Securitisation 2024 Comparisons

Under Greek Law 3156/2003 (the “Securitisation Law”), all business claims originated in and resulting from the business activity of a commercial entity domiciled in Greece or a non-Greek resident having an establishment in Greece are eligible for securitisation, including future claims (as long as they are identifiable), conditional claims and claims towards consumers. Real estate properties can be also securitised; however, the relevant framework has not been tested in practice, as it is considered to be restrictive.

In addition, a special Greek law governs the securitisation of State receivables.

Non-banking securitisations are not common in Greece. Notable recent transactions outside the banking sector include the securitisation of Greek electricity supply contract receivables in the form of overdue invoices of up to 60 days, and the securitisation of Greek electricity supply contract receivables in the form of overdue invoices of at least 90 days.

The vast majority of claims securitised in Greece during recent years have arisen from non-performing loans (NPLs). The most common securitised banking receivables are those arising from mortgage loans, corporate loans, credit card and other revolving credit claims, consumer loans, leasing contracts, bond loans and shipping loans.

The usual transaction structure for all types of assets mentioned in 1.1 Common Financial Assets is that stipulated in Article 10 of the Securitisation Law, pursuant to which the seller (originator) transfers its business claims to the purchaser (a special-purpose entity or SPE) by way of outright sale, together with the issue by the SPE and offer, by private placement, of notes, the repayment of which is funded by the proceeds of the transferred business claims or by loans, credits or financial derivative agreements.

Typically, in Greek securitisations a sale agreement governed by foreign law and an executory transfer (assignment) agreement governed by Greek law are signed between the seller and the SPE. A typical securitisation also involves the appointment by the SPE of a third servicer, who will actively manage the transferred claims and collect the proceedings therefrom.

In 2015, Greek Law 4354/2015 was introduced as an alternative to securitisation for the servicing, sale and transfer of NPL receivables. Its scope has been expanded to cover the transfer of performing loans as well. Greek Law 4354/2015 applied in parallel with the Securitisation Law and its provisions (with the exception of the tax provisions of Article 3A) were recently repealed and replaced by Greek Law 5072/2023.

The Securitisation Law, however, continues to be the preferred tool for the disposal of NPLs by credit institutions, as a Greek State guarantee scheme was put in place in December 2019, following EU Commission approval, for the senior tranches (ie, senior notes) of banking securitisations (including NPLs) (the “Hellenic Asset Protection Scheme” or HAPS, or “Hercules”), which was extended until October 2022. The HAPS programme has been reintroduced into Greek legislation by Greek Law 5072/2023. The current HAPS programme is up to EUR2 billion and expires on 31 December 2024.

The securitisation of business claims and real estate properties in Greece is governed by the Securitisation Law, together with the general provisions on the “sale of assets” contained in Articles 513 et seq and 455 et seq of the Greek Civil Code.

Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017, laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised (STS) securitisation, and amending Directives 2009/65/EC, 2009/138/EC and 2011/61/EU and Regulations (EC) No 1060/2009 and (EU) No 648/2012 (the “EU Securitisation Regulation”), and any regulatory technical standards issued thereunder, would also apply.

Securitisations in the banking sector that aim for a significant risk transfer and accounting derecognition should meet the requirements of Regulation (EU) 575/2013 of the European Parliament and of the Council of 26 June 2013, as amended by Regulation EU 2017/2401 (the CRR).

Banking securitisations aiming to qualify for the HAPS programme should also comply with the provisions of Greek Law 4649/2019, as most recently amended by Greek Law 5072/2023 (the “HAPS Law”).

Greek Law 2801/2000 governs the securitisation of State receivables.

More general aspects of securitisation transactions are governed by the Greek Company Law 4548/2018, a legislative decree dated 17 July/13 August 1923 on some special provisions on sociétés anonymes, and by Greek Law 2844/2000 on the pledge registry.

The provisions of Greek Law 5072/2023, which transposed Directive (EU) 2021/2167 of the European Parliament and of the Council of 24 November 2021 on credit servicers and credit purchasers and replaced the relevant provisions of Greek Law 4354/2015, would also apply to the servicing of receivables transferred under the Securitisation Law, if the relevant servicing activities have been assigned to licensed Greek or EU credit servicers, within the meaning of Greek Law 5072/2023. Greek Law 5072/2023 does not apply to the transfer of claims under credit agreements transferred before 30 December 2023, nor to their respective servicing agreements.

Under the Securitisation Law, the purchaser and transferee of the claims (and issuer of the notes) within a securitisation transaction is always an SPE and may be established either in Greece or abroad. Pursuant to Article 4 of the EU Securitisation Regulation, an SPE cannot be established in a third country that is listed as a high-risk jurisdiction.

In order to mitigate regulatory and accounting risks, securitisation SPEs in Greek securitisations are usually orphan entities and are typically established offshore, in countries where favourable double taxation avoidance treaties are in force, such as Ireland or Luxembourg, which ensures that payments from obligors to the SPE can be made free of withholding tax. The choice of jurisdiction is also driven by set-up and maintenance costs and confidence in the respective legal system’s ability to ensure a ring-fencing of the transferred assets.

Greece is not a preferred jurisdiction for the incorporation of SPEs, as securitisation SPEs established in Greece should have the form of a company limited by shares (société anonyme), which cannot be an orphan vehicle, while its shares are mandatorily registered.

The Securitisation Law does not include specific provisions on credit enhancement. The choice of the most appropriate form is left to the discretion of the parties involved.

The forms of credit enhancement most commonly used in Greek securitisations are:

• tranching (senior/subordinated note structures), where senior notes have a priority of payment over more junior notes, which also absorb losses before senior notes;
• over-collateralisation, when the receivables transferred are of a greater value than the notes issued;
• cash reserves and deposits; and
• limited recourse loans.

A special form of credit enhancement is the provision of a State guarantee to the most senior class of notes of banking securitisation transactions, pursuant to the HAPS Law.

