The most commonly securitised financial assets in the Dutch market are residential mortgage loans (RMBS). Other financial assets frequently securitised in the Dutch market are auto-leases, buy-to-let mortgage loans (B2L), consumer loans and trade receivables. Less common are equipment lease securitisations and commercial mortgage loans (CMBS). There is also an increasing appetite for “green” securitisations and, in particular, green RMBS transactions. The volume of green RMBS securitisations issues in the Netherlands rose from EUR0.5 billion in 2022 to EUR1.4 billion in 2023, and we see this increasing in the coming years.

The typical structure for securitisations for cash RMBS, B2L, auto-lease and consumer-loan financial assets entails the sale of the assets by an originator (or financial-asset owning company) to a special purpose vehicle (SPV) by way of a legal “true sale” which usually, but not necessarily, involves an orphan SPV. This SPV is often a Dutch limited liability company established as an orphan (though not necessarily), and we see Irish as well as Luxembourg incorporated SPVs employed in Dutch securitisations. The sale of the assets to the SPV is funded by the SPV through the issuance of (different tranches of) secured notes or borrowing money under senior and subordinated secured loan arrangements.

Financial assets in the form of “receivables” under cash securitisations are usually transferred via an assignment (cessie), and, more specifically, by way of undisclosed assignment (stille cessie), under which the obligor under the receivable is not – unless a prescribed trigger event occurs – notified of the assignment. However, for legal reasons that will be touched upon under 6.1 Insolvency Laws, the separation of assets under operational lease receivables securitisations usually does not primarily involve a transfer by way of assignment of the receivables – rather, alternative structures are used to transfer the economic interest of the receivables, such as transfer by means of hire purchase (huurkoop) or contract transfer (contractsoverneming).

The various tasks/obligations that the SPV needs to perform or observe under a Dutch securitisation are customarily outsourced to independent third parties, such as asset servicing and cash management, while a security trustee or agent is appointed to represent and safeguard the interests of the prescribed secured creditors of the SPV as well as to hold the transaction security. To secure the financial obligations of the SPV against the various prescribed creditors of the SPV, the SPV will secure its obligations to such secured creditors by pledging all of its assets to the security trustee/agent.

The structures referred to in 1.2 Structures Relating to Financial Assets are regulated by the requirements for a valid and enforceable transfer of property under the Dutch Civil Code (Burgerlijk Wetboek, or DCC). In addition, matters in relation to the efficacy of the bankruptcy remoteness of a Dutch SPV are regulated by the Dutch Bankruptcy Act (Faillissementswet).

Depending on their characteristics, Dutch securitisations may also be governed by 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 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 (“EU Securitisation Regulation”). If applicable, they will need to comply with the requirements of the EU Securitisation Regulation, which include risk retention and transparency requirements. Investors will also need to comply with the due diligence requirements specified by the EU Securitisation Regulation. 

As mentioned above, for Dutch securitisation transactions, orphan SPVs are established both in the Netherlands and offshore. The favourable corporate law environment, the tax regime and the relatively low set-up and maintenance costs are often mentioned as reasons to choose the Netherlands as the SPV jurisdiction. Frequently used alternatives to the Netherlands are Luxembourg and Ireland. In the Netherlands, the most common form of corporate vehicle for an SPV is a limited liability company (besloten vennootschap met beperkte aansprakelijkheid), which is 100% owned by a Dutch foundation, by nature an orphan vehicle, in each case with limited objects and powers to preserve the integrity of the securitisation transaction.

Although the list of credit enhancement techniques is not fixed and is often dependent on the nature of the transaction and the parties involved, several credit-enhancement techniques commonly found in securitisations are more generally used in Dutch deals, as follows.

