EU and Malta securitisation Market

Securitization is one of the most misunderstood legal structures in Malta. In Malta, this notion has often been tainted badly. However, there is more to securitization than what newspapers and tabloids say. According to the Maltese jurisdiction, securitization can be an arrangement or a transaction in which a securitization vehicle:

  • acquires securitization assets from the initial holder regardless of circumstance, or
  • take the responsibility of the initial holder under any circumstance, or 
  • gives a secured facility or loan to an originator and funds any or all of the above, either directly or indirectly, either fully or in parts.

 
Major parties in securitisation 
For a successful securitisation business procedure the following parties should be incorporated:

  • The originator-who is the owner of the specific entities.
  • The sponsor-the one who finances the Securitisation.
  • Special purpose vehicle(SPV).
  • Credit Rating Agencies.
  • Third Party Credit enhancers.
  • Swap counterparts.
  • Servicer.
  • Trustee and Investors.
  • However, without any of these parties, the process of Securitisation cannot commence.

 
Factors affecting securitisation 
The 2007-2008 US subprime mortgage caused a rapid disintegration and debasement in the quality of securitized entities and this phase. It also weakened the investors' trust. The ingredient of distrust shunned away many potential investors. This drastic change also affected the EU Securitization level although all outstanding EU securitization had been compensated for during the economic recession.
 
Action taken by EU to revive stabilization 
To ensure safe and simple Securitisation contracts certain forms were introduced by the European Supervisory Authorities. Proper control mechanisms were put in place in order to reduce risks and protect investors. New regulations were also put in place. A good example is the Securitisation Regulation-which deals with the legislature governing EU Securitisation. It serves to introduce long-awaited rules for simple transparent and standardized STS Securitisation.
 
The Securitisation Prudential-serves as a framework or backbone under which certain institutional investors such as banks can benefit from more favorable regulatory treatment for STS exposure.
 
Introduction of the Prospectus Regulation in July 2017 gave rise to a steep increase in growth of Securitisation in Europe hence restoration of market activity in EU Securitisation transactions. New investment opportunities also emerged leading to an extra additional source of finances.
 
The aim of STS (Simple, Transparent And Standardised) Securitisation is to restart and build a firm reliable EU Securitisation market.
 
Steps taken by the European Council to fulfill their aim 
The implementation of certain laws and regulations which were drafted by the EC and ESA helps to create investment opportunities as well as an alternative source of funding. These laws will invigorate the securitisation market hence increasing capacity for lending to households and businesses.
 
What you can get from Malta’s Securitisation Market 
The country’s business-friendly and favorable legislative framework attracts investors who want to establish structured finance vehicles from all over the world.  Its success in securitisation has its roots based in: 

  • Accessibility of the regulator- this makes it easier for the establishment of constructive working relationships with companies investing in Malta.
  • Its robust legal framework allows the formation of several Securitisation cells without incurring any risks of cross-contamination between different creditors and investors of individual cells.

 
All in all, Malta’s opportunities for further growth in the Securitisation market are astounding. Its growth is credited to its robust legislative framework and its competitive edge against other EU nations like Luxembourg and Ireland.
 
Professional Assistance
For more insights on Malta’s securitization, you may contact SIGTAX. Our invaluable team, which consists of expert lawyers, accountants and consultants will give you detailed information and counsel in each step.  Our lawyers can provide you with finer details on the legal aspects pertaining to Malta’s securitization so that you don’t skip any necessary steps.
 

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