«They say things are happening at the border, but nobody knows which border» (Mark Strand)
by Patrizio Messina and Madeleine Horrocks
Abstract: European institutions have recently enacted a common and uniform legislation for securitisation transactions, which emphasises the importance of their simplicity, transparency and standardisation and which entered into force on 1 January 2019 (Regulation (EU) 2017/2401 and Regulation (EU) 2017/2402). Through a grandfathering period, certain aspects of the new regime will become completely applicable by 2020. As will be seen in the following chapter, the new regulation strongly impacts also other laws (in primis, Regulation No. 575/2013), giving a new strong imprinting of the main focuses and parameters that must be taken into consideration when operating with securitisation transactions.
Securitisation is an important element of well-functioning capital markets. Soundly structured securitisation can be an important channel for diversifying funding sources and allocating risk more efficiently within the EU financial system. The securitisation of loans (and, in particular, of Non-Performing Loans (NPLs) or credits that are unlikely to be paid (UTPs), generally and specifically of SMEs receivables, represent other strategies useful for exploiting alternative sources that may allow to gain long-term capital.
This new regulation should create a higher number of transactions within the European territory, rendering the securitisation tool even more suited for financing companies of smaller dimensions through dispositions that can be applied in all European markets and are coordinated and easier to be applied.
Summary: 1. Former European Legal and Financial Context for Securitisations’ Transactions – 2. Structure and Main Actors of Securitisation Transactions – 3. The New Securitisation Regulation Framework – 4. STS Securitisation Criteria – 5. Risk Retention Requirement – 6. Due Diligence and Transparency Requirements
1. Financial regulation presents some issues that European and national authorities across European Member States have to face constantly during the different economic cycles. These matters have become crucial for the European institutions in recent years, and in particular since the 2008 crisis. In this respect, a solid improvement to uniformity and integration among different national legislations has been achieved through amendments of existing regulations and the creation of new ones.
In order to reach this goal, the European institutions have agreed to carry out, over the last ten years, two major projects, the Banking Union (BU) and the Capital Markets Union (CMU), which represented at the same time the basis and the objective for European regulators. Indeed, the provisions contained in particular in the last one, presented a recognition of the legislation in force and the need of the European market in order to grow and improve its efficiency. This activity allowed the definition of the objectives (and relevant deadlines) in order to reach a common playing field and fair and convenient conditions for companies of different Member States.
As well known, securitisation transactions represent an important tool for well-functioning financial markets. Certainly, soundly structured securitisations are an important channel for diversifying funding sources for companies and allocating risks more widely within the European Union Area financial markets. Indeed, it permits a more thoughtful management of the financial sector risk and can help to free up originators’ balance sheets to allow for larger lending activities to companies, both large and smaller ones.
Indeed, given its ability to release reserves, which otherwise had to be retained for regulatory purposes, by replacing non-liquid assets included in portfolios of performing and NPLs with liquid financial tools, securitisation has established itself as one of the main avenues offered by the market to an immediate improvement in the liquidity of a bank’s assets. Thus, it allows to convert assets which are illiquid by themselves into instruments that can be traded on the debt capital markets and that can be bought also by smaller investors.
Moreover, the solution of issues related to financial regulation across European Member States has been a crucial goal for the European institutions during the last years, especially since the 2008 crisis. In this respect, a strong enhancement to uniformity and integration among different national legislations has been achieved through amendments of existing regulations and passing of new ones.
Evolving models that have been used in international practice have undoubtedly played a role of fundamental importance in the spread and further development of securitisation. These have inevitably influenced the practice on the European capital markets, admitting domestic securitisation as part of a process of de facto globalisation, in which interactions between global financial markets have driven the structuring of increasing complex deals, while also offering the possibility of organising such deals in various jurisdictions.
In addition, the securitisation framework has proved sufficiently elastic and malleable to allow it to take on an increasingly complex structure, further driving its evolution and expanding its boundaries.