• Subordination of interests. The SPV/purchaser issues secured debt instruments (or borrows the equivalent in secured loan format) to investors with different levels of seniority in terms of payment and security. In the case of any non-performance of the securitised assets that lead to a reduction on or non-payment of interest and/or repayment of principal on the debt instruments, the most subordinated debt instruments will be subject to losses first, thereby functioning as loss-absorbing instruments for the more senior-ranking debt instruments in reverse sequential order. The more senior debt instruments are not affected by the non-performance of the securitised assets if and to the extent that such losses do not exceed the SPV’s payment obligations under the junior (or more junior) debt instruments.
• Cash reserves. The SPV is required to have a cash reserve to fund principal losses on the asset portfolio and/or shortfall in senior rankings costs, fees and/or expenses of the securitisation transaction. The reserve fund is financed and maintained by allocating any excess cashflow the securitisation transaction generates from time to time and/or using the proceeds of certain of the debt instruments issued by the SPV, often to the seller/originator of the securitisation transaction. The net effect of this model is that the seller/originator is first liable to make whole such shortfalls and/or losses and, therefore, first suffers any credit losses on the asset portfolio.
• Overcollateralisation. This involves securitising a larger notional amount of financial assets than the notional amount of the securitised debt issued or otherwise raised by the SPV. Since there are more assets, and therefore income, supporting the securitised debt, the probability of there being a shortfall (eg, caused by credit losses on the underlying assets) from time to time in the SPV’s income to service the SPV’s securitised debt is reduced. If asset performance is as expected, any excess cashflow generated by the excess assets (or otherwise), is returned by the SPV to the seller/originator in the form of a deferred purchase price.

The issuer is the purchaser of the financial assets and issuer (or borrower) of the securitised debt issued or otherwise advanced to investors. The issuer is typically structured to be an orphan with limited objects and activities and bankruptcy remote with a limited group of creditors, each of which agree to limit their recourse to the issuer and ability to petition for the insolvency of the issuer. To further enhance its orphan status, the issuer will have directors appointed from third-party service provider.

Furthermore, as already mentioned in 1.2 Structures Relating to Financial Assets, as the SPV is limited in terms of objects and activities, all tasks are outsourced to third parties. A paying agent is appointed to make payments to the specified noteholders of the SPV, an account bank will be mandated to establish one or more transaction accounts for the SPV, the seller (or another specialised entity) will usually function as servicer to the SPV to manage and collect payments on the transferred financial assets and, as mentioned above, a specialised corporate services provider will be appointed to perform the SPV’s administrative tasks, and a cash manager will run the relevant payment waterfalls.

The sponsor is the party that commences the securitisation transaction. The sponsor will usually be either the originator/seller of the financial assets itself or an entity affiliated with the originator/seller. Sponsors can be a financial asset-originating business or an investment firm (commonly, private equity and alternative asset managers) that purchases financial assets for the purpose of achieving an economic return which may in whole or part be through the use of securitisation.

The originator is the entity that creates (or in some cases, the entity that acquires) the financial asset that is being securitised – eg, the lender under a mortgage loan or a lessor under an auto lease. There is a wide variety of businesses operated by entities classified as originators, and the line of business of an originator directly correlates to the type of asset that it securitises. Typical originators in the Netherlands are businesses such as mortgage loan providers, banks and companies that offer business and consumers cars or other types of vehicles under a lease arrangement.

An originator’s responsibility is principally to reassure the SPV that the financial assets that are being securitised are of sufficient quality. This responsibility comes in the form of providing representations and covenants in relation the financial assets, as well as agreements in relation to future conduct with respect to such financial assets, including its business affairs. Often, the originator is also the financial asset servicer, in which case there is range of protections that it provides to the SPV with regard to the sound management of the financial assets, including collections. An originator is often required to provide credit enhancement in the form of investing in the most subordinated asset tranches, as well funding any reserve funds. An originator’s entitlement to deferred purchase prices is also contingent on – and limited to – the cashflows available to the SPV from time to time. 

If appointed by the originator, an underwriter performs a vital function in the transaction by agreeing to subscribe to the securitised notes for a certain price. This gives the originator transaction certainty by ensuring that the relevant securitised debt will be issued and the required funds received. Investment banks typically provide underwriting services and receive fees in the form of commissions (or similar) for providing their services.

As the SPV does not have the expertise, operations and regulatory permissions to manage and collect payment on the acquired assets, it will typically enter into a contractual arrangement with the originator/seller according to which the latter will keep servicing the transferred assets (ie, collecting payments on the assets on behalf of the SPV and managing the contractual relationships with the debtors), for which services it will receive a fee.

