Recent Legal Developments (1) - New EU securitisation risk retention rules

The securitisation risk retention provisions of Article 122a of the CRD II were replaced by the Capital Requirements Regulation ("CRR") as per 1 January 2014. As of this date the related guidance on Article 122a of the European Banking Authority ("EBA") no longer applies and the Regeling Securitisaties Wft 2010 was withdrawn. New regulatory guidance was published by the EBA on 17 December 2013 in the form of the final draft regulatory technical standards (the "RTS") and the accompanying implementing technical standards (the "ITS"). The draft RTS and ITS were first released by the EBA in May 2013 as a consultation document and have been the subject of consultations with market participants.

The RTS and the ITS will become effective following the required adoption by the European Commission ("EC"), which is expected in the first half of 2014, and provided that no objection is made by the European Parliament ("the EP") and the Council of the European Union ("the Council"). As long as the RTS and the ITS do not apply, there may be some uncertainty regarding the interpretation of the risk retention rules to the extent such interpretation is not clear from the CRR. This may affect new securitisation transactions that are not straightforward in terms of risk retention until the RTS and the ITS have been adopted. 

Recent Legal Developments (2) - Mortgage Credit Directive

On 31 March 2011 the EC has adopted a proposal for a Directive on credit agreements relating to residential property (COM(2011) 142) ("the proposed MCD"). The goal of the proposed MCD is to create a further integration of the internal market for mortgage credits. In this respect it is envisaged to introduce, amongst others, a license requirement for creditors and credit intermediaries at a European level.

Although the activities will be regulated at a European level no European passport will apply. The proposed MCD includes behavioral rules for creditors and credit intermediaries involved in mortgage credits, such as minimum competence requirements, advertising rules, (pre-contractual) information requirements, the creditworthiness test and the calculation of the annual percentage rate of charge. In the Netherlands there is currently such a regime on a national level which includes many of the abovementioned behavioral rules.


On 10 December 2013 the EP has adopted amendments to the proposed MCD. The EP and the Council have tentatively reached an agreement on the final wording. On 17 January 2014 the Council has published the revised text of the proposed MCD. The Council has adopted the proposal on 28 January 2014. It is expected that the Mortgage Credit Directive will be published in the first quarter of 2014. The member states should have implemented the Mortgage Credit Directive within two years.

Recent Legal Developments (3) - Outsourced mortgage management services taxable with VAT according to the Dutch Supreme Court

In October 2013 the Dutch Supreme Court decided that third party management of mortgages is taxable with VAT. The Dutch Supreme Court ruled that credit management can consist of a number of activities, such as arranging for the initial payment of the mortgage to the borrowers, credit administration, calculation of monthly payment due by the borrowers, arranging for payments and the collection of the loan principal, interest, and arrears and the provision of periodical balance statements regarding the loans to both the borrowers and credit providers. These activities constitute one single supply for VAT purposes, which qualifies as credit management. The management of credit is only VAT exempt when performed by the person granting the credit. If a third party provides these services, the services are taxable. As a consequence of this judgment, third party managers have to reconsider the VAT treatment of their services. This judgment is also of importance to credit providers who outsource the management of credit to a third party, as they will be faced with non-deductible VAT on the outsourced services.

Selected Recent Transactions (1) - NIBC PTCB Programme

NIBC's groundbreaking and IFR's awardwinning 2013 Covered Bond Award pass-through covered bond programme in which NautaDutilh has assisted NIBC in setting up the structure of the EUR 5,000,000,000 conditional pass-through covered bonds programme and the first issue of EUR 500 million. This type of covered bond which is backed by a pool of Dutch residential mortgage loans, is globally the first of its kind. The conditional pass-through covered bond structure differs from the traditional covered bond structure, due to the absence of derivatives and inclusion of an orderly wind-down mechanism of the cover pool subject to strict conditions. This results in a better protection of the investors in case of a bankruptcy of the issuing bank. The maturity mismatch between the assets (mortgage loans) and the liabilities (the pass-through covered bonds) has been reduced significantly by eliminating the potential need for a fire-sale of cover pool assets in the event of an issuer default as a result of which the probability of losses declines. From an issuer perspective, the structure is attractive, as a pass-through construction results in a higher credit rating (AAA) than the credit rating of the issuing bank (BBB), while less over-collateral is needed. Quote IFR's:"The deal was so successful that NIBC and as many as eight other banks are looking to follow up this deal in the coming year." To see the full digital edition of the IFR 2013 Review of the Year, please click here.