2. Under Article 2(1)(1) of the Regulation (EU) 2017/2402 of the European Parliament and of the Council (the “Securitisation Regulation”), ‘securitisation’ is defined as a transaction or scheme, whereby the credit risk associated with an exposure or a pool of exposures is tranched, having all of the following characteristics: (a) payments in the transaction or scheme are dependent upon the performance of the exposure or of the pool of exposures; (b) the subordination of tranches determines the distribution of losses during the ongoing life of the transaction or scheme; (c) the transaction or scheme does not create exposures which possess all of the characteristics listed in Article 147(8) of Regulation (EU) No 575/2013.
Recital No. 1 of the Securitisation Regulation also assists to understand the term by stating that “Securitisation involves transactions that enable a lender or a creditor – typically a credit institution or a corporation – to refinance a set of loans, exposures or receivables, such as residential loans, auto loans or leases, consumer loans, credit cards or trade receivables, by transforming them into tradable securities. The lender pools and repackages a portfolio of its loans, and organises them into different risk categories for different investors, thus giving investors access to investments in loans and other exposures to which they normally would not have direct access. Returns to investors are generated from the cash flows of the underlying loans.”
In is interesting to note that, according to Article 4(1)(61) of Regulation (EU) No. 575/2013 (the “Capital Requirements Regulation” or the “CRR”), which has been repealed and replaced by the Securitisation Regulation, securitisation means a transaction or scheme, whereby the credit risk associated with an exposure or pool of exposures is tranched, having both of the following characteristics: (a) payments in the transaction or scheme are dependent upon the performance of the exposure or pool of exposures; (b) the subordination of tranches determines the distribution of losses during the ongoing life of the transaction or scheme.
Therefore, it is excluded from the scope of application of the Securitisation Regulation the so-called ‘Mono-tranche’ securitisation transactions (in other words, when the structure provides for the issuance of a single class of ABS securities), as was the case also under CRR; in addition in general, any securitisation transactions with several classes of ABS securities with no subordination between the different classes of ABS securities (i.e. they are repaid equally to each other and pro rata among them) are excluded from the scope of application of the Securitisation Regulation. Finally, the ‘Multi-tranche’ transactions (that is to say transactions involving the issuance of two or more tranches of securities with risk segmentation) which create exposures classified as “exposures by specialised financing” falling within limb (c) of the definition of securitisation are excluded.
As a preliminary outline and as better explained in the following pages, securitisation begins with a normal sale of loans, typically by a bank, known as the ‘originator,’ to a third entity known as a ‘special-purpose vehicle’ (SPV), which in turn finances its purchase of the loans by issuing securities collateralised by the credit claims to which it has obtained title.
In terms of carrying out an economic activity, which can turn out to be profitable, on behalf of the SPV, its operations may appear to be to be classified as economic; however it is more difficult to hypothesise an SPV engaging in a professional activity, given that even the remote possibility that the organisation of the capital and of the labour inherent an SPV may go beyond its function of performing the obligations for which it has been incorporated, which is the issuance of the securities comprised in the securitisation transaction. Thus, this however implies that an SPVs can be classified as an entrepreneurial undertaking not on a general and theoretical basis, but only considering its specific conditions of incorporation.
Considering its objective and business purpose, each SPV has to maintain a very low minimum capital level. Within the international practice, such condition is generally known as ‘thin capitalisation’ or even a ‘capital-free’ approach. Indeed, conferring an SPV with a high amount of capital, may endanger the achievement of the goal of securitisation, which clearly aims at freeing up capital reserves. Besides, technically speaking, a high level of capitalisation of an SPV could conversely represent a potential source of financial risk for this type of company and, consequently, for the noteholders of the SPVs, because of the relevant reduction of their outstanding collaterals.
While the above description may be taken as an outline of the basic deal structure, it must be considered that there is no single historical model for securitisation: each deal may differ from another in terms of the type of loans sold, the allocation of risk between the parties involved and the guarantees securing the sale. Nonetheless, in most cases the structures adopted in European transactions to release capital placed in securitised assets – which also leads to their conversion into securities – are all based on one main model of reference.