Alternatively, there are certain specialised entities that act as servicer for receivables subject to a securitisation. These entities are often either engaged as sole servicer or as a sub-servicer or delegate of the originator/seller as master servicer.

The offering of and brokerage in relation to financial products, including consumer loans, mortgage loans and any form of credit, concern regulated activities in the Netherlands for which a regulatory licence must be obtained. As acquiring consumer receivables falls within the scope of the activities that require a licence, an SPV would usually also be required to have an appropriate licence. However, there is an exception which is frequently applied within the context of Dutch securitisation transactions whereby an issuer SPV is exempt from the licence requirement if the servicing and administration of the receivables is outsourced to an entity which is itself in possession of the relevant licences. Originators/sellers, or the original lenders of record to which the servicing and administration of the receivables has already been outsourced, typically take on the role of servicers in Dutch securitisation transactions. As the originators/sellers or the original lenders of record usually already possess the appropriate regulatory licences, this solves the above-mentioned licence issue for the issuer SPV.

Credit institutions often take the senior and/or mezzanine investment position in securitisation transactions. Other types of investors are frequently insurers, pension funds and alternative investment funds. Investors are usually heavily involved in the legal structuring of the transaction as well as undertaking their own due diligence with respect to the assets to be securitised; this reflects their position as beneficiaries of the expected cash flows generated by the securitised assets.

The use of note trustees is not very common in the Dutch securitisation market. Please see 2.8 Security Trustees/Agents.

Note trustees generally manage and represent the interests of the investor in the contractual relation to the issuer SPV. Security trustees hold and manage the security interests of all the prescribed secured parties in the transaction.

It is currently uncertain under Dutch law whether it is possible for a third party, such as a security trustee, to hold a security interest without it being owed the corresponding financial obligation which that security interest secures. In the case of a securitisation, a security trustee would not be a creditor of any of the notes, but would still be a holder of the entire security package. Therefore, it is market practice for Dutch securitisation transactions to create a “parallel debt” structure. Under a parallel debt structure, an independent claim for the security trustee against the issuer SPV is created to mirror the claims of the secured parties against the issuer SPV. Payment by the issuer SPV to the secured parties reduces the security trustee’s claim against the issuer SPV by the corresponding amount.

The role of the security trustee is usually performed by independent third-party trust corporations or specialised entities affiliated with credit institutions. It is also common to incorporate a new SPV for a specific transaction to perform the role of security trustee, usually in the form of a Dutch foundation (stichting) with limited objects and purposes.

For a transfer of receivables to be valid under Dutch law:

• the originator/seller must have the necessary power to dispose (beschikkingsbevoegd) of the receivables;
• there must be a valid title (geldige titel) for the transfer of the receivables; and
• there must be a valid delivery (levering) of the receivables.

Although the receivables can be delivered by way of disclosed assignment (openbare cessie), which is carried out by way of notification to the underlying borrower, they are generally delivered by undisclosed assignment (stille cessie). The undisclosed assignment must be recorded in a transfer deed that should either be in a notarial format and take place in front of a Dutch civil notary (notariële akte) or registered with the Dutch Tax Authorities (onderhandse geregistreerde akte) in order to be valid. In addition, for an undisclosed assignment to be enforceable against the underlying obligors, the obligors must be notified of the assignment.

Under Dutch (true sale) securitisations, the following documentation facilitates a bankruptcy-remote transfer of assets:

• a receivables purchase agreement (RPA) between, among others, the originator/seller, the SPV and the security agent;
• a (notarial) deed of assignment between the originator/seller and the SPV; and
• a servicing agreement between, among others, the issuer SPV, the originator/seller in its capacity as servicer, and the security agent.

The RPA

The RPA typically includes the following contractual provisions to ensure the bankruptcy-remote transfer of the receivables to the SPV.

