In alignment with its European Union membership, Poland will amend a banking law to introduce specific regulations facilitating the securitization of bank assets.
The rules will become effective on May 1. Under the new guidelines, banks will be able to consider every kind of asset for securitization. No law previously prohibited that. However, prior guidelines were thick with bank secrecy laws, which threw a wrench into the evolution of the Polish securitization market.
According to the Polish Bank Association, the amendment abolishes the bank secrecy protection for the realization of securitization schemes and execution of connected agreements.
The securitization provisions of the banking law apply only to true sale structures. It allows for banks to sell assets (or the liabilities of its borrowers) of uniform kind to a special purpose entity in order to issue interests secured by these assets. The banking law adopts the securitization model that requires the full independence of the SPV from the initiator - such that it's both legally and organizationally separate - explained the Polish Bank Association.
Such an SPV is restricted to the joint stock or limited liability company structure. The scope of its activities is restricted to the acquisition of assets and the issuance of interests secured by the assets.
"We have adopted the securitization model that would set the full legal separation of risk of securitized assets from the initiator's risk, so that the initiator's insolvency will have no negative impact on the SPV operations and the safety of investors," said a spokesperson at the PBA.
Under the new amendment, it will be forbidden for the bank-initiator to support the SPV's obligations for the benefit of its investors, to repurchase the assets previously sold to the SPV, or purchase outstanding securities to absorb an investor's loss.
Industry sources said that at least 10 to 15 banks have portfolios large enough for securitization purposes.
"It's still a very young legislation," said a source. "While we have had some experience in the past with securitization structures, Polish banks still need to get comfortable with the idea."
Sources at the Polish Bank Association said that two other drafts concerning securitization are currently under discussion in the Polish Parliament. These include the amendment of the Investment Fund Act and the Securitization Act.
Though the new law facilitates the market, it does not address several other issues related to securitization, such as tax issues affecting certain structures (see ASR 3/23/2004).
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