 1 (1)(1)

STATISTICS AND CENTRAL BALANCE SHEET DATA OFFICE DEPARTMENT 10 Types of securitisation: scheme 1 (2)(2) Originator: Credit institution Subscribers of the securities FVC Mortgage loans Cash Securities FVC for securitise mortgage loans

STATISTICS AND CENTRAL BALANCE SHEET DATA OFFICE DEPARTMENT 11 Types of securitisation: scheme 2 (3)(3) FVC for securitise assets Originator FVC Subscribers of the securities Credit institution Assets and receivables Cash Securities Loans (assets) Loans (liabilities) Cash

STATISTICS AND CENTRAL BALANCE SHEET DATA OFFICE DEPARTMENT 12 Types of securitisation: scheme 3 (4)(4) FVC for synthetic securitisation Originator FVC Subscribers of the securities Credit institution Premiun for transferring risks (1) Securities Loans (assets) Loans (liabilities) Cash (1) This transaction has the same effects as a credit derivative

STATISTICS AND CENTRAL BALANCE SHEET DATA OFFICE DEPARTMENT 13 Characteristics of the FVCs created to securitise assets in Spain: chart 1 (5)(5)

STATISTICS AND CENTRAL BALANCE SHEET DATA OFFICE DEPARTMENT 14 Reform of the accounting standards for credit institutions and its effect on securitisation : chart 1 (6)(6)

STATISTICS AND CENTRAL BALANCE SHEET DATA OFFICE DEPARTMENT 15 Sources of information necessary to measure the different aspects of the securitisation process. Reference to Spanish sources: table 1 (7)(7) FVCs for securitise assets: balance-sheet EUR millions II ASSETSASSETS Currency and deposits Securities other than shares: long-term Loans Other assets Total assets = liabilities LIABILITIESLIABILITIES Securities other than shares: short-term long-term Loans Other liabilities

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