• The receivables sold and assigned to the issuer SPV, which is usually demarcated by referring to a definition of receivables as defined in a master definitions agreement to which all involved in the transaction are a party (with each individual receivable identified and listed in an annex to the RPA), as well as the related security attached to each receivable that is, by operation of law, transferred to the issuer together with the sale and assignment of the receivables. It is important that the receivables that are the subject of the sale and assignment be clearly identified together with the prescribed purchase price, including any deferred components.
• The arm’s length consideration paid by the SPV to the originator/seller for the receivables.
• The title for the sale and assignment of the receivables.
• Provisions on the undisclosed assignment of the receivables, including information about the nature of the deed of assignment that will be used.
• Provisions for properly carrying out the transfer of the receivables. As already mentioned, the SPV can only enforce its claims against underlying obligors if and to the extent that the obligors have been notified of the assignment. However, for various reasons, parties generally do not wish to notify the obligors of the assignment. Instead, the transaction parties often ensure that the obligors make payments under the receivables to an account of a foundation established specifically for collecting payments under the receivables. Furthermore, the RPA usually refers to a series of “assignment notification events”, a term typically included in the master definition agreement, which is a set of events and circumstances (often relating to the originator and its business) that trigger the notification of the assignment to the obligors. Examples of such assignment notification events are insolvency of the seller and/or originator, a servicing termination event, or insolvency of the collection foundation (see below). After an assignment notification event has occurred and the obligors have been notified by the security trustee (as directed by the noteholders), the underlying obligors can only make payment under the receivables to an account designated by the issuer SPV.
• The originator usually gives representations and warranties to the SPV relating to, among other things:
1. its power to dispose of the receivables to the SPV;
2. the existence, transferability, nature, origins, quality and integrity of the receivables; and
3. the absence of any obligor set-off rights or other obligor defences.

The Collection Foundation Account Pledge Agreement

Although not a necessary feature required to effect a true sale, in order to mitigate co-mingling risk and ensure bankruptcy remoteness of collections until the occurrence of assignment notification events, the underlying obligors must make payment under the receivables to an account of a foundation established specifically for collecting payments under the receivables (the “collection foundation”). The foundation is a bankruptcy-remote orphan entity. To further mitigate any bankruptcy risk, the account(s) of the collection foundation is/are usually pledged to the issuer SPV. To that extent, it is also important to note within the context of Dutch securitisations that Dutch banks usually obtain a first right of pledge on the accounts of accountholders pursuant to the General Banking Conditions (Algemene Bankvoorwaarden). However, for the purpose of providing investors with assurance over the bankruptcy-remote status of the acquired cash flows, Dutch banks are generally willing to release their first ranking right of pledge on the accounts of collection foundations.

The originator, the issuer SPV and possibly other transaction parties will provide fundamental warranties, for example about their capacity, authority, compliance with law and regulations and solvency, as well as asset warranties. Please see 3.1 Bankruptcy-Remote Transfer of Financial Assets for information on asset warranties.

Breaches of asset warranties are usually covered by obligations of the originator/seller to repurchase the relevant sold receivables.

See 3.1 Bankruptcy-Remote Transfer of Financial Assets.

See 3.1 Bankruptcy-Remote Transfer of Financial Assets for principal covenants of the originator with respect to itself (existence, solvency, compliance with law, etc) and receivables (transferability, nature, security, etc).

The issuer generally provides a series of negative and possible undertakings to ensure that it maintains its bankruptcy remoteness and does not incur liabilities other than those under the securitisation. Such undertakings include not exercising any other business or attracting any other indebtedness.

The documents further generally include an undertaking relating to the applicable risk-retention regime where the relevant risk retainers undertake to comply with risk-retention rules throughout the life of the transaction. If the securitisation qualifies as a securitisation under the EU Securitisation Regulation it will, for example, have to comply with EU risk-retention rules as contained in Article 6 of the EU Securitisation Regulation, meaning that the entity qualifying as originator, sponsor or original lender for the purpose of the EU Securitisation Regulation will need to retain at least a 5% material net economic interest in the transaction throughout the transaction’s life. The documents generally include undertakings for the chosen risk retainer to ensure compliance with such rules.

The Servicing Agreement governs matters in relation to servicing the receivables, such as the servicing standard, collection of the receivables, and the process with respect to any receivables in arrears, including carrying out any enforcement procedures.

Furthermore, the Servicing Agreement typically includes reporting provisions setting out the nature of the information that the Servicer should provide to the transaction parties and the frequency with which such information must be provided.

As set out in 3.1 Bankruptcy-Remote Transfer of Financial Assets, certain events may cause the Servicer to be replaced and/or the Servicing Agreement to be terminated.

