Press Release – Embargoed until 1330 CEST (1230 GMT) Tuesday 12 June 2012
The Association for Financial Markets in Europe (AFME) and the European Financial Services Round Table (EFR) today announce the launch of Prime Collateralised Securities (PCS) - an industry-led, nonprofit project to develop a label for high quality securitisations which meet best practice in terms of quality, transparency, simplicity, and standardisation.
With the first label expected to be granted by the PCS Secretariat towards the end of this year, a number of key milestones have been reached:
Access to securitisation markets for issuers is becoming increasingly important to overcome a real economy funding shortfalll in Europe. Asset Backed Securities can be an important component of the instruments that investors have available to them, especially as they do not use up the same credit line capacity as other investments, such as corporate bonds and covered bonds.
Yet, despite the very strong underlying performance of European asset-backed securities since 2007, a smaller investor base and the reduced level of issuance over this period could have knock-on effects for companies reliant on capital markets funding, as well as Europe’s broader economic recovery.
The PCS initiative - developed by a broad group of market professionals comprising issuers, investors arrangers, and other market participants, in collaboration with other European industry associations, as well as observers such as the European Central Bank, European Investment Bank and Bank of England - will comprise a two-tier governance structure:
PCS is more than just a positive label for eligible securitisations — it provides the basis for a deﬁnition of agreed market standards, as well as an enforcement mechanism of these agreed standards, based on a label which can be granted and withdrawn depending on compliance and as veriﬁed by the PCS Secretariat.
Rick Watson, I-lead of Capital Markets at AFME, commented:
"Investors and regulators need a clear reference point, setting out best practices around which to build investment guidelines and regulations, which, in turn, will encourage issuance as well as investment and support the real economy. Combining the expertise and market coverage of both AFME and EFR members has resulted in the ability to move forward on this very important initiative.
"PCS will bring added quality, transparency and standardisation to the market, which will deepen the securitisation investor base in Europe and, in turn, improve overall liquidity. Europe needs a healthy securitisation market and we are conﬁdent that this initiative, alongside regulatory changes, will provide a signiﬁcant boost to the market."
Sebastian Fairhurst, the EFR‘s Secretary-General, commented:
"The PCS label will be awarded on a deal-by-deal basis and subjected to a veriﬁcation process by the newly established PCS Secretariat It will be granted to transactions backed by asset classes that have performed extremely well through the ﬁnancial crisis and are of direct relevance to the real economy, including European auto, residential mortgage, SME, consumer and credit loans.
"Issuers will need to provide high quality reporting on an ongoing basis, in accordance with the relevant ECB and Bank of England reporting standards."
Ian Bell, PCS‘s newly appointed Head of Secretariat, commented:
"It’s exciting to be part of such an important industry initiative, which has seen so much support from investors, issuers and policymakers alike. With commitments to fully fund PCS‘ ﬁrst two years of operations from over 30 institutions in the industry, PCS demonstrates the seriousness of the industry's intent to establish a vibrant, yet robust European securitisation market capable of funding the growth Europe so badly needs."
James White +44 (0)20 7743 9367 [email protected]
1. AFME (Association for Financial Markets in Europe] promotes fair, orderly, and efﬁcient European wholesale capital markets and provides leadership in advancing the interests of all market participants. AFME represents a broad array of European and global participants in the wholesale ﬁnancial markets. lts members comprise pan-EU and global banks as well as key regional banks, brokers, law ﬁrms, investors and other ﬁnancial market participants. AFME participates in a global alliance with the Securities Industry and Financial Markets Association (SlFMA] in the US, and the Asia Securities lndustry and Financial Markets Association through the GFMA (Global Financial Markets Association]. For more information please visit the AFME website, www.afme.eu
2. The European Financial Services Round Table (EFR] was formed in 2001. The Members of EFR are Chairmen and Chief Executive Officers of international banks or insurers with headquarters in Europe. EFR Members believe that a fully integrated EU financial market, a Single Market with consistent rules and requirements, combined with a strong, stable and competitive European financial services industry will lead to increased choice and better value for all users of financial services across the Member States of the European Union. An open and integrated market reflecting the diversity of banking and insurance business models will support investment and growth, expanding the overall soundness and competitiveness of the European economy. For more information please visit the EFR website, www.afme.eu
3. The PCS label has been followed by policymakers throughout its development. For example, Andrea Enria, Chairperson of the European Banking Authority provides the following comment:
‘EBA believes that the European securitisation market can play an important role in meeting the funding needs of the originators and the asset diversiﬁcation needs in Europe in the future. The PCS label could be an important component to re-establish a sound and well controlled market job securitisation in Europe. The EBA will continue to monitor the securitisation market closely once the PCS label starts to be operational."
A further example includes a letter from Marlo Draghl, President of the European Central Bank which comments:
‘The ECB welcomes the initiative, which aims at increasing the attractiveness of asset-backed securities among investors and originating banks A well-ﬁmctioning ABS market in the EU would allow investors to diversify their investments and thereby contribute to a smooth ﬁnancing of the economy.
"The ECB has been able to follow this project since 2009 and we are pleased to see you are ready to launch the labeling process."
PCS Funding Members
1. Allen & Overy
3. Bank of America Merrill Lynch
5. Bishopsfield Capital Partners
7. BNP Paribas
8. BNY Mellon
9. Clifford Chance
10. Credit Suisse
11. Deutsche Bank
12. DNB Bank ASA
13. European Banking Federation
16. Intesa San Paolo
17. J P Morgan
18. Lewtan Technologies
20. Lloyds Banking Group
22. NIBC Bank
25. Royal Bank of Scotland
27. Securitisation Services
28. Societe Generale
29. Twenty Four Asset Management
32. Weil, Gotshal & Manges
Additional supporters of PCS
A number of other institutions and associations have contributed their time and expertise to assist in
the development of PCS. These include:
2. Allianz SE
3. AXA Investment Management
7. Holland Financial Centre
8. Insurance Europe
9. RBS Asset Management
10. Swiss Re
11. True Sale International