Comments for your selection

• 1: Sociétés de crédit foncier ("SCFs") are the French special-law based covered bonds issuers. They are governed by Article L.513-2 and seq. of the French Monetary and Financial Code (the "Code") relating to SCFs and, as credit institutions, by the general banking regulation including an Order of 3 November 2014 (former regulation 97-02) regarding the internal control in the banking industry.
• 2: Also, credit institution, but pledged to the issuer (with transfer to the issuer upon trigger event).
• 3: Under Article L.513-2 of the French Monetary and Financial Code, SCFs are allowed either to grant or to acquire mortgage loans or exposures on public sector but generally, they are not the originators of the assets.
• 4: The articles L.513-2 to L.513-27 and R.513-1 and seq. of the French Monetary and Financial Code govern the legislation of the SCF.
• 5: The special bankruptcy regime applicable to the SCF results from Articles L.513-11 and Articles L.513-18 to L.513-21 of the French Monetary and Financial Code. The main features of this regime are as follows: -the judicial liquidation of a SCF does not accelerate the payment of the privileged debts of the SCF that are paid on their contractual due date and with priority over all other debts. -until the privileged debtors are fully paid off, no other creditor of the SCF may avail itself of any right over the SCF's property and rights. -the judicial reorganisation or liquidation of a company holding shares in the SCF can’t be extended to the SCF. As a result, SCFs are totally bankruptcy remote and enjoy full protection from the risks of default by their parent company or by the group to which they belong. Furthermore, Article L. 513-21 of the French Monetary and Financial Code stipulates that, notwithstanding any legal or regulatory requirements to the contrary, notably those of Section II of Volume VI of the French Commercial Code, contracts for servicing and recovering loans of a SCF can be immediately terminated in the event that a company responsible for the servicing of such loans is placed under legal receivership or liquidation.
• 6: Exposures on credit institutions are only allowed in the form of replacement assets, up to 15% of the outstanding privileged debt issued (covered bonds and other debt issued benefiting from the Privilege of Article L.513-11 of the French Monetary and Financial Code). Replacement assets are considered to be sufficiently secure and liquid assets as defined in Articles L.513-7 and R.513-6 of the Code. Replacement assets have to qualify for the credit quality step 1. If the maturity of these assets doesn’t exceed 100 days, the credit quality step 2 is equally allowed. Exposures on public sector entities under leasing format are also allowed.
• 7: Others are, as defined in Article L.513-4 and R.513-2 of the French Monetary and Financial Code, Central administrations and Central banks not belonging to the above mentioned geographic scope but the States of which are benefiting from at least the credit quality assessment step 1 (step 2 up to 20% of the privileged liabilities) issued by a rating agency recognised by the French banking supervisor.
• 8: Others are States qualifying as at least the credit quality assessment step 1 issued by a rating agency recognised by the French banking supervisor (Article L.513-3).
• 9: According to CRBF Regulation 99-10 relating to SCFs, real estate properties are valued on a yearly basis. They are valued conservatively, excluding any element of a speculative nature. Valuations have to be made on the basis of the lasting, long-term characteristics of the real estate properties, normal market and local conditions, the current use of the real estate and other uses to which it could be assigned. This mortgage lending value shall be determined clearly and transparently in writing and may not exceed the market value.
• 10: Pursuant to Article R.513-1 of the French Monetary and Financial Code, a mortgage or guaranteed loan can only be refinanced by privileged debts in the limit of the smallest following amount : - the outstanding principal amount of the loan, - the product of the financing share of the loan and the value of the real estate. The financing share of the loan is equal to: - 60 per cent of the value of the real estate given in guarantee, - 80 per cent of the value of the real estate given in guarantee when the loan has been granted to individuals in order to finance the building or the acquisition of a housing or in order to finance the acquisition of the building land and the construction of the housing. - 100 per cent of the value of the real estate when the loan benefit from the guarantee of the Guarantee Fund for Social Home Ownership (FGAS). The acquisition by a SCF of senior units of RMBS is subject to similar rules as more described in Article R.513-3 of the Code.