For these purposes, on January 2018 two EU regulations entered into force and became broadly applicable on January 2019: (i) Regulation (EU) 2017/2402 (the “Securitisation Regulation”) defines the framework of laws disciplining European securitisation transactions and contains the legislation applicable to simple, transparent and standardised (“STS”) securitisations and (ii) Regulation (EU) 2017/2401 (the “CRR Amendment Regulation”) replaces some rules provided by Regulation (EU) No. 575/2013 (the “Capital Requirements Regulation” – “CRR”) on prudential requirements for credit institutions and investment firms (jointly referred as the “European Securitisation Regulation Package”).
Hence, the Securitisation Regulation represents the conclusion of a long legislative process and political debate, which lead to the approval of the European Securitisation Regulation Package. In legal terms, the Securitisation Regulation endorses two main goals: firstly, the consistent harmonisation and consolidation of some key regulatory elements of the already existing rules (for example, the provisions already in force on due diligence, risk retention rule, disclosure and transparency and notification procedures); secondly, the creation of a specific legal framework for simple, transparent and standardised long-term securitisations.
With regards to market efficiency, the European Securitisation Regulation Package aims at:
(1) restarting markets on a more solid and healthy basis, so that securitisations can work to improve effectively the funding channels to the economy;
(2) allowing for convenient and effective risk transfers to a broad set of institutional investors, as well as banks;
(3) allowing STS securitisation to function as an effective funding mechanism for some longer-term investors as well as, of course, for banks; and
(4) protecting investors and manage systemic risks by avoiding a recurrence of the flawed ‘originate-to-distribute’ models.
The goals set by the European Securitisation Regulation Package show how this type of transaction constitutes an indirect support for those banks that need to recover the higher standards for lending activities and adequate levels of credit risk by removing NPLs and Unlikely to Pay loans (“UTPs”), of residential and commercial nature, from their balance sheet. These are the main drivers that have lead the European institutions in the last past years to draft and adopt a relevant legislation capable of managing the reduction of the total amount of NPLs that national banks have accumulated during the low level of market liquidity which has become recurrent since the 2008 crisis.
3. The CMU Action Plan included, since its first original version, the adoption of a package of legislative measures that would pave the way to a stable and profitable market for securitisation transactions. In general terms, the package provides for:
(1) a regulation containing provisions applicable to all securitisation transactions;
(2) the introduction of a STS type of securitisation;
(3) amendments to the regulation on the banks’ capital requirements that renders them more risk-sensitive and appropriate for the STS securitisation transactions.
According to the provisions of the CMU Action Plan, on 12 December 2017, the European Parliament and the European Council issued two regulations:
(1) Regulation (EU) 2017/2402 (the ‘Securitisation Regulation’), laying down a general framework for securitisation directly applicable in every Member State and including due diligence, risk retention and transparency rules, together with a very detailed set of criteria that outlines the characteristics of STS securitisations. Its first part (Chapter 2) provides for a common set of rules that apply to all securitisations, including STS securitisations; the minimum requirements imply the maintenance of a minimum net economic interest in the securitisation transaction, enabling investors to carry out the necessary analyses in order to be able to make a well-informed choice with regards to their investments and ensuring that the information regarding the securitisation transaction are transparent (together with the possibility of assessing over time the status of the investment). The second part (Chapter 4) drafts the parameters that identify STS securitisations; and
(2) Regulation (EU) 2017/2401 (the ‘CRR Amendment Regulation’), amending Regulation (EU) No. 575/2013 on prudential requirements for credit institutions and investment firms.
It is important to underline that there are two types of securitisation transactions excluded from the scope of the Securitisation Regulation: (a) the mono-tranche securitisations (or, in any case, securitisations where, in case of more than one class of securities, no subordination between the different classes of notes is present), as previously (i.e. before 1 January 2018) provided for by the regulatory framework of the CRR; and (b) transactions or schemes that create exposures classified as ‘specialised lending exposures’ (ex Article 147(8) of the CRR Regulation).
Nonetheless, this category of securitisation transactions could be performed under the domestic European securitisation regimes such as the Italian Securitisation (Italian Law No. 130/1999). However, a securitisation transaction carried out pursuant to Italian law but not compliant with the European Securitisation Regulation Package, cannot benefit from the risk weighting factors provided for by the CRR Regulation.