The issuer is an insolvency-remote special-purpose vehicle, the scope of which is exclusively the acquisition of business receivables and the issuance of the notes to fund the securitisation transaction.

The issuer must not be owned or controlled by the seller (whether through holdings of shares or control of the management), both for accounting reasons (consolidation implications) and for legal and regulatory reasons (including under the CRR and the EU Securitisation Regulation); please see also 1.4 Special-Purpose Entity (SPE) Jurisdiction.

The term “sponsor” is not contained in the Securitisation Law.

According to the CRR and the EU Securitisation Regulation, a sponsor is a credit institution (whether located within the EU or not) or an investment firm as defined under Directive 2014/65/EU (MiFID II), other than the originator, that establishes and manages a securitisation that purchases exposures from third-party entities, or that establishes a securitisation that purchases exposures from third-party entities and delegates the day-to-day active portfolio management involved in that securitisation to an entity authorised to perform such activity in accordance with Directive 2009/65/EC (the “UCITS Directive”), Directive 2011/61/EU (AIFMD) or MiFID II.

According to the Securitisation Law, in a securitisation of business claims, the originator/seller of the receivables can be any merchant residing or being permanently established in Greece, whereas in real estate securitisations the seller can only be the Greek State or another public sector entity, a credit institution, an insurance company or a société anonyme 100% owned by the above entities.

The HAPS Law applies only to securitisations originated by credit institutions.

The EU Securitisation Regulation imposes a “direct” obligation on the originator to ensure that it retains a 5% material net economic interest on the transferred assets (risk retention – see 4.3 Credit Risk Retention).

Underwriters – usually also referred to as managers and/or arrangers – are typically investment banks, which act as an intermediary between the issuer and investors in the offering of the notes. In Greek securitisations, the arrangers provide advice on the structure of the transaction and/or investor demand, and facilitate the marketing and sale of the notes.

The servicer is the entity undertaking the servicing, the collection and, generally, the management of the transferred receivables. Under the Securitisation Law, the servicing of the securitised portfolio can either remain with the originator or it can be assigned to a credit or financial institution, which legally provides services according to its scope within the EEA, or to any third party, provided that it is either a guarantor to the transferred receivables or is entrusted with the management or collection of the receivables prior to their transfer.

It is noted that, under the Securitisation Law, if the SPE does not have an establishment in Greece and the transferred receivables are claims against consumers payable in Greece, the servicer must have an establishment in Greece.

The servicer is appointed by the SPE by a written agreement. The servicing agreement is registered in the public books of the pledge registry of the registered seat of the originator. If the servicer is replaced, a new servicing agreement will be entered into and will be registered in the same manner as the initial servicing agreement.

Under Greek Law 5072/2023, which repealed the relevant provisions of Greek Law 4354/2015, the credit servicer acting on behalf of a credit purchaser or a credit institution or a financial institution having its registered seat or established in EU, in respect of a creditor’s rights, under credit agreements issued by credit or financial institutions having their registered seat or established in EU, must be a licensed servicing company. Credit servicers fall into the category of financial institutions, and may act as servicers of securitised claims under the Securitisation Law arising from credit agreements.

Investors purchase the notes issued by the SPE, and receive interest and principal payments from the notes.

According to the Securitisation Law, the notes issued by the SPE can be offered in any jurisdiction by private placement only – ie, to a limited number of persons not exceeding 150. Under the Securitisation Law, the minimum denomination of each note issued by the SPE is EUR100,000.

The notes issued are usually bought by institutional investors, such as credit institutions, financial institutions and investment firms.

Although not prohibited, the distribution of the notes to retail investors is subject to specific requirements under the EU Securitisation Regulation, MiFID II and Regulation 1286/2014 (the “PRIIPS Regulation”). In any case, such distribution is highly unlikely due to the aforementioned minimum nominal value of each note issued by the SPE.

Greek law does not recognise the common law concepts of trusts or trustees. As an alternative, the Company Law imposes the organisation of the noteholders into a group and the appointment of a “bondholder agent” to act as the representative of the group of noteholders and exercise their rights on their behalf; according to the Company Law, such agent can only be a credit institution or a licensed servicer under the former Greek Law 4354/2015 (and now Greek Law 5072/2023), or entities such as an investment firm, an alternative investment fund manager or a central securities depository.

However, foreign trust arrangements are recognised in Greece. In this case, the role of the note trustee will be regulated by the law governing the securitisation transaction documents. A professional corporate entity is usually appointed as a trustee.

As mentioned in 2.7 Bond/Note Trustees, Greek law does not recognise the common law concept of trusts, but foreign trust arrangements are recognised in Greece. In this case, the role of the security trustee will be subject to the law governing the securitisation transaction documents. A security trustee’s role is to hold benefit of the security interests and rights on behalf of and for the account of the investors and the secured parties. A security trustee is also entitled to enforce the collateral transferred to the trustee in the occurrence of a default event. A professional corporate entity is usually appointed as a trustee.

As an alternative to the trust structure, the Securitisation Law provides that, upon registration of the Greek law transfer (assignment) agreement in the public books of the pledge registry of the registered seat of the originator, a first ranking pledge on the transferred receivables and the collections relating to the receivables (which must be paid into a segregated bank account) is created directly in favour of the noteholders (and any other creditors of the issuer under the securitisation transaction documents, such as swap counterparties, liquidity providers, etc), by operation of law. Finally, the Company Law imposes the organisation of the noteholders into a group and the appointment of a “bondholder agent” (see 2.7 Bond/Note Trustees).

A securitisation transaction customarily includes the following elements.

• A sale agreement (usually under English Law) between the seller and the SPE, which contains the contractual terms and conditions of the sale. This agreement typically includes the agreement to sell and purchase the receivables, the agreed consideration, the conditions precedent, completion and post-closing actions, representations and warranties, indemnity clauses and general clauses regarding the language and jurisdiction, whereas the parties usually choose to annex in pre-agreed form any documentation to be used on the execution of the agreement – namely the Greek law assignment agreement (see below) and any powers of attorney.
• A transfer (assignment) agreement under Greek law between the seller and the SPE, with the minimum content required by law – namely the counterparties, the purchase price (with reference to the respective clause in the sale agreement) and a short description of the receivables and jurisdiction clauses. A list of the receivables (with the description of the receivable, its nominal value and its related rights) is annexed to the agreement.

