On March 8, 2016, after a public consultation process, the Bank
of Italy published the implementing measures relating the
supervisory regulations for loans granted by securitization
vehicles incorporated under the Italian securitization law (Law No.
130 of April 30, 1999).
The new provisions—introduced into Law 130 in
2014—allowed securitization vehicles to grant loans to
entities other than individuals and microenterprises without the
necessity of any further license, subject to implementing
regulations to be issued by the Bank of Italy.
Pursuant to the Italian securitization law, as now implemented
by the new measures of the Bank of Italy, special purpose vehicles
("SPVs") may grant loans to a wider range of borrowers
upon satisfaction of certain conditions, in particular:
The borrower that receives the loan by the SPV must be selected
and identified by a bank or financial intermediary;
The bank or financial intermediary that identified the
borrowers of the relevant loans maintains a "net economic
interest" in the transaction (i.e., "retention" or
"skin in the game");
The bank or financial intermediary that identified the
borrowers of the relevant loans provides the investors with the
information related to the structure of the transaction, the
underlying assets and cash flows, and compliance with the retention
The selection of the borrowers by the relevant bank or
financial intermediary will be made on the basis of the same
evaluation criteria and approval procedures adopted by the
respective banks or financial intermediaries for the assumption of
their own credit risk; and
The servicer of the SPV carries out monitoring and control
activities to ensure compliance with the provisions under the
The most debated aspect during the consultation process was
compliance with the retention requirements in the context of
transactions where SPVs grant loans to entities other than
individuals and microenterprises.
In this respect, pursuant to the Bank of Italy regulation, the
bank or the financial intermediary that identifies the borrower
must retain, on an ongoing basis, a material net economic interest
that, in any event, will not be less than 5 percent.
The bank or financial intermediary complying with the retention
requirement must also satisfy certain conditions, in
The bank or financial intermediary maintaining the 5 percent
risk in the transaction cannot invest in just this product but will
need to have its own economic substance through further activities;
If the bank or financial intermediary maintaining the 5 percent
risk also operates as a servicer in the context of the transaction,
it must ensure that two separate and autonomous functions of the
bank/financial intermediary are involved for the two different
Notably, the retention requirement will have to be met even
though such transactions do not qualify as securitizations pursuant
to the CRR (EU Regulation No. 575/2013), and therefore they in
principle do not fall within the scope of application of the
The retention requirement must complied with by applying one of
the retention options provided for by article 405 of the CRR.
Considering the particular structure of the new transaction (and
the relevant purpose), an additional form of retention could be the
retention by the bank or the financial intermediary of 5 percent of
the respective loan. This procedure could be more efficient for the
banks and the financial intermediaries from a capital-requirements
Care will need to be taken in structuring transactions to ensure
that the retention structure complies with the new law, CRR (and,
in the future, the new "securitization regulation"
proposed by the European Commission that is expected to enter into
force later this year), as well as any investor
The above-mentioned provisions are part of a comprehensive
reform of the rules governing lending activity in Italy to be
carried out by entities other than banks or financial
intermediaries. Securitization vehicles represent a flexible instruments to
operate in the Italian lending market.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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