The European Securitisation Regulation Package was published in the Official Journal of the European Union on 28 December 2017; it entered into force on 17 January 2018 and has applied to securitisation transactions where the securities are issued on or after 1 January 2019, since 1 January 2019.
Moreover, other regulations already in force that deal with securitisation transactions were amended so as to render them consistent with the European Securitisation Regulation Package, avoiding overlaps or lack inconsistency and ensuring the same level playing field for all the players of the market. The most important legislative interventions regarded the CRR Regulation, fund managers that are required to become authorised under Directive 2011/61/EU on Alternative Investment Fund Managers (the ‘AIFMD Directive’) and insurance and reinsurance undertakings as classified according to the EU Directive 2009/138/EC as amended (the ‘Solvency II Directive’).
4. A securitisation transaction can be classified as a STS Securitisation if it meets all the requirements of the Securitisation Regulation and only after the positive completion of the notification procedure with the European Securities and Markets Authority (“ESMA”), pursuant to Article 27 of the Securitisation Regulation, which presents a description of the activities to be undertaken in order to comply with the STS criteria and the relevant procedures. Investors, anyhow, should be aware that the “STS classification” does not automatically imply the absence of any risks in the transaction, but solely that the compliance with some more specific prudential criteria has been required.
Once the notification procedure has been completed and the transaction is classified as “STS”, the effective responsibility of being compliant with the Securitisation Regulation stays exclusively with the subject who applies for the inclusion in ESMA’s register (for example, the originator, the sponsor or the SPV). ESMA does not take any responsibility for verifying the contents of the notification. The same rule applies when the responsible entity becomes aware that the transaction cannot be classified as a “STS” anymore since it no longer meets the requirements; in such case, it has to make a request to ESMA to be removed from the list.
The STS criteria identify three main pillars on the basis of which securitisation transactions should be structured, which are simplicity, standardisation and transparency. Each criterion is explicitly addressed in a specific provision of the Securitisation Regulation (from Articles 20 to Article 22).
Considering the usual complexity that characterises the structure of STS securitisations, the concept of simplicity requires the securitisation structure to have a clear and comprehensive explanation of the potential risks. Transparency, on the other hand, implies that current investors and subjects interested in such investment are capable of carrying out their own due diligence activities. In the end, standardisation means that the securitisation transaction is in line with high-quality standards with regards to the underlying assets (specifically their performance), to applied rates and formulae, together with transaction documents and servicer’s expertise to manage the transaction. It is important to underline that the servicer must demonstrate knowhow and proficiency with regards to securitised loans and/or exposures.
Securitisations that can be classified “simple” should be included in the “traditional securitisations” category, given that the legal and economic transfer of the securitised assets should take place either through the transfer of ownership to an SPV or through a sub-participation on behalf of an SPV. Such scheme should give the investors recourse to the securitisation assets if the SPV does not comply with its payment obligations. It is important to underline that such recourse cannot be granted in all non-traditional securitisation transactions (for example, synthetic transactions), due to their nature and main features.
Also, another innovative aspect of STS securitisations derives from the requirement for homogeneity of the underlying exposures. Indeed, this kind of transaction should be structured on underlying exposures that are standard obligations, specifically with regards to rights to payments and/or income from assets, currency and applicable legal system.
A peculiarity of the STS regime, in addition to the above, is that the new provisions of the Securitisation Regulation expressly require that, at the time of the transfer of the underlying exposures, any borrower must have made at least one payment. The only exception is allowed when the transaction involves a revolving securitisation backed-up by exposures payable in a single instalment or that have a maturity of less than one year. Of course, the reason stays in the fact that the new regulatory framework is thought in light of protection of the final investor and tends to reduce the extent to which those ones are required to detect and judge potential frauds and operational risks. In this regard, the credit risk and cash flow analysis which investors must be able to carry out cannot involve atypical rates or peculiar variables which would need a more skilled market experience and practice (as would happen with complex formulae or derivatives).