In accordance with the Securitisation Law, a summary of the assignment agreement must be registered in the public registry book of Article 3 of Greek Law 2844/2000 kept with the pledge registry of the registered seat of the seller in order to effect a bankruptcy-remote transfer of financial assets to the SPE (see 6.1 Insolvency Laws).

Principal warranties used in securitisation documentation typically include:

• corporate warranties of the seller and SPE regarding their good standing and their power to enter into the transaction; and
• warranties in relation to the underlying assets.

Any party breaching corporate warranties is typically obliged to indemnify the other party against any losses and damages, including any costs.

In the case of a breach of the warranties in relation to the underlying assets, the documentation typically provides for indemnification clauses, containing, among others, the procedure for bringing up a claim, limitations on the seller’s liability and time limitations. A seller may also have the option to repurchase any receivable that does not meet the criteria set out in the sale agreement and replace it with another.

The warranties are enforced in accordance with the law governing the sale agreement (usually English law).

The principal perfection provision is the registration in the public registry book of Article 3 of Greek Law 2844/2000 kept with the pledge registry of the registered seat of the seller of a summary of the transfer (assignment) agreement.

This is enforced by:

• the execution and delivery by the seller and the SPE of a duly completed Greek assignment agreement in respect of the receivables and the related rights on the closing date; and
• the execution and delivery by the seller and the SPE of an executed notification form to the registry on the closing date – the sale agreement typically includes an obligation for the parties to deliver such an executed form.

The execution and delivery by the seller to the SPE on the closing date of a seller power of attorney, authorising the SPE to proceed with the registration on its own, is also customary in Greek transactions. Notarised powers of attorney may also be provided to the legal counsels of the transaction, by virtue of which the latter have the right to appear before the public registry and proceed with the registration on behalf of the parties.

The principal covenants in securitisation documentation in respect of a seller are as follows:

• to comply with all of its obligations under the documentation;
• to make any and all payments free and without deduction for any and all present and future taxes; and
• to notify the SPE if it becomes aware of any material breach by it of any representation or warranty, or if any legal proceedings are instituted against any of the transferred receivables.

In the case of a breach, the seller will be liable for compensation, in accordance with the sale agreement.

The SPE’s main covenant is to limit its scope of activities to the purposes of the securitisation.

The Securitisation Law does not include specific provisions regarding servicing, except for the servicer’s obligation to deposit immediately all collections in a special account, held either with it (if the servicer is a bank) or with a credit institution seated in the EEA, which is segregated from the servicer’s and/or the credit institution’s assets.

The servicing agreement typically includes terms regarding the servicing fees, the procedures of servicing and the collection of monies, the key performance indicators to be taken into account for the evaluation of the servicer’s performance, the undertakings and liabilities of a servicer, and clauses on the termination and replacement of the servicer.

A summary of the servicing agreement must be registered in the public registry book of Article 3 of Greek Law 2844/2000 kept with the pledge registry of the registered seat of the seller.

Enforcement of the terms of the servicing agreement is made under the law governing said agreement.

With respect to the servicing of bank loan receivables by licensed credit servicers, within the meaning of Greek Law 5072/2023, the latter provides the minimum content of servicing agreements, which should include the following clauses:

• a detailed description of the servicing activities assigned;
• the servicing fees and a reference that these cannot be passed through to the debtors of the receivables;
• the costs payable by the SPE;
• the authorisation of the servicer to represent the SPE towards debtors;
• covenants of the parties to comply with EU and national legislation, specifically data protection rules;
• the receivables under servicing, in aggregate (ie, the number and total amount of claims on the signing date) and a case-by-case reference (total claim amount), as well as the status of each loan receivable (performing, non performing);
• the related rights;
• undertakings for the fair and prudent handling of the debtors;
• the previous notification of the SPE before the assignment of the servicer of any servicing activities (outsourcing) to third parties; and
• the intermediary policy on the sale of loan receivables in a secondary market.

Under Greek Law 5072/2023, a copy of the servicing agreement must be submitted to the Bank of Greece (BoG), which is the competent authority responsible for the supervision of licensed credit servicers, within ten days of its signing.

Principal defaults used in securitisation documentation include the following:

• in the sale and purchase agreement: the breach of representations and warranties in relation to receivables;
• in the servicing agreement: the failure of the servicer to meet the Key Performance Indicators set, breach of undertakings, or non-compliance with laws; and
• in the trust deed: the failure of the trustee to apply monies according to the order of priority.

Specific defaults are provided for in servicing agreements of banking securitisations that intend to be compliant with the HAPS Law (see 4.12 Participation of Government-Sponsored Entities).

Breach of contractual obligations by the servicer or the trustee may also lead to their substitution.

In the case of a breach of corporate warranties, the breaching party is typically obliged to indemnify the other party against any losses and damages, including any costs.

In the case of a breach of warranties with respect to the underlying assets, the documentation usually provides indemnification clauses, as well as the option for the seller to repurchase the receivables that do not meet the set criteria.

Indemnities are enforced in accordance with the law governing the relevant agreement.

According to the Securitisation Law, the board of directors of the Greek SPE is the competent body to resolve on the issuance of the notes and to define their characteristics. The board of directors may provide authorisations for the determination of additional issues, such as the number, the total nominal value, the offering details and the appointment of the servicer and the bondholder agent. The only restriction in the Securitisation Law is the minimum denomination of each note, which must be at least EUR100,000.

Typically, in Greek securitisations, the terms and conditions of the notes are included in a note trust deed governed by English law. The note trust deed provides for the number of notes to be issued by the SPE, their denomination and other basic terms, such as the covenant to pay, the pre-acceleration and post-acceleration application of monies received by the trustee, the interest rate and the interest payment dates, events of default and terms regarding the role of the trustee.

