Securitization in France

More on this site and elsewhere

Text of French securitization law is on this site - click here

Deutsche Bank's article on Overview of the French Securitisation market

Article on recent changes in French securitisation law by Jean-Norbert Pontier: click here

A detailed article on French securitization vehicles appeared in Feb., 2000 issued of Asset Finance International.

For an elaborate article on the securitization markets and law in France, see article titled French Securitization Law and Practice: Understanding a Mature and Profitable Market by Gilles Saint Marc, Gide Loyrette Nouel (Paris), click here

For description of the mortgage-securitization market in France, also see the following article on our site - click here.

A news report on the obligations fonciers law in France was posted on our securitisation news page - click here.

On 17th June, 1999, France passed a law made further permissive amendments to facilitate mortgage securitisation markets. For more on the late breaking developments in France, read update article by European Mortgage Federation - click here.

Fitch IBCA's Mortgage default model for France (PDF) file: click here

Standard and Poor's Tritisation en France (in French)

Recent additions 18th Feb 2002:

In year 2001, the market grew approx. 23% over 2000.

In year 2000, France recorded a securitization volume of Euro 15 billion of term ABS and Euro 12.7 billion of rated ABCP volume. This marked an increase of about 10% over the previous year. A special report by Standard and Poor's, dated 26-Apr-2001, titled Innovation Provides Positive Outlook for French Securitization After Moderate 2000 Results says that "Securitization in France is showing strong evidence of maturity and innovation. The new types of assets being securitized and the nature of structures reflect the market's willingness to adapt".

In year 2000, France was home to two remarkable transactions: Marne et Champagne Finance a.r.l., which closed at the beginning of that year, and involved the financing of inventories of champagne, and Cruise Ship Finance Ltd., which was the first securitization in Europe involving cruise liners. The champagne securitization transaction made international headlines and is covered on our news pages - search through the news.

French securitization market has started showing positive response to the new legal developments. France is taken as the second largest securitization market in Europe.

Recently, some very interesting securitization transactions originated from France -the most remarkable of these was the securitisation of champagne stock by Marne en Chamapagne, a French champagne maker. Click here for a news item on this site. Another French company securitised a stock of wool - click here for a news item.

In 1996, the aggregate securitization volume was at Ffr 60 billion, which increased to some Ffr 68 billion (USD 11.3 billion) in 1997.

Recent legal developments have taken place aimed at advancing securitisation markets in France. The original French legislation on securitization was implemented by the Act of December 23, 1988. [Full text of this law is on our site - click here.] Under this legislation, credit institutions, insurance companies and the Caisse des dépôts et consignations (a public entity) were permitted to sell their receivables to a vehicle, the fonds commun de créances or FCC (equivalent of the SPV known in other markets), which would be financed by issuing units on the market.

Amendments in 1997 extended the scope of the legislation by taking into account most of the objections of market practitioners. It allowed an FCC to purchase and issue from time to time any type of receivables (including doubtful receivables or receivables of different types), whether denominated in French francs or in other currencies.

The 1998 amendments have further expanded the scope of securitisation by making it possible for commercial companies to also use FCC to securitise their assets - earlier, the facility was limited to financial intermediaries such as credit institutions and insurance companies alone. Second, the originator is no longer required to notify the debtors of the assigned receivables of the transfer of their receivables - which was required earlier and was found to be detrimental to the interests of the securitiser.

In June 1999, further permissive amendments were made to the law - see news report click here.

Understanding the French securitisation market

Under French practice, securitization is the same as in the United States: a sale of assets, generally a pool of receivables held by a bank, a financial institution, or a commercial company, to a dedicated vehicle that finances this purchase by issuing financial instruments on the market. Cash flow generated by the securitized assets is assigned to the payment of principal and interest due under the financial instruments. On the basis of the U.S. securitization experience, France enacted legislation in 1988 the FCC legislation, making France and Great Britain the most advanced European countries in this field. Upto 1998 more than 120 FCC's have been set up by way of public offering (the only ones for which statistics are available), representing approximately 150 billion French francs. The market should continue to grow significantly in the next few years.

The French FCC:

The French FCC is a legal process for conduct of securitizations. The creation and operation of an FCC requires the participation of: (i) investors; (ii) a bank or financial institution where the funds of the FCC will be parked; (iii) a management company, the role of which is to conduct the investment policy of the FCC.

The FCC is a legal concept, not a legal entity. In eyes of law, assets of FCC are regarded as the joint ownership of the investors. Interest in an FCC, that is, the interest held by the investors, is itself a transferable property. The activities of the FCC must consist exclusively of the co-ownership of receivables and not of other types of securities such as shares. The transfer mechanism provided for in the securitization law is inspired by the Loi Dailly mechanism. Title to the receivables is transferred by the execution and dating of a certain instrument, called bordereau.

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