In respect of the transaction documents, some particular requirements are established by the Securitisation Regulation. Thus, in order to provide investors with certainty over the essential information, the transaction documentation has to specify the contractual obligations, duties and responsibilities of all the parties involved (mainly trustee, servicer and other ancillary service providers), as well as processes and responsibilities. The transaction documentation must also contain provisions related to an ‘identified person’ with fiduciary responsibilities, who acts on a timely basis and in the best interest of investors in the securitisation transaction. Such identified person might be the trustee of the securitisation (including the noteholders’ representative) who must take decisions to facilitate, for example, the timely resolution of conflicts between different classes of investors, in all circumstances and in accordance with applicable law; if necessary, by sub-delegating to third parties.
5. The Securitisation Regulation requires that the interests and goals of originators, sponsors, original lenders and all the other participants to the securitisation transaction are aligned and match one with the others. Indeed, the last few years have shown that this is a strong solution that permits the avoidance of misalignments and conflicts among these same parties, damaging the investors’ interest and confidence in being part of this type of transaction. Thus, a directly applicable provision (Article 6 of the Securitisation Regulation) that requires the originator and the sponsor (or the original lender) of each transaction to retain a significant interest in the securitisation itself has been reconfirmed in the European Securitisation Regulation Package. Specifically, it represents a material net economic exposure to the underlying risks of the exposures securitised held on an ongoing basis and for the entire life of the securitisation transaction which amounts to not less than 5% (‘Risk Retention Rule’). There are many different structures for accumulating exposures (differently from a securitisation scheme based on the so-called originate-to-distribute model), nonetheless every scheme has to be compliant with the risk retention structures provided for by the Securitization Regulation as supplemented by the applicable regulatory technical standards (such as those contained in Regulation (EU) 2014/625).
As just mentioned, the level of risk retention at 5% and its relevant structural methods have not changed from the previously applicable regime, due to the existing practice that confirmed its efficacy. However, there are some significant differences if compared with the previous legal framework of the CRR Regulation, the Solvency II and the AIFMD.
Firstly, the Securitisation Regulation imposes a new direct obligation on originators, sponsors and original lenders to retain the risk through a so-called “Direct Approach” in addition to the previous existing so-called “Indirect Approach” through an obligation on each institutional investor to verify – before investing in any securitisation transaction that the originator, sponsor and/or the original lender retained on an ongoing basis the material net economic interest in the securitisation in accordance with the Risk Retention Rule. This implies that entities carrying out securitisation transactions that involve also investors not residing in any European Member States or that cannot be classified as institutional investors have to (as they did previously) apply the Risk Retention Rule.
Secondly, the Securitisation Regulation requires that the originators may not select assets to be transferred to the SPV for rendering losses on the assets transferred to the same SPV for the whole span of the securitisation transaction (or over a maximum of four years if it lasts longer) higher than the losses over the same period on comparable assets held on the balance sheet of the same originator. This further condition appears to make the application of the Risk Retention Rule effective.
In addition, the strongest amendment concerns the breach of the Risk Retention Rule. Indeed, the Securitisation Regulation states that each European Member State has to put into force detailed sanctions directly applicable to the non-compliant originator, the original lender or the sponsor of the securitisation transaction.
Lastly, the replacement of the different fragments of legislation (as listed above, CRR Regulation, Solvency II and AIFMD) into one all-encompassing disposition contained in Article 6 of the Securitisation Regulation. This level playing field facilitates its application on the market.
6. The Securitisation Regulation, as an underlying theme, stresses the importance of monitoring and controlling risks deriving from securitisation transactions. The main risks involved are due first of all to the complexity of the transaction structure, together with the characteristics of the underlying securitisations, exposures, the underlying borrower, the guarantees and any applicable credit risk mitigation measure. In addition to agency risks, modelling risks, legal and operating risks, counterparty risks, servicing risks, liquidity and concentration risks. In order to prevent, as much as possible, the potential issues that could jeopardise the positive result of securitisation transactions and investors’ confidence in the market, the Securitisation Regulation sets out a number of prudential criteria that require to carry out some due diligence activities, differentiated on the several parties in charge of the obligation, and the circulation of a ‘continuous, easy and free’ flow of information – regardless of their private or public nature – that allows the fulfilment of the mandatory transparency obligations. The goal is to improve awareness by the institutional investors in terms of the exposures in which they are evaluating a possible investment and the ability of institutional investors to better examine and recognise the risks.
