A benefit of a securitisation being STS is that it allows European banks investing in such a securitisation to place such securitisation within its liquidity cover ratio (“LCR”) pool. These are pools of highly liquid securities that banks must hold to meet temporary liquidity difficulties. This provision is set out in the Capital Requirements Regulation (Regulation (EU) 2017/2401). In essence, the new regulation applies from January 1, 2019 but includes a transition period whereby for the relevant transactions the existing LCR rules apply until April 2020 and the new rules apply from that future date.
From 30th April 2020, in order for the LCR benefit to be available a securitisation must not only be STS but also meet an additional 8 criteria.
In addition to an STS verification, PCS will provide an LCR assessment in which it will address these additional 8 criteria which are applicable from April 2020 onwards from all transaction closed after January 1, 2019.
The LCR assessment operates in the same manner as the STS verification: PCS will complete a checklist containing the additional 8 points based on documentation provided by, or on behalf, of the originator or sponsor.
We strongly advise all visitors to this site to read our “Disclaimer” for a better understanding of the nature of all PCS Labels.
In order to meet regulatory requirements, it is not possible for an originator or sponsor to engage PCS only for an LCR assessment without engaging PCS for an STS verification of the same transaction.
As an LCR assessment is always part of an STS verification, application for an LCR assessment is made by ticking the LCR assessment box in either the Application Form for an STS Verification and Assessment for PCS UK, or the Application Form for an STS Verification and Assessment for PCS EU.
The fees for an LCR assessment shall be payable in Euros or Pounds Sterling depending on the currency in which the securities are denominated.
The STS regulations do not allow the fees payable to third party verification agents to be dependent on the result of the verification activities. This includes the fees for any ancillary activities such as LCR assessments. Therefore originators and sponsors must bear in mind that the fees become payable on the receipt of an application form and acceptance by PCS of the engagement and (save in certain exceptional circumstances detailed in the PCS Terms & Conditions) irrespective of whether the STS Verification or LCR assessment is completed.
The LCR assessment fee, if denominated in Euros is: €1,500 + VAT (if applicable)
The LCR assessment fee, if denominated in GBP is: £1,500 + VAT (if applicable)
There is no annual maintenance fee.
For more details on PCS’ fees and the principles that underpin them, we strongly suggest to consult our PCS Fees Schedule.
The fees are set by PCS UK and PCS EU on a group wide basis to meet the expenses of running the PCS initiative. No money is paid by way of dividend to any shareholders or members of the PCS Association (PCS UK’s and PCS EU’s parent) and the PCS initiative as a whole is run on a not-for-profit basis.
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