Focus on Securitization: National Adaptation to EU Legislation

Prepared by Cristian Sgaramella, Giovanni Bombaglio and Valeria Saponaro

With Legislative Decree No. 131 of 3 August 2022, published in the Italian “Gazzetta Ufficiale” No. 205 on 2 September 2022 and entered into force the following 3 September, amending Legislative Decree No. 58/1998, European Regulation No. 2017/2402 (hereinafter the “EU Regulation” or the “Regulation”) was transposed into national law.

The above-mentioned Regulation has, since its entry into force on 1 January 2019, made significant changes to the regulatory framework of securitization transactions by introducing the figure of “simple, transparent and standardized” securitizations with the aim of forging a “virtuous” market for the financial instruments related to them.

The notions of simplicity (Art. 20 of the EU Regulation), standardization (Art. 21) and transparency (Art. 22) constitute the pillars of the ‘new’ securitization legislation. 

In particular, as far as relevant herein, it should be noted that the simplicity requirement imposes that the sale of the receivables to the vehicle (defined as “SSPE”) must be effective and permanent (so-called true sale), with the consequent certification provided by the assignor’s lawyers; the standardization requirement  establishes a risk retention obligation (not less than 5%) in the hands, alternately, of the assignor, the promoter, and the original lender, introducing, moreover, specific requirements that the documentation connected to the transaction must have (i.e., inter alia, indicating the obligations and responsibilities of the ancillary service providers), Finally, transparency requires the originator and the sponsor to make available to potential investors historical data on the static and dynamic performance (in terms of defaults and losses) of exposures similar to those being securitized and to subject a sample of the exposures to external verification of the accuracy of the data disclosed.

Furthermore, with this new legal provision, domestic authorities required to supervise this type of operation were identified.

In particular, with regard to what is of interest here, without prejudice to the tasks attributed to the BCE by the EU regulation, the Bank of Italy will be competent to supervise compliance with: “i) the obligations established in Article 5 of Regulation (EU) 2017/2402 for banks, investment firms, asset managers, as well as for financial intermediaries registered in the register provided for in Article 106 of the Consolidated Banking Act (T.U.) who hold a position in a securitization or receive instructions to comply with the obligations of another institutional investor; ii) the obligations established in Articles 6, 7, 8 and 9″ of the EU Regulation in securitization transactions. banking that holds a position towards a securitization or receive instructions to fulfil the obligations of another institutional investor; ii) of the obligations set out in Articles 6, 7, 8 and 9” of the EU Regulation in securitization transactions, in securitizations where the originator or the original lender or the sponsor or the SSPE are banks, investment firms, asset managers, or financial intermediaries registered in the register provided for in Article 106 and of the Banking Act (T.U.B.).

In addition, CONSOB will be responsible for supervising the compliance with the requirements  established in: i) Article 3 of the EU Regulation; ii) Articles 6, 7, 8 and 9 of the Regulation, when neither the originator nor the original lender nor the SSPE established in the Union are supervised entities; iii) Articles 18 to 27 on the compliance of the assignors, promoters and SSPEs and to authorize the third party verifier referred to in Article 27(2) of the EU Regulation, as provided for in Article 28 of the same Regulation, supervising the compliance of this entity with Article 28 of the Regulation, with the power to revoke the abovementioned authorization.

Finally, through Article 190-bis.2, the newly adopted law introduced an administrative fine provided for in case of any violation of the provisions thereof, ranging from thirty thousand euros up to five million euros, or up to ten percent of the total annual turnover, when this amount exceeds five million euros.

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Cristian Sgaramella

PwC TLS Avvocati e Commercialisti