However, the Securitisation Regulation does not provide for a complete and detailed scheme of the information that has to be disclosed, in particular in relation to the underlying exposures. Indeed, Article 7(1)(a) requires only that ‘information on the underlying exposures’ shall be made available on a quarterly basis (or, ‘in the case of ABCP, information on the underlying receivables or credit claims on a monthly basis’). Recital n. 16 and Article 7(1)(e)(i) of the Securitisation Regulation require the disclosure of ‘all materially relevant data on the credit quality and performance of underlying exposures’, which include the originator, the sponsor and the SPV to disclose to holders of a securitisation position the potential investors; in addition it implies the disclosure to the relevant competent authorities’ of the information relating to the securitisation (both before the pricing and, when required and/or appropriate, consistently during the whole transaction). These due diligence requirements are of considerable importance. As with the risk retention requirement, the due diligence obligations are introduced with both a Direct Approach and Indirect Approach. This obligation applies directly to the originator, sponsor and SPV to disclose and deliver the information related to the securitisation transaction and to institutional investors to verify that the originator, the sponsor and the SPV are compliant with their own obligations. The due diligence obligations that have to be borne by the institutional investors can even be delegated to a third party if this last one is an institutional investor as well and it is authorised to take decisions with regards to the management of the investments related to the securitisation transaction on behalf of the first delegating institutional investor.
In technical terms, the disclosing strategy depends on the nature of the relevant securitisation transaction and it is the result of a combination of the requirements on behalf of the investors and the ones pertaining to the subjects who have structured the securitisation transaction. Indeed, in order to acquire a securitisation position, the investors have to carry out a due diligence on the underlying assets and on the other aspects of their own interest related to the securitisation transaction. Nonetheless, such activities can take place only if the originator, the sponsor or the original lender have provided the amount and quality of information needed. Thus, it seems that the depth and level of detail of the activities depend on the quality of the work presented by those who have structured the securitisation transaction.
Moreover, in case of a public transaction, the disclosure activities have to take place through a securitisation data repository (or, if it does not exist, the information has to be published through a website meeting according to some prearranged standards). Whereas, if it is a private deal, there are no official prescribed methods; in any case, the goal implies that the information becomes available to holders of securitisation positions, competent authorities and (upon request) potential investors.
In any case, according to Article 7(4), the Securitisation Regulation requires that ESMA, in close cooperation with the European Banking Authority (EBA) and European Insurance and Occupational Pensions Authority (EIOPA), develops regulatory technical standards – to submit to the European Commission – based on some specific standard templates, which provide for the crucial information according to the different types of underlying asset (for example, leasing, consumer credit, corporate, residential or commercial real estate, etc.), to specify the information that the originator, the sponsor and the SPV shall provide in order to comply with their obligations under Article 7(1), letters (a) and (e). It is easily foreseeable the innovative strong effects that this scheme can have on the markets’ procedures.
In this respect, on 19 December 2017, ESMA issued a Consultation Paper on ‘Draft technical standards on disclosure requirements, operational standards, and access conditions under the Securitisation Regulation’, so as to match what required in the Securitisation Regulation and allow operators to fulfil properly their obligations. On 22 August 2018, ESMA published its Final Report on the securitisation disclosure technical standards; it consists of a adapted, updated and revised version of the already existing ECB reporting templates used for the ‘ABS loan-level initiative’ (which have broadly and successfully been tested on the market during the previous years) and it embraces 17 reporting standard templates. Nevertheless, on 14 December 2018, the European Commission informed ESMA that it would have been appropriate to amend part of the disclosure technical standards. Thus, on 31 January 2019, the relevant Authority released a new opinion concerning ‘Amendments to ESMA’s draft technical standards on disclosure requirements under the Securitisation Regulation’ that shall be in line with the European Commission’s view. As at the date of writing this article, no official version of the documents has been issued by any Authority, a framework which leaves the market’s operators with a scheme of obligations and responsibilities technically inapplicable and almost deprived of the core contents until the final decision of the European Commission (in other words, the specific data and an authorisation that allows to communicate them to an authorised securitisation data repository is indispensable for being compliant with the Securitisation Regulation).