The Securitisation Law explicitly allows SPEs to enter into financial derivatives transactions for hedging purposes or for purposes related to securitisation.

Interest rate derivatives, such as interest rate swaps, are mainly used in Greek securitisation transactions, in order to mitigate the interest rate risk (eg, by exchanging fixed income from receivables against floating interest under the notes, or vice versa).

For more information regarding the laws and regulations that apply to the use of derivatives, please see 4.7 Use of Derivatives.

The Securitisation Law allows only private securitisations effected through the distribution of the notes to a limited number of persons not exceeding 150. Accordingly, no Offering Memoranda are required in this case. Instead, and in order to meet the transparency requirements of the EU Securitisation Regulation, a “transaction summary” or overview of the main features of the securitisation has to be drafted.

Even though notes issued under the Securitisation Law may only be distributed via private placement, their listing is not prohibited. If the notes were listed on an EU regulated market or Multilateral Trading Facility (MTF), a Prospectus (within the meaning of the Regulation EU 2017/1129 – the “Prospectus Regulation”) or an Offering Circular, respectively, would be issued.

According to paragraph 8 of Article 10 of the Securitisation Law, a summary of the receivables transfer (assignment) agreement (and of any repurchase of receivables) has to be registered in the public books of the competent pledge registry (ie, the pledge registry of the registered seat of the originator), set up under Article 3 of Law 2844/2000. Pursuant to paragraph 16 of Article 10 of the Securitisation Law, the servicing agreement should also be registered with the pledge registry (see 2.5 Servicers). The Greek Ministry of Justice has issued template forms regarding the above registrations.

In addition, the EU Securitisation Regulation has introduced a set of harmonised disclosure and transparency rules that have applied to all forms of EU securitisations since 1 January 2019 (other than securitisations existing prior to that date to the extent that they are grandfathered). The EU Securitisation Regulation has imposed specific disclosure requirements on the originator, the sponsor and the SPE, which were clarified by the implementation of technical standards, comprising formats and templates to help standardise the reporting procedures.

• Certain information should be disclosed to investors (and to potential investors, upon request) and to national competent authorities before pricing, including all documentation essential for the understanding of the transaction, as well as any offering document or prospectus and, where no prospectus has been drawn up, a “transaction summary” of the main features of the securitisation. Information on the underlying exposures and investor reports should also be made available on an ongoing basis (see also 4.4 Periodic Reporting).
• The originator, sponsor and SPE should designate from amongst themselves one entity to fulfil the relevant information requirements. In private securitisations, such as the ones stipulated under the Securitisation Law, the required information is provided directly to investors and to the competent authorities, whereas information transparency in public securitisations is achieved through filings with a securitisation repository, or by registering an entity online to act as a securitisation repository.

As mentioned above, the Securitisation Law only allows private securitisations, but the listing of the respective notes is not prohibited. If the notes are listed on ATHEX, the following legislation will also apply:

• the Prospectus Regulation and Greek Law 4706/2020, which specifies the implementation measures under the Prospectus Regulation;
• Greek Law 3556/2007, transposing Directive 2004/109 (the “Transparency Directive”); and
• Regulation EU 596/2014 (the “Market Abuse Regulation” or MAR).

The Securitisation Law does not provide for “credit risk retention”. However, the risk retention requirements found in the relevant European legislation (namely the EU Securitisation Regulation and previously the CRR) are applicable to Greek securitisations.

More specifically, pursuant to Article 6 of the EU Securitisation Regulation, the originator, sponsor or original lender of a securitisation should retain, on an ongoing basis, a material net economic interest in the securitisation of not less than 5%, using one of five methods. The EU Securitisation Regulation exempts from the risk retention requirement securitisations where the underlying assets are obligations of or obligations guaranteed by central governments, central banks, regional governments/local authorities and multilateral development banks.

In addition, certain institutional investors must verify that the risk retention obligations have been complied with, as part of their due diligence obligations under Article 5 of the EU Securitisation Regulation.

The risk retention regulatory technical standards (RTS) under the EU Securitisation Regulation were published in the Official Journal of the EU on 18 October 2023 as Commission Delegated Regulation (EU) 2023/2175 of 7 July 2023, and came into force on 7 November 2023. From the date on which the RTS came into force, the relevant CRR RTS (namely EU Delegated Regulation 625/2014) were repealed (subject to the transitional provisions of the EU Securitisation Regulation for securitisations that remain grandfathered and that are subject to the previous rules).

According to Article 70 of Greek Law 4706/2020, in the case of a breach of the applicable requirements under the EU Securitisation Regulation (including the risk retention requirements), the national competent authorities – namely the BoG or the Hellenic Capital Markets Commission (HCMC), as provided for in the above law – may impose the administrative sanctions and measures provided for in paragraph 2 of Article 32 of the EU Securitisation Regulation on any natural or legal person. The same administrative sanctions may also be imposed in case of breach of the regulatory obligations laid down in the implementing acts of the EU Securitisation Regulation, as well as in the regulatory acts adopted by the above national competent supervisory authorities, pursuant to the EU Securitisation Regulation. Notably, among the above administrative sanctions, a fine of up to EUR5 million or up to twice the benefit derived from the violation, where this amount can be determined, is provided for. Despite the discretion provided by the EU Securitisation Regulation, Greece has not provided for any specific criminal sanctions.

Article 13 of the Securitisation Law requires Greek SPEs to submit a valuation report on their real estate property and the liquidation value of all the assets thereof (including loan receivables) to the BoG and the HCMC, on an annual basis. This report must be audited by statutory auditors, under the International Financial Reporting Standards (IFRS). No specific penalties for a breach of such obligations are provided for in the Securitisation Law.

The EU Securitisation Regulation also imposes a number of periodic reporting obligations on the originator, sponsor and issuer, to holders of securitisation positions, the supervisory authorities and investors, such as the submission of quarterly reports to investors, which must contain information on:

• the credit quality and performance of the underlying exposures;
• the trigger events affecting the priority of payments or the replacement of the parties involved;
• the cash flows generated by the underlying exposures and the liabilities of the securitisation; and
• risk retention.

