MALTA centro di eccellenza Europeo nella SECURITIZATION (cartolarizzazione)
Securitisation is often associated with the financial crash of 2008 which was in part caused by the over rating of pools of mortgages within Collateralised Debt Obligations (CDOs) which started a chain reaction of events exposing weaknesses in an already fragile financial system.
However, securitisation has a much wider capital markets role and Investopedia provides us with a helpful definition:
“The process through which an issuer creates a financial instrument by combining other financial assets and then marketing different tiers of the repackaged instruments to investors. The process can encompass any type of financial asset and promotes liquidity in the marketplace.”
Quite clearly we can see therefore that the purpose of Securitisation is to repackage financial assets into investable units with the result that investors have access to a wider range of assets and an increase in liquidity.
Securitisation is also associated with “structured finance” which involves the creation of the complex financial transactions that are used by organisations for their unique needs.
In short form the securitisation process involves an originator that transfers the assets (and associated cash flows and/or risks) to a securitisation special purpose vehicle (SPV) which then issues securities backed by the assets and made available to investors.
Malta has achieved growth as a jurisdiction for structured finance transactions and in particular securitisation for a number of reasons.
Malta provides a robust legal framework for securitisation firstly within the Securitisation Act of Malta and recently the Securitisation Cell Companies Regulations. This legal framework provides both clarity and investor protection whilst enabling flexibility in the structuring of the transactions.
As a result of the robust legal framework that Malta offers for securitisation transactions investors have an absolute legal right over any assets attributed to a segregated cell within the Issuer. This applies should the Issuer vehicle become insolvent and also ensures that each Cell is protected from all other Cells.
Any asset can be securitised which means that there is a vast scope of possibility for transactions within a securitisation structure.
The securitisation special purpose vehicle (SPV) is a tax neutral vehicle which assists both the investor to optimise their return and the originator’s costs for the funding of the transaction. There is no withholding tax on any interest or dividend payments from a securitisation SPV and because the SPV has tax residency certificate the extensive tax treaty network with all major jurisdictions is available.
Opportunities for Growth
Within the traditional role of securitisation, that of enabling financial institutions to transfer assets and/or risks off their balance sheets, Malta is already established as a jurisdiction of excellence for large transactions over 500 million Euros and there are a number of established Maltese domiciled legal and accountancy practices whose partners have extensive experience in this sector. Whilst there are opportunities for growth in this area, the number of transactions may have limits simply due to the size of the transactions.
Below the level of the large transactions, Malta has much to offer for securitisations of between 100 and 500 million. The European Whole Securities Market4, a joint venture between the Irish Stock Exchange and the Malta Stock Exchange launched its first listing in June 2013. As an EU regulated exchange domiciled in Malta with competitive pricing and a focus on the efficiency of their processes, the EWSM is an attractive exchange for the listing of securitisations. With each new prospectus being reviewed in just a few days by the MFSA acting as the Listing Authority speed of listing is a key driver of this growth.
It is perhaps below the 100 million Euro level that Malta has the greatest opportunity for growth in the number of securitisation transactions. At these levels, whilst the speed of listing and the other advantages of Malta as a jurisdiction are vital, it is the costs of the transactions that give Malta its unique edge and thus its opportunity. The speed of structuring has an impact on the costs but in addition Malta’s key cost advantages for the legal, accounting, corporate services and exchange listing components of a securitisation structure all deliver important cost advantages.
As a growing European funds domicile Malta is already attracting increased attention of fund managers seeking to establish funds that have European passporting rights to attract investors under the UCITS, AIFMD or PIF regulatory frameworks. A Securitisation structure also offers an additional option for asset managers to establish an investment product that is designed to be offered to Professional Investors in Europe.
Many of these types of transactions are in the 5 to 50 million Euro range, and the EWSM experienced some growth in 2014 at this level with several Asset Managers launching investable products designed for UCITS funds to achieve diversification into transferable securities backed by a pool of private equity investments, commodity futures contracts and foreign exchange trading.