Typical events of default under a securitisation include the following:

• non-payment by the issuer;
• breach of (material) obligations by the issuer;
• insolvency of the issuer;
• cessation of business of the issuer;
• litigation against the issuer; and
• invalidity of security.

The consequence of an event of default would typically be the possibility for the security trustee or be required, as instructed by the controlling noteholder group, to accelerate all or part of the payment obligations of the issuer. Paired with the acceleration, the security trustee will generally have the right (or may be required by the relevant noteholder majority) to enforce all or part of the transaction security.

Transaction indemnities provided vary from deal to deal but, in general, the seller/originator will provide indemnities to the SPV for breach of warranty and undertaking (but excluding in relation to the credit performance of the financial assets). Such indemnities may be limited in time and quantum. The SPV will also provide a series of indemnities to the Security Trustee for itself and on behalf of the secured creditors for certain matters, such as breach of representation and undertakings.

The terms and conditions of debt instruments are typically included in a trust deed, and for public deals are disclosed in a prospectus.

The terms and conditions include matters as to the nature of the debt instruments, amounts, terms, interest rates, security, events of default, any call or put options with respect to the note instruments, provisions regarding noteholder consent for certain decisions and noteholder voting procedures. The terms and conditions also refer to the priority of payments, as well as the limited recourse nature of the debt instruments and non-petition covenants. Boiler-plate provisions, such as governing law and jurisdiction, are also included.

Traditional securitisations frequently include swap arrangements to protect securitisation asset cash flows against currency and/or interest rate mismatches with the securitised debt.

Prospectus Regulation (EU) 2017/1129 dictates whether a prospectus is required, and what the prospectus content should cover. This will typically be the case for public deals, where the notes are offered to the public and listed for trading on a regulated market. For transactions that are not listed on a regulated market, an offering memorandum is used which is similar in substance to a prospectus.

For non-listed private transactions, a transactions summary is submitted to the regulator in accordance with the EU Securitisation Regulation, setting out the main terms of transactions.

No securitisation-specific disclosure laws or regulations have been adopted in the Netherlands. However, 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 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 (‘EU Securitisation Regulation’) applies to all Dutch securitisation transactions.

Securitisation transactions falling within the scope of the EU Securitisation Regulation are subject to the disclosure requirements of Article 7 of the EU Securitisation Regulation. Among other information, the following must be disclosed to the investors, the competent authorities and, upon request, potential investors:

• information on the underlying exposures, on a regular basis;
• all underlying documentation that is essential for the understanding of the transaction, including a detailed description of the priority of payments of the securitisation, before pricing;
• information regarding the risk retained, on a regular basis; and
• if no prospectus is required pursuant to Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC (“Prospectus Regulation”), a transaction summary or overview of the main features of the securitisation, before pricing.

Closely related hereto are the Commission Delegated Regulation (EU) 2020/1224 of 16 October 2019 supplementing Regulation (EU) 2017/2402 of the European Parliament and of the Council with regard to regulatory technical standards specifying the information and the details of a securitisation to be made available by the originator, sponsor and SSPE (“Disclosure RTS”) and Commission Implementing Regulation (EU) 2020/1225 of 29 October 2019 laying down implementing technical standards with regard to the format and standardised templates for making the information and details of a securitisation available by the originator, sponsor and SSPE (Disclosure RTS), and which set out the disclosure requirements applicable to securitisation transactions in a more detailed manner.

Additional disclosure requirements are applicable if the group of potential investors include one or more institutional investors (as defined under Article 2 (12) of the EU Securitisation Regulation), which are set down in Article 5 of the EU Securitisation Regulation.

There are no Dutch national laws or regulations on credit-risk retention. There are, however, rules on risk retention applicable to Dutch securitisation transactions pursuant to Article 6 of the EU Securitisation Regulation.

Article 6 of the EU Securitisation Regulation stipulates that the originator, sponsor or original lender must retain on an ongoing basis a material net economic interest in the securitisation of not less than 5%, measured at the origination and determined by the notional value for off-balance-sheet items. Embedding certain mechanisms into the transaction structure that effectively reduce the material net economic interest is not permitted. Furthermore, it is not possible to split the material net economic interest among different types of retainers, and the risk retainer cannot undertake any credit-risk mitigation or hedging in relation to the material net economic interest that is to be retained.