Furthermore, there are reporting obligations on any inside information relating to the securitisation that the originator, sponsor or SPE is obliged to make public in accordance with MAR and, where the above do not apply, information on any significant event that can materially impact the performance of the securitisation, such as any material amendment to the transaction documents, any material breach of the obligations provided for in the transaction documents, or any material change in the structure or the risk characteristics of the securitisation or the underlying exposures.

Please see 4.3 Credit Risk Retention regarding the penalties imposed for non-compliance with the periodic disclosure requirements under the EU Securitisation Regulation. Additional periodic disclosure requirements apply to banks under the CRR.

Rating agencies are governed by Regulation (EC) 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies, as amended, and Greek Law 3867/2010. The HCMC is the Greek authority responsible for the registration and supervision of rating agencies established in Greece and the imposition of fines and other measures, along with the European Securities and Markets Authority (ESMA).

In some cases, the rating of the notes issued in the context of the securitisation transaction is necessary. For instance, under the Securitisation Law, mutual funds and investment holding companies established in Greece may only invest in notes that have been assigned an “investment grade” by an internationally accepted rating agency. Please see 4.12 Participation of Government-Sponsored Entities regarding the rating of the senior notes of securitisation transactions under the HAPS Law.

Credit institutions and large investment firms have to calculate their regulatory capital as provided for under the CRR. Securitisation may be an important risk management tool for banks.

Simple, transparent and standardised (STS) securitisations within the meaning of the EU Securitisation Regulation draw a more beneficial capital treatment, which is an incentive for originators and investors.

Pursuant to the CRR, a bank may exclude the underlying exposures from its calculation of risk-weighted exposure amounts if the securitisation meets the regulatory criteria for significant risk transfer (STS). The CRR establishes standardised tests to assess whether the credit risk transferred is significant and, consequently, whether the bank’s capital requirements can be reduced. The SRT principle is applicable to both traditional and synthetic securitisations. Originators of SRT securitisations should notify the European Central Bank (ECB) of their intentions at least three months in advance of the expected closing date of the transaction.

Insurance and reinsurance undertakings are subject to specific capital requirements pursuant to Commission Delegated Regulation (EU) 2015/35 of 10 October 2014, supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (“Solvency II”), as amended and in force, when investing in securitisations. For this purpose, Solvency II originally divided securitisation positions into three categories for the purpose of calculating capital charges (type 1, type 2 and resecuritisation). The introduction of the STS categorisation under the EU Securitisation Regulation modified the Solvency II capital calibrations relating to securitisations and replaced the original categories with senior STS, non-senior STS, non-STS and resecuritisations, for which different capital requirements apply.

According to the Securitisation Law, SPEs may enter into financial derivatives transactions for hedging purposes or for purposes related to securitisation.

Furthermore, Article 21 of the EU Securitisation Regulation provides that for STS securitisations the use of derivative contracts shall be limited to the purpose of hedging the SPE’s interest rate or currency risk. These derivatives should be underwritten and documented according to common standards in international finance. The SPE shall not enter into derivative contracts for any other reason, and should ensure that the pool of underlying exposures does not include derivatives.

Derivatives are generally regulated by Regulation (EU) 648/2012 of the European Parliament and of the Council of 4 July 2012, as amended (EMIR). An EU SPE entering into such contracts will be subject to obligations imposed under EMIR. For EMIR purposes, an SPE would be considered to be a non-financial counterparty (NFC).

EMIR provides, inter alia, for central clearing of derivatives, if certain thresholds are met, or for risk mitigation techniques, such as the exchange of collateral. Article 4 of EMIR provides for an exemption from the clearing obligation (and collateral posting obligation) for STS securitisations if the counterparty credit risk is adequately mitigated – ie, if the following additional criteria under Article 2 of the Commission Delegated Regulation (EU) 2020/447 are met:

• the counterparty ranks at least pari passu with the holders of the most senior notes (unless such counterparty is the defaulting or affected party); and
• the most senior notes are subject to a credit enhancement of at least 2% of the outstanding notes.

Under EMIR, as amended, financial counterparties are solely responsible, and legally liable, for reporting derivative transactions on behalf of both counterparties, for the details of OTC derivative contracts concluded with an NFC that does not exceed the clearing thresholds (NFC-), and for ensuring the correctness of the details reported.

Please see 4.3 Credit Risk Retention regarding the potential penalties that could be imposed for non-compliance with the limitations provided for in the EU Securitisation Regulation as regards derivative transactions.

Pursuant to Greek Law 4209/2013, the HCMC supervises Greek NFCs in relation to their compliance with EMIR. In the case of a breach, penalties range from reprimands to administrative fines.

Investor protection under the Securitisation Law is achieved through the registration of the transfer and the servicing agreements with the public pledge registry and the creation of the statutory pledges, the prohibition of creation of any other security interests over the receivables and the collection accounts, and the segregation of assets and bankruptcy-remoteness. In addition, the Securitisation Law provides for the formation of the noteholders’ group and the appointment of a bondholder agent, which constitutes an additional protection for investors.

At an EU level, the EU Securitisation Regulation includes specific requirements aimed at protecting investors, such as:

• the pre-investment due diligence requirements for institutional investors (Article 5);
• the risk retention requirements (Article 6);
• the transparency requirements for the underlying exposures (Article 7); and
• the credit-granting requirements imposed on the originators, sponsors and original lenders, with the aim of ensuring the quality of the securitised assets (Article 9).       

The ban on resecuritisations (Article 8) and the obligation to hold data in a securitisation repository (Article 17), where applicable, also serve as investor protection measures.

The EU Securitisation Regulation also aims to protect retail investors by including certain restrictions with regard to the sale of securitised positions to retail clients, including a requirement to perform a suitability test in accordance with MiFID II, which was implemented in Greece by Greek Law 4514/2018. MiFID II contains a number of requirements aiming to protect investors, including product governance, information and record-keeping. Additionally, in the case of offerings made to retail investors, a key information document (KID) may need to be prepared, in accordance with the PRIIPS Regulation.