In any case, it appears that ESMA should set clear the scope and the contents (in this respect, institutional investors and industry associations are demanding to be aware of the specific items in data and reports both on the lender’s and on the borrower’s side, in order to be sure to be capable of handling the implementation of the new provisions) of the disclosure obligations, together with the format and all the other bureaucratic and logistic aspects related to the first (among others, setting out the procedure for the authorisation as a securitisation data repository).
Paragraphs 1, 2, 3, 4 and 5 have been written by Patrizio Messina; Paragraph 6 has been written by Madeleine Horrocks.
Patrizio Messina is a dual qualified lawyer (England and Wales, and Italy), a senior legal expert in International Business and Finance. Patrizio is member of the Banking & Finance Group, Partner in charge for Europe and a member of the Firm’s Global Management Committee.
Madeleine Horrocks is a dual qualified lawyer (England and Wales, and Italy), a senior legal expert in International Business and Finance. Madeleine is member of the Banking & Finance Group.
 Engelen, W. & Glasmacher, A., The Waiting Game: How Securitization Became the Solution for the Growth Problem of the Eurozone, https://journals.sagepub.com/doi/pdf/10.1177/1024529418758579.
 The banking Union (BU) allowed the shifting of the responsibility of the banking policy from the national to the EU level of the European Union for a number of Member States, requiring though the consistent national application of EU banking rules. Due to the Eurozone crisis after the 2008, in 2012, the BU was approved mainly in order to create a more transparent, unified and safer market for banks management and to control and monitor the fragility of banks within the European Union. The Banking Union stands on two pillars: (i) the Single Supervisory Mechanism (SSM), a new system of banking supervision that comprehends the European Central Banks (ECB) and the national supervisory authorities of the relevant Member States; and (ii) the Single Resolution Mechanism (SRM) aims at ensuring the efficient and rapid resolution of banks with financial issues with minimal costs for taxpayers and to the real economy.
 The Capital Markets Union (CMU) is the European programme presented by the European Commission in September 2015, which aims at a full integration of the national capital markets. Specifically, it intervenes by providing new sources of funding for businesses (particular attention is dedicated to Small and Medium Enterprises), reducing the cost of raising capital, increasing options for savers across the EU, facilitating cross-border investments and attracting more foreign investments into the EU, supporting long-term projects and making the EU financial system more stable, resilient and competitive. The whole plan have undergone through a revision in 2017 and it is expected to be completed by 2019.
 A securitization is a transaction within which the credit risk associated with an exposure (or a pool of exposures) is tranched and that has all of the following characteristics:
(a) payments in the transaction are dependent upon the performance of the exposure (or of the pool of exposures);
(b) the subordination of tranches determines the distribution of losses during the ongoing life of the transaction;
(c) the transaction does not create exposures which will be classified as specialized lending exposures according to Article 147(8) of CRR.