• 11: SCFs are required to comply with a number of specific management rules intended to ensure the matching of assets and liabilities in terms of interest rates and maturities. Exposure to market risk is required to be mitigated by an Order of 3 November 2014 (former regulation 97-02) regarding the internal control in the banking industry.
• 12: Also, use of derivative hedge instruments.
• 13: As a credit institution, a SCF is governed by an Order of 3 November 2014 (former regulation 97-02) regarding the internal control in the banking industry. A SCF measures itself interest rate and currency risks. These measures must be quarterly reviewed by the French Banking Authority and by the Specific Controller. In this framework, each issuer is able to choose its type of coverage test.
• 14: It depends on the issuer’s choice. The SCF must ensure that it complies, at any time, with the regulation relating to the coverage ratio and ALM congruency.
• 15: Test calculations must be completed at least quarterly, an implementation of a more frequent calculations depends on the policy of the issuer.
• 16: By law. Under Article R.513-7 of the French Monetary and Financial Code, SCFs must, at any time, manage their liquidity risk over a period of 180 days. In addition to specific rules, SCFs are required to comply with an Order of 3 November 2014 (former regulation 97-02) regarding the internal control in the banking industry. Exposure to liquidity risk is required to be mitigated by Article 148 of the Order.
• 17: Replacement assets are a key instrument to achieve the "natural" matching. In addition, SCFs have a direct access to the French Central Bank, even after the bankruptcy of the mother company. The law allows them to enter into repo transactions.
• 18: Replacement assets are a key instrument to achieve the "natural" matching. In addition, as a credit institution, a SCF has a direct access to the French Central Bank, even after the bankruptcy of the mother company. The law allows it to enter into repo transactions.
• 19: Other is the Specific controller defined by Article L.513-23 of the Code. He is selected from the official list of auditors. According to the CRBF Regulation 99-10, the Specific controller controls an adequate matching of maturities and interest rates and alerts the French Banking Authority should he consider the levels are insufficient.
• 20: The reporting must be done at least quarterly.
• 21: Article L.513-12 of the French Monetary and Financial Code requires that, at any time, the total amount of the SCF’s assets must be greater than the outstanding amount of its privileged debt. The 105% minimum level of overcollateralization is provided by Article R.513-8 of the Code. Overcollateralisation, defined by law (Article L. 513-12) requires that total weighted assets of SCFs (specified in the chapter on the basics of obligations foncières) are always equal to at least 105% of the total amount of liabilities benefitting from the preferential claim (Article R.513-8 of the French Monetary and Financial Code). One of the Specific Controller’s duties is to monitor compliance with this regulatory overcollateralisation rule. When calculating regulatory overcollateralisation, as stated in CRBF Regulation No. 99-10 as amended, assets must be weighted in accordance with their quality and their nature. The non collateralised exposures with the group to which the SCF belongs are limited to 25% of the non privileged resources.
• 22: In addition to all measures aiming at ensuring the liquidity of the SCF, SCFs are incorporated as credit institutions and have a direct access to the French Central Bank refinancing, even after the bankruptcy of the mother company. The law allows them to enter into repo transactions.
• 23: A SCF must deliver quarterly (and within a period of 45 days after the end of the quarter) a reporting to the French Banking Authority. Furthermore, the issuer has to communicate quarterly an overcollateralization certification and a bond issuance program to the French Financial Markets Authority.
• 24: The banking supervision has an additional role which consists in approving the management of the issuer.
• 25: The cover pool monitor who is independent from the issuer is the Specific controller defined by Article L.513-23 of the French Monetary and Financial Code.
• 26:
• 27: They benefit from the privilege of article L.513-11 of the French Monetary and Financial Code under which they have the right to be paid by preference to all others creditors including the State.
• 28: All the assets of the OFs issuing credit institution secure the OFs and other privileged debtors of the credit institution.
• 29: The sums due under the derivatives entered into by SCFs to cover their assets and liabilities elements and to manage or cover the global risk on their assets, liabilities and off-balance-sheet items have privileged status. The sums due under derivatives used to cover the non-privileged debts of the SCF do not have such privileged status.
• 30: Covered bonds are eligible for repo transactions with the ECB, except those whose asset covered pools still contain securitisations not originated by the affiliation group of the issuer.