Securitisations of Greek credit institutions are mainly governed by the provisions of the Securitisation Law, the CRR and the EU Securitisation Regulation.

Please see 1.4 Special-Purpose Entity (SPE) Jurisdiction and 2.1 Issuers.

Pursuant to the Securitisation Law, SPEs may not engage in any other activity outside the scope of securitisation.

As discussed in 1.2 Structures Relating to Financial Assets, the HAPS Law introduced the HAPS programme, which has recently been reintroduced by Greek Law 5072/2023 and now expires on 31 December 2024. The HAPS Law sets out the terms and conditions under which the Greek State may provide its guarantee for the senior notes issued in the context of bank securitisations. These transactions are otherwise regulated by Article 10 of the Securitisation Law.

Under the HAPS Law, at least two classes of notes, in terms of payment priority (ie, senior and junior notes), should be issued, and the issuance of mezzanine notes is also possible.

It should also be noted that Greek banks are not allowed to include loans that benefit from State guarantees in their securitised portfolios. In addition, the Greek State, public entities and general government entities, including those directly or indirectly controlled by the State, may not acquire any junior or mezzanine bonds that are issued in the context of securitisations for which a Greek State guarantee has been provided or a request for a Greek State guarantee has been submitted, under the provisions of the HAPS Law.

The HAPS Law prescribes the priority of payments under the securitisations intended to be guaranteed under the HAPS programme. The servicing of the securitised claims is mandatorily assigned to a servicer, who at the time of entry into force of the State guarantee is not controlled by the transferor, pursuant to International Accounting Standard 10 (independent servicer).

The main conditions for the entry into force of the State guarantee are the transfer to private investors by way of sale, against positive value, of at least 50% +1 of the junior notes issued, and the transfer to private investors by way of sale at a positive price of an adequate number of junior notes and, if applicable, an adequate number of mezzanine notes, for the derecognition of the securitised claims in the financial statements of the transferor and its group, on a consolidated basis, in accordance with the IFRS. In addition, following the recent amendment of the HAPS Law, senior notes should be rated BB+, Ba1, BB+, BB (high) or higher by a recognised rating agency registered in the relevant register of the European Central Bank (the relevant rating provided in the initial text of the HAPS Law was ΒΒ-, Ba3, ΒΒ-, BBL or higher). Any second rating should be carried out by a rating agency registered in accordance with the provisions of Regulation (EC) 1060/2009. This second rating cannot be lower than BB+, Ba1, BB+ or BB (high).

The HAPS Law explicitly provides that the Greek State guarantee constitutes an express, irrevocable, unconditional and on first demand guarantee, pursuant to the provisions of Articles 213, 214 and 215 paragraph 1 of the CRR.

Several transactions for very large portfolios of bank loan and credit receivables have been concluded by the Greek systemic banks under the HAPS Law since 2019.

Please see 2.6 Investors and 4.12 Participation of Government-Sponsored Entities.

As mentioned in 4.5 Activities of Rating Agencies, under the Securitisation Law, mutual funds and investment holding companies established in Greece may only invest in notes that have been assigned an “investment grade” by an internationally accepted rating agency.

There are no other relevant principal laws or regulations.

Synthetic securitisations do not qualify as “securitisations” within the meaning of the Securitisation Law, because in synthetic securitisations the ownership of the securitised receivables is not transferred to the SPE but remains with the originator. In synthetic securitisations, the risk of the securitised claims is transferred from the originator to the investors through a credit protection agreement, usually in the form of a financial guarantee or a credit derivative (such as a total return swap), whereby the originator agrees to pay the investor a credit protection premium and the investor agrees to pay the originator a credit protection payment, if a contractually agreed credit events occurs.

Synthetic securitisations are permitted under the EU legislation and are recognised by the Single Supervisory Mechanism and the BoG for the regulatory capital treatment of credit institutions. A number of synthetic securitisations have been concluded by Greek systemic banks during the last three years.

Under paragraph 19 of Article 10 of the Securitisation Law, upon perfection of the sale and transfer of the receivables by registration of the transfer (assignment) agreement with the pledge registry, the validity of the sale and transfer of the receivables (including any rights ancillary to the claims transferred) shall not be affected by the opening of any insolvency proceedings against the seller, the SPE, the servicer of the receivables or any third-party guarantor or beneficiary of other ancillary rights.

In addition, upon registration of the transfer (assignment) agreement with the pledge registry, a first-ranking pledge is created by operation of law over:

• the receivables for the benefit of the holders of the notes and other secured creditors under the securitisation transaction; and
• the proceeds of collections made by the servicer in respect of the receivables, which should be deposited in a separate bank account held with the servicer itself (if it is a credit institution) or with a credit or financial institution within the EEA.

This collection account is segregated from the servicer’s or the relevant account bank’s insolvency estate (as applicable). Secured claims are satisfied from the enforcement of the statutory pledge ahead of the claims of any statutory preferential creditors.

In addition, the Securitisation Law provides that, following the registration of the transfer of the claims, no security interest or encumbrance can be created over the receivables other than the aforementioned statutory pledge.

Finally, according to the Securitisation Law, any security interest granted for the account of the noteholders, any funds received by the servicer on behalf of the noteholders and any titles of securities deposited with the servicer are not subject to attachment, set-off or any other encumbrance sought by the servicer or by any of its creditors, nor are they included in the servicer’s insolvency estate.

In Greek securitisation transactions, the SPE is typically a newly established orphan entity, established offshore and keeping separate financial statements. Pursuant to the Securitisation Law, SPEs may not engage in any other activity outside the scope of securitisation; see 1.4 Special-Purpose Entity (SPE) Jurisdiction and 2.1 Issuers.