 Association for Financial Markets in Europe, High-Quality Securitisation for Europe https://www.afme.eu/globalassets/downloads/publications/afme-high-quality-securitisation-for-europe-the-market-at-a-crossroads.pdf
 As it is well known, the most recent financial crisis related to subprime mortgages became evident among the actors of the market in the United States of America in 2006. However, its reasons run back even to some years before, when mortgages were commonly granted to clients who clearly did not match the requirements related to the relevant risks and reimbursement of the loan, for example due to the lack of adequate guarantees. Since the year 2000, indeed, securitization transactions offered the possibility for banks to transfer its rights and obligation related to mortgages contracts, as securities, to the selected SPV, thus recovering in a relatively short period of time a significant portion of its credit, which otherwise could have been collected only at the expiration date of the loan (holding the risk that the client could become insolvent while the obligations were still standing out. Therefore, banks easily disposed of important amounts of liquidity that allowed always new and more lending activities in favour of borrowers who could be set outside the regular framework of these activities. Of course, the advantages of such investing strategy – in most cases – lead to high profits in the short-term period, but also to undeniable risks of strong losses during the same time lag. Through this mechanism banks could assign the borrowers’ insolvency risk to third parties, a strategy which in many cases, allowed a less rigid assessment of the debtors’ economic and financial merit. Under these circumstances, different types of banks agreement have been subscribed by investors who did not meet the most appropriate economic and financial parameters for receiving a loan. Such lending practice fostered the spreading of lack of adequate liquidity on behalf on behalf of banks and let the issue affect the European economy too.
 Carbó-Valverde S., Rodríguez-Fernández F. & Udell G. F., 2016, Trade Credit, the Financial Crisis, and SME Access to Finance, in ‘Journal of Money, Credit and Banking’, 48, pp. 113,143.
 Norton Rose Fullbright US LLP, Structured Finance & Securitisation, http://www.nortonrosefulbright.com/files/ca-structured-finance–securitization-167792.pdf. Norden, L., Buston, C. S. & Wagner, W., 2014, Financial Innovation and Bank Behavior: Evidence from Credit Markets, in ‘Journal of Economic Dynamics and Control’, 43(C), pp. 130–145. Baradwaj, B.G., Dewally, M. & Shao, Y., 2015, Does Securitization Support Entrepreneurial Activity?, in ‘Journal of Financial Services Research’, pp. 1–25.
 Global Legal Book, Securitisation 2018 (England and Wales): A Practical Cross-Border Insight into Securitization Work.
 The securities usually issued appear to be bonds (well known in English-speaking environments as ABSs).
 Baums, T., 1994, Asset Securitization in Europe. Kluwer Law and Taxation Publishers; Curtin, E. & Tanega, J., 2009, Securitisation Law: EU and US Disclosure Regulations. LexisNexis. Ramos-Munoz, D. & Ingram, K., 2010, The Law of Transnational Securitization. Oxford.
 The type of receivables that may potentially be used in securitization, over the past years, have been identified with those arising from mortgage lending, consumer lending, leasing and factoring. In addition, they also include other different kinds of receivables, such as trade receivables and healthcare receivables arising from arrangements between suppliers and national health service.
 The Regulation (EU) 2017/2402 creates also a specific framework for simple, transparent and standardized securitization, and amended Directives 2009/65/EC, 2009/138/EC and 2011/61/EU and Regulations (EC) No. 1060/2009 and (EU) No. 648/2012.
 https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1490966616011&uri=CELEX:52016DC0601; Demsetz, R. S., Bank Loan Sales: A New Look at the Motivations for Secondary Market Activity, https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr69.pdf
 The Bond Market Association, European Securitisation: A Resource Guide, http://people.stern.nyu.edu/igiddy/ABS/resourceguide.pdf.
 Kayode, S. A., Post Financial Crisis Securitization: Can (EU) 2017/2402 Make Any Diffference? https://helda.helsinki.fi/bitstream/handle/10138/279432/Master%27s%20Thesis%20_Kayode.Asoro_2018.pdf?sequence=2&isAllowed=y.
 Specialised lending exposures are a type of exposure towards an entity specifically created to finance or operate physical assets, where the primary source of income and repayment of the obligation lies directly with the assets being financed.
 In any case, since 1 January 2019, securitizations that cannot be classified as “STS”, but that are compliant with the requirements set by the European Securitization Regulation Package, can anyhow be structured.
 Kaya, O., Synthetic Securitization Making a Silent Comeback, https://www.dbresearch.com/PROD/RPS_EN-PROD/PROD0000000000441788/Synthetic_securitisation%3A_Making_a_silent_comeback.PDF.
 As defined by Article 2, c. 1, no. 12 of the Securitization Regulation and by Article 124-ter, c. 1, let. b), of Legislative Decree No. 58 Of 24 February 1998.