When it was set up in 2012, one of the most important ways in which the PCS initiative sought to fulfil its mission to re-inforce asset-backed securities as a sustainable investment and funding tool to strengthen the European economy, was by awarding the PCS True Sale Labels to specific asset backed instruments. In 2017, PCS also added a Risk Transfer Label to support securitisations where the investors assumed risk without a sale of the assets. Today, PCS continues to support the asset-backed market through its issuance of both types of labels.
Awarded at the request of financial institutions which issue these instruments, the PCS Labels will be awarded, in the case of the True Sale PCS Label, to the senior most tranche of asset-backed transactions and, in the case of the Risk Transfer PCS Label, to an asset backed risk transfer transaction. In both cases, the transactions to which labels are awarded must fully meet the eligibility criteria set down by the PCS Association.
In December 2017, the European Parliament and the European Council recognised the benefits that simple, transparent and robust securitisations could bring to the European economy by the passage of a new European Regulation. This Regulation, amongst a number of measures of general application, also created a new kind of securitisation: “simple, transparent and standardised securitisations” or “STS securitisations” for short. STS securitisations, when the Regulation comes fully into force in January 2019, will benefit from certain regulatory advantages over non-STS securitisations.
However, the rules that need be met for a securitisation to be designated as an “STS securitisation” are numerous and often complex and subtle. Recognising that transitioning from current market practice to the new STS regime may not be entirely straightforward, PCS is seeking to do as much as it can to assist issuers, investors, regulators and all market stakeholders to understand the changes that will be necessary. To do so, PCS – upon request of any market participant – will issue STS Reports (including Grandfathering Reports) setting out how and to what extent current issues meet the new STS regime’s requirements.
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