Substantive consolidation is not provided for in Greek insolvency law. Given that the SPE has a separate legal personality, if the Greek originator is subject to insolvency proceedings, the assets of the SPE (ie, the receivables, including future receivables) will not be included in the originator’s bankruptcy estate and will be available exclusively for the satisfaction of the noteholders and other secured creditors under the securitisation transaction. As a matter of Greek law, the lifting of the corporate veil has been applied by courts in exceptional cases, outside the scope of securitisation. Such cases involved entities that were fully owned and controlled by their shareholders and operating as separate legal entities in name only.

Under the Securitisation Law, the transfer of receivables is effected and perfected upon the registration of a summary of the transfer (assignment) agreement in the public books of the pledge registry. In addition, the transfer agreement and its registration override any contractually agreed non-transferability of the respective receivables between the seller and the obligor of the receivables.

The above registration also operates as a deemed notification of the transfer to the relevant obligors of the securitised claims, without the need to give them individual notifications (as would otherwise be required under the general provisions of Articles 455 et seq of the Greek Civil Code on assignment of rights and claims).

Accordingly, by and upon such registration, the transfer of the receivables and related security interests to the SPE, like all other effects of the securitisation of the receivables, takes effect automatically in rem as against all persons, as far as Greek law is concerned. If the registration requirements are not complied with, the receivables continue to be a part of the seller’s estate.

The registration of the transfer agreement with the public registry is also the only perfection requirement for the statutory pledge over the receivables and the collection account to take effect (see 6.1 Insolvency Laws).

For the purposes of the registration, a specific form is used. A full list of the transferred receivables, including identification of the relevant contract, information on debtors, guarantors, outstanding amounts, maturity date, etc, is annexed to this form.

Upon registration, the pledge registry will issue a certificate of registration, on the basis of which the SPE (in practice, the servicer appointed on its behalf) will be able to effect annotation of the transfer of the relevant receivable in the public books of the competent land registry or cadastre in cases where the receivable is secured over real property, or the competent pledge registry in cases where the receivable is secured over a pledge, which is subject to publicity. Such annotations are not required for the perfection of the transfer of the relevant receivable (nor of the security interest securing that receivable): they are only required for the update of the public books of the public registry regarding the identity of the beneficiary of the security interest securing the relevant receivable. Usually, such annotations are made when enforcement steps are intended to be taken against the obligor of the securitised claim.

Legal opinions that are typically provided with respect to securitisation transactions confirm, inter alia, that the transfer of the claims under the relevant sale and transfer agreement constitutes a true and unconditional sale of the claims, and that the transaction qualifies as a securitisation transaction for the purposes of the Securitisation Law. True-sale legal opinions need to be provided under the CRR for capital treatment purposes in the case of banking securitisations.

A securitisation is the typical way to construct a bankruptcy-remote transaction. Greek credit institutions may also achieve a bankruptcy-remote transaction through the issuance of covered bonds.

Covered bonds are a particular category of bonds, subject to a special legal and regulatory framework; until 2022, the issuance of covered bonds was regulated by the Greek Banking Law 4261/2014. Law 4920/2022 (the “Covered Bond Law”) entered into force on 8 July 2022, transposing Directive (EU) 2019/2162 of the European Parliament and of the Council of 27 November 2019. Covered bonds issued prior to such date continue in principle to be governed by Greek Law 4261/2014.

The label “European Covered Bond” may be used only for covered bonds that meet the requirements of the Covered Bond Law. Furthermore, the label “European Covered Bond (Premium)” may be used only for covered bonds that also meet the requirements of Article 129 of the CRR.

The Covered Bond Law supersedes the general provisions of the Greek Civil Code, the Greek Code of Civil Procedure and the Greek Insolvency Code. The Securitisation Law and the Company Law are also applicable, to the extent that the Covered Bond Law refers to these laws.

Finally, the Covered Bond Law authorises the BoG to enact secondary legislation in order to supplement the provisions of the Covered Bond Law. On the basis of such authorisation, the BoG Executive Committee Act 215/2023 was issued, which specifies and supplements the covered bond issuance and supervision framework.

Only the direct issuance of covered bonds by credit institutions is permitted under the Covered Bond Law.

The segregation of the cover pool is achieved through a statutory pledge over the cover pool assets. In the case of assets governed by a foreign law (such as claims from derivative contracts), a security interest must be created in accordance with such foreign law. The statutory pledge and the foreign law security interest secure claims of the holders of covered bonds and may also secure other claims that are connected to the issuance of the covered bonds (in accordance with their terms).

The claims constituting cover assets are identified by being listed in a document signed by the issuer and the bondholder agent who is acting for the account and on behalf of the bondholders, within the meaning of the Company Law. A summary of such document is registered with the pledge registry of the registered seat of the issuer.

According to Article 14 of the Covered Bonds Law, upon registration of the summary of the document listing the claims included in the cover pool, the issuance of the covered bonds, the establishment of the statutory pledge and the foreign law security interest and the entering into of all contracts connected to the issuance of the covered bonds are not affected by the commencement of any insolvency proceedings against the issuer.

The remaining creditors of the credit institution will only have access to any remaining assets of the cover pool after the holders of the covered bonds and other secured creditors have been satisfied in full. According to Article 4 of the Covered Bond Law, holders of covered bonds have dual recourse both to the cover pool as secured creditors and to the remaining assets of the credit institution ranking as unsecured and unsubordinated creditors.

It is also noted that the cover assets may not be attached.

Pursuant to Article 7 of the Covered Bond Law, covered bonds do not automatically accelerate upon the insolvency of the issuer. Article 21 of the Covered Bond Law provides that, in case of the insolvency or reorganisation of the issuer, a special administrator shall be appointed, whose statutory duties include managing and liquidating the cover assets, including, if there is an opportunity to do so, transferring the assets comprising the cover pool to another bank that is a covered bond issuer, and ensuring that any receipts or recoveries received in respect of the cover pool are made available to pay the obligations and liabilities arising under the covered bonds and the other obligations that are secured by the statutory pledge.

The following applies under the current regime.

