In order to obtain a PCS Label, securities must meet all the applicable eligibility requirements. When taking into account the various jurisdictions and asset class requirements, the PCS True Sale Label eligibility criteria are quite numerous and can be found in their entirety here. Depending on the nature of the transaction, only some of the criteria will be relevant though.
The criteria are designed to capture the key elements of quality, transparency, simplicity and liquidity that underpin the whole PCS Initiative. Below are set out some of the key elements of the PCS True Sale Label.
Eligible Asset Classes
The PCS True Sale Label is to be awarded to transactions securitising assets which are important to the funding of the real economy and which have shown resilience through the crisis. Assets-backed securities eligible for the PCS True Sale Label will therefore be backed by the following assets:
- Auto Dealer Floorplan Loans
- Auto Loans and Auto Leases
- Auto Fleet Leases
- Consumer Loans
- Credit Card Receivables
- Non-Auto Leases
- Residential Mortgage Loans
- SME Loans
However, in these asset classes some categories are excluded, such as “sub-prime” mortgages (e.g. self-certification products, equity release products).
Although the full eligibility requirements can be found in the full PCS True Sale Eligibility Criteria, set out here are some of the highlights:
- Strict criteria exist regarding such credit components such as loan-to-value.
- The issuing vehicle must be incorporated in the European Union, the European Economic Area
- The securitised assets must be originated in the European Union, the European Economic Area
- Only the most senior tranche of any securitisation is eligible for the PCS Label.
- Strict criteria exist to deal with the quality of underwriting
(e.g. underwritten residential mortgages)
- Re-securitisations and synthetic transactions (such as CDO squared) are not eligible for the PCS Label.
- Eligibility criteria deal with the issue of granularity with minimum number of assets in a transaction.
- The originator must provide loan level and cash flow data.
- The originator must provide ongoing information on the performance of the transaction throughout its life.
- Transactions must meet minimum size requirements.
- The originator must provide information on the proportion of any issue that is not sold to third party investors.
- PCS Procedures Manual more >
- Terms and Conditions of the PCS Label more >
- Label Fees more >
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