Selected Recent Transactions (2) - Kigoi 2013

Crédit Agricole Consumer Finance Nederland B.V. and Kigoi 2013 B.V., acting as the Issuer, were assisted by NautaDutilh in a transaction consisting of two phases. In connection with the first phase the purchase of certain consumer loan receivables (resulting from revolving consumer loans) by Kigoi 2013 B.V., which have been originated by certain group companies of Crédit Agricole Consumer Finance Nederland B.V., was facilitated by a bridge loan. Subsequently, NautaDutilh assisted Crédit Agricole Consumer Finance Nederland B.V. and Kigoi 2013 B.V. with the consumer loan securitisation transaction, whereby the transaction was refinanced by an issuance of 533,100,000 notes and a subordinated loan of which the proceeds were used to repay the bridge loan which funded the original purchase of the consumer loan portfolio and to purchase from the relevant sellers the further advance receivables under certain conditions. This has been the first public consumer loan securitisation transaction in the Netherlands since the Chagoi transaction in 2010, which was also initiated by Crédit Agricole Consumer Finance Nederland B.V. Furthermore, the transaction's innovative structure has led to a derecognition of the securitised consumer loan portfolio by the originator's group. As a result thereof, following the purchase of the consumer loan portfolio by Kigoi 2013 B.V., the portfolio (via Kigoi 2013 B.V.) is no longer consolidated by Crédit Agricole Consumer Finance Nederland B.V.'s group.

Selected Recent Transactions (3) - Venn Partners

NautaDutilh acted as transaction counsel to Venn Partners LLP, a London based investment management firm, which recently announced their move into the Dutch mortgage market by the acquisition by Ember VRM S.à r.l., an entity established by Venn, of the shares in the capital of three originators previously owned by Banque Artesia Nederland N.V. (a subsidiary from General Electric Capital Corporation) and the subsequent sale and assignment of (close to all of) the nearly EUR 500m portfolio of Dutch residential mortgage receivables previously owned by such originators to a securitisation vehicle established for the sole purpose of acquiring the portfolio. The acquisition by Ember of the shares as well as the subsequent sale and assignment of the portfolio of mortgage receivables by the securitisation vehicle is financed by a combination of senior financing and financing (equity and a subordinated loan) from VSK Holdings Ltd., a company owned and financed by Venn and its co-investor partners.

Currently, NautaDutilh acts as transaction counsel to Venn in the contemplated refinancing of the acquisition by the securitisation vehicle of the portfolio of mortgage receivables, by means of a securitisation transaction and the issuance of residential mortgage backed notes to the public, which will be listed on the Irish Stock Exchange. The deal is expected to close this month. The acquisition by Ember of the shares in the three originators, the take-out and the subsequent securitisation transaction is an interesting development for the Dutch mortgage market showing that this market is not only attractive to banks but to other potential investors as well. In addition, the recent activities by Venn demonstrate an excellent rare combination of an acquisition, take out and a securitisation, a combination which we expect to see more often in the near future.

See also:

The Financial Times: Venn moves into the Dutch mortgage market
Het Financieele Dagblad: Nieuwe partij op de hypotheekmarkt (Dutch only)
BNR: Consument profiteert van openbreken hypotheekmarkt (Dutch only).

Selected Recent Transactions (4) - The National Energy Saving Fund

NautaDutilh has assisted the Stichting Stimuleringsfonds Volkshuisvesting Nederlandse gemeenten (literally, the Dutch municipalities Housing Stimulation Fund Foundation, "SVn") in setting up the Nationaal Energiebespaarfonds (literally, National Energy Saving fund, "NEF"). The 21st January 2014 saw the start of the NEF. The NEF has been set up to realise one of the objectives of the Woonakkoord 2013 (literally, Living Agreement). The NEF, to which Rabobank, ASN and the Dutch government contribute, will provide low-interest loans to private home owners to allow them to take energy saving measures. The SVn is responsible for managing the fund.

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