BBVA – with Deloitte and PCS acting as independent third parties – has completed the first issuance of securitized bonds in Spain, which will be registered with the ESMA (European Securities and Markets Authority) as Simple, Transparent and Standardized (STS). With this securitization, BBVA takes advantage of European regulation in force since January 1 that will confer preferential capital treatment to financial institutions issuing STS securitizations.
BBVA closed an issuance of securitized bonds through the BBVA “Consumo 10 fund” securitization fund. The issuance, with a nominal value exceeding €2 billion, is guaranteed by the bank’s own consumer loans. Europea de Titulización, S.A., S.G.F.T. was charged with establishing and managing the fund. Deloitte Spain reviewed a sample of underlying exposures and the accuracy of data disclosed in relation to those exposures, and Prime Collateralised Securities (PCS) UK Limited verified compliance with the rest of the requirements necessary for STS qualification.
This is the first Spanish issuance that will be registered with ESMA in its registry of simple, transparent, and standardized securitizations. The European Union has developed mechanisms to both strengthen the regulatory framework and reinvigorate the securitization market. In 2015 – under the framework of the Capital Markets Union – the Commission published a legislative proposal that included: new regulation for simple,transparent, and standardized securitizations and a modification to the capital requirements regulation.
The first of these (Regulation 2017/2402), which established a general framework to regulate securitization transactions, came into force on January 1, 2018 (with a transition period through January 1, 2019). The objective is to encourage the recovery of the securitization market. To this end, a safe, standard, and simple framework was created, a framework capable of containing systemic risk and preventing failures and abuses. Issuances that specifically qualify as STS will enjoy special treatment and be of higher quality than other securitizations.
The adoption of these regulations does not necessarily mean the end of the legislative process. It has been anticipated that STS issuances would entail a freeing up of capital for the acting financial institution, although the market is waiting for the authorities to finalize the technical details. Both pieces of regulation contain a series of mandates which stipulate that the European supervisory authorities (EBA and ESMA) must use technical standards to develop the level 2 regulatory provisions, which are needed to further specify and complete the new STS securitisation framework and bolster the market. Thus, with this STS issuance, BBVA has acted in advance of the finalization of the regulation.
According to BBVA Spain Head of Securitizations Diego Martín Peña, this first STS issuance in Spain represents an important step in the recovery of the market, which was significantly impacted by the 2008 global financial crisis. “The STS framework allows for a collection of securitization issuances that are well-defined, discernible, and safe. Such a profile improves their transparency, reduces exposure to risk, and encourages the development of an efficient and secure market for the European financial system,” he pointed out.