• In order for assets governed by the law of another EU member state to be included in the cover pool, credit institutions shall submit legal confirmation to the BoG that the lien established on such assets, under Article 14(2) of Law 4920/2022, is valid, effectual and enforceable according to the provisions of the relevant law.
• Assets that are secured by collateral assets outside the EU and that may, under Article 9(3) of Law 4920/2022, be included in the cover pool shall only be loans secured by ships. In connection with such collateral, credit institutions shall submit legal confirmation to the BoG that the collateral asset is a ship.
• Credit institutions should submit a legal opinion to the BoG confirming the enforceability of the derivative contract used by the parties to covered bond transactions.

The securitisation documents include representations and warranties relating to the establishment, type and limited purpose of the SPE. The activities of the SPE are typically restricted in the transaction documents by negative undertakings, in order to ensure that they are limited to those required in connection with the securitisation.

Transaction parties contracting with the SPE typically agree on non-petition clauses not to commence insolvency proceedings against the SPE, and on limited recourse provisions limiting each party’s claims against the SPE on the assets acquired by it. The transaction documents are typically governed by foreign (usually English) law.

According to Article 14 of the Securitisation Law, the transfer of claims under a securitisation transaction to or from the SPE is exempt from all direct or indirect taxes, stamp duty, commissions or any other right in favour of the Greek State or any third party, other than a minimal registration duty for the registration of the assigning and of the servicing agreement with the pledge registry. This tax exemption also applies if the relevant SPE is established outside Greece.

In addition, notarial fees and duties in connection with the notarisation of any document or agreement in the context of the securitisation are capped.

Pursuant to Article 14, paragraph 11 of the Securitisation Law and the Circular of the Ministry of Finance No 1042/26.01.2015 (paragraph 11, subparagraph 3), the income that the SPE earns from interest payments on the transferred receivables is considered income from business activity and is not subject to withholding tax.

Interest on the receivables received by the SPE will not be subject to Greek income tax, unless the SPE is a Greek tax resident or maintains a permanent establishment in Greece, to which the interest income is attributable. The mere purchase or ownership of receivables generated in Greece or governed by Greek law will not cause the SPE to be considered as a Greek tax resident if the place of management of its operations and the control of its business is not in Greece. Moreover, tax consolidation is not possible under the current Greek tax law rules; on such basis, the SPE will not be subject to Greek taxation if it is being consolidated with the seller for accounting purposes.

As mentioned in 1.4 Special-Purpose Entity (SPE) Jurisdiction, in all securitisation transactions in Greece, SPEs were established in jurisdictions with bilateral double taxation treaties with Greece.

Any applicable withholding taxes need to be assessed when the transaction is structured, in order for the parties to decide on the jurisdiction of incorporation of the SPΕ.

It should be noted that interest on the notes payable to Greek tax resident noteholders or noteholders with a permanent establishment in Greece to which the notes are attributable would be subject to a withholding tax of 15% if the relevant payment was made by a Greek tax resident entity or permanent establishment in Greece. Such withholding extinguishes the income tax obligation of noteholders that are individuals, whereas for all other noteholders interest on the notes is included in their taxable income for income tax purposes and any tax withheld thereon may be credited against any resulting tax.

According to the Securitisation Law, the payment of the principal of the notes and in general the exercise of rights arising from the notes issued are exempt from all direct or indirect taxes.

The Securitisation Law contains significant provisions aimed at tax efficiency, including that the following are exempted from any direct or indirect tax, duty, contribution, levy, right or other encumbrance (being subject only to any applicable VAT or withholding tax and any charges that may be payable to the central securities depositary of the Athens Exchange):

• the transfer and collection of receivables;
• the transfer of real property to and from the SPE and its retransfer to the transferor/originator;
• the profits realised from the transfer of receivables; and
• the execution of loans, credit agreements and financial derivatives, any collateral agreements or, under certain conditions, real property.

No value-added tax will apply to the sale of the receivables, but it will apply to fees payable to the servicer or to other service providers involved in the securitisation transaction.

In addition, interest generated over the amounts deposited in a Greek proceeds collection account is subject to Greek withholding tax.

Finally, a levy of Greek Law 128/1975 is due on loans or credit receivables originated by credit or financial institutions (with the exception of bond loans, to which the levy of Greek Law 128/1975 is not applicable), unless interest under the facility remains unpaid for more than six months. The cost of this levy is contractually passed on to the borrowers of the respective loans/credits; accordingly, it is not a cost of the securitisation transaction, where the borrowers meet their payment obligations under the loan or credit receivables.

Greek legal opinions for Greek securitisation transactions usually cover the tax treatment of:

• the sale and transfer of the receivables;
• the issuance and offering of the notes;
• the payments under the notes and of the transfer thereof;
• the income of the SPE on interest arising from the receivables; and
• the services provided to the SPE (see 7.1 Transfer Taxes, 7.2 Taxes on Profits, 7.3 Withholding Taxes and 7.4 Other Taxes).

Usual assumptions in Greek transaction opinions include the following:

• that the SPE does not or will not (other than as a result of the securitisation transaction) have a permanent establishment in Greece and that the central management and control of the SPE and of the SPE’s business is and will at all times be exercised outside Greece;
• that obtaining a tax advantage for any person is not, has at no time been, and will not at any time be the main or one of the main purposes of the transaction parties in entering into the transaction; and
• that, wherever applicable, any transactions between associated persons are carried out at arm’s length.

The criteria for a transfer of receivables to be treated as a true sale of assets for accounting purposes are determined in line with the accounting standards applied by the originator. Sellers in completed Greek securitisation transactions apply the IFRS. Section 3.2 of IFRS 9 deals with the derecognition of financial assets. The respective issues fall outside the scope of legal analysis.

Legal opinions do not typically cover accounting matters, but may include certain conclusions, qualifications or assumptions that may be used for the purposes of risk assessment.

Legal practitioners should pay attention to the transfer price and to any remuneration received by the seller from the SPE, and should confirm, through the documentation, among others, that the seller has no control over the SPE and that the seller does not provide any undertaking to ensure the realisation of any of the securitised assets.