Now that PCS has received its authorisation as a third party verification agent we thought it useful to provide some answers to questions we have received from market participants and set out the scope of our STS verification activity.
Q. What asset classes does the authorisation cover?
A. It was a requirement of the ESMA drafted application process that a candidate third party verification agent should specify for which asset classes it was requesting to be authorised. PCS’ application in this respect is extremely broad and allows us to verify the STS status of pretty much all conceivable asset classes.
Q. Can PCS verify ABCP?
A. Yes. PCS’ authorisation covers both term and ABCP transactions as well as ABCP conduits.
Q. Can PCS verify private transactions?
A. Again yes. Our authorisation allows us to verify the status of public deals as well as private deals and placed transactions as well as retained transactions.
It also allows us to verify the status of securitisations regardless of the form the financing takes as long as it qualifies legally as a “securitisation”. So warehousing loans and other forms of finance not involving a bond issue but still meeting the technical legal definition of a “securitisation” may have their STS status verified by PCS.
Q. Can PCS help me with my risk-transfer securitisation for which I would like to get the benefit of article 270 of the CRR?
A. Risk transfer (synthetic) transaction broadly meeting the STS criteria and some additional rules may benefit from better CRR capital treatment under article 270. However, technically, a risk transfer transaction can never be STS. As such, its STS status can never by “verified” under the STS Regulation and so PCS may not provide it with a regulated “verification”. However, the regulator has agreed that PCS may provide the same analytical service to any originator who wishes to get comfort on their article 270 risk transfer transaction.
Q. What are CRR and LCR assessments?
A. PCS can provide an assessment of whether securitisation transactions appear to meet CRR (current rules) and LCR (post 2020 rules) rules for bank investor capital and liquidity requirements – which can be made available to those investors as a public report. Further details can be found on the PCS website.
Q. In which jurisdictions can PCS verify STS status?
A. PCS has been authorised by the United Kingdom Financial Conduct Authority. Under the STS Regulation, this authorises us to verify the STS status of securitisations originated from any member of the European Union.
Q. Could Brexit affect your STS Verification?
A. There are three possible short-to-medium term outcomes to the Brexit affair. First, the UK obtains an extension of the Article 50 period. Then PCS would continue to use its FCA authorisation across the EU as the UK would still be a member. Second, the UK agrees the deal. Then PCS could still use its FCA authorisation across the EU during the transition period (currently set at 18 months). Finally, if the UK leaves – on or after March 29 – without a deal, PCS’s application already has been filed to enable the French company – PCS EU – to obtain a French authorisation within a matter of days. Of course, once PCS EU obtains its French authorisation, PCS will continue to be able to fully operate within the EU27 irrespective of what happens in the UK.
Q. PCS has three entities in the group. To whom should originators apply?
A. Currently, our authorisation is with PCS UK and so originators should apply to that entity.
Q. Who will actually verify my deals?
In line with the regulatory requirements, STS verifications will only be conducted by the PCS analytical team.
This team, headed by Mark Lewis, is currently four strong, including – in addition to Mark – Fazel Ahmed, Daniele Vella and Rob Leach. This team has more than extensive experience in analysing securitisation with their average experience in this market being over 24 years.
Q. I have obtained PCS Labels before. Will my interaction with PCS be different now that you are regulated?
Yes but not radically. To ensure the integrity of the STS verifications conducted by PCS, we will insulate the analytical team – Mark, Fazel, Daniele and Rob – from the “commercial” aspect of our business. Therefore, going forward applications and discussions of upcoming transactions should be addressed to Ian Bell, PCS’ CEO or Rob Koning, Issuer Liaison. Investor queries should be addressed to Max Bronzwaer, Investor Liaison. Non-commercial questions including those relating to the process and the practicalities of obtaining an STS verification or how PCS interprets or approaches specific STS criteria may be addressed to any member of the team, including analysts. (Contact details for all our team members may be found on the PCS website).
Q. You mention the “commercial” aspect of PCS’ business. Will PCS still be a not-for-profit?
A. Absolutely. PCS was set up by market stakeholders to help revitalise the European securitisation market. Our mission statement has not changed. As such, we continue to run the PCS initiative including the STS verification business on a not-for-profit basis.
Q. What are the prices or costs of PCS’ new STS, LCR, CRR and Article 270 services?
A. In line with our regulatory obligations and our mission statement as a not-for-profit serving all stakeholders in an even-handed way, our fees are fixed and non-negotiable. The exact fees may be found on the PCS website at:
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