There are different ways to retain a material net economic interest of not less than 5% within the meaning of Article 6 of the EU Securitisation Regulation, as follows:

• the risk retainer holds not less than 5% of the nominal value of each of the tranches sold or transferred to investors;
• with revolving securitisations or securitisations of revolving exposures, the risk retainer retains an interest of not less than 5% of the nominal value of each of the securitised exposures;
• the risk retainer retains randomly selected exposures equivalent to not less than 5% of the nominal value of the securitised exposures, where such non-securitised exposures would otherwise have been securitised, provided that the number of potentially securitised exposures is not less than 100 at origination;
• the risk retainer holds the first loss tranche, and where the retention does not amount to 5% of the nominal value of the securitised exposures, if necessary, with the other tranches having the same or a more severe risk profile than those transferred or sold to investors, and not maturing any earlier than those transferred or sold to investors, so that the retention equals in total not less than 5% of the nominal value of the securitised exposures; or
• the risk retainer retains a first loss exposure of not less than 5% of every securitised exposure in the securitisation.

Article 7 of the EU Securitisation Regulation sets out transparency requirements according to which periodic reporting is required. The originator, sponsor and SPV must designate one entity among themselves, called the designated entity, to fulfil the information requirements set out in Article 7 (1) of the Securitisation Regulation. The designated entity must periodically make the following information available to holders of a securitisation position, the competent authorities and, upon request, potential investors:

• information on underlying exposures on a quarterly basis, or, in the case of asset-backed commercial paper (ABCP), information on the underlying receivables or credit claims on a monthly basis; and
• quarterly investor reports, or in the case of ABCP, monthly investor reports, containing the following:
1. all materially relevant data on the credit quality and performance of underlying exposures;
2. information on events that trigger changes in the priority of payments or the replacement of any counterparties, and, in the case of a securitisation which is not an ABCP transaction, data on the cash flows generated by underlying exposures and by the liabilities of the securitisation; and
3. information concerning the risk retained, including on which of the modalities provided for in Article 6 (3) of the EU Securitisation Regulation has been applied, in accordance with Article 6 of the EU Securitisation Regulation.

Credit rating agencies are subject to regulatory oversight pursuant to Regulation (EU) No 462/2013 of the European Parliament and of the Council of 21 May 2013 amending Regulation (EC) No 1060/2009 on credit rating agencies (“CRA III Regulation”). According to the CRA III Regulation, credit rating agencies are required to obtain registration with the European Securities and Markets Authority (ESMA). The CRA III Regulation also mandates ESMA with the supervision of the activities of credit rating agencies within the EU.

Entities supervised under Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (CRD V) are subject to capital adequacy rules pursuant to Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and amending Regulation (EU) No 648/2012 (CRR III). Accordingly, such entities will be required to maintain a certain amount of regulatory capital over their risk-weighted assets. CRR III sets out the parameters for calculating the risk weight that can be attached to a securitisation position. In this regard, it is important to note that CRR III differentiates between positions in traditional securitisations and positions in STS (“Simple, Transparent and Standardised”) securitisations, as positions in STS securitisations held by credit institutions and investment firms are assigned a more favourable risk weight than positions held by credit institutions and investment firms in traditional securitisations.

Whether a transaction qualifies as an STS non-ABCP traditional securitisation depends on whether the requirements covered by Section 1 of Chapter 4 of the EU Securitisation Regulation have been met, while the requirements set out in Section 2 of Chapter 4 of the EU Securitisation Regulation determine whether a transaction qualifies as an STS ABCP securitisation.

Derivatives are governed by Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (EMIR). EMIR applies not only to financial counterparties but also to non-financial counterparties (eg, a securitisation SPV). Furthermore, EMIR includes provisions on the central clearing of OTC derivatives as well as on obligations to post collateral.

Dutch securitisation transactions often include hedging arrangements between the issuer SPV and a hedge counterparty, which seek to address mismatches between interest rates under the underlying receivables and interest rates under the notes issued by the issuer SPV.

The EU Securitisation Regulation has multiple pillars in terms of investor protection, as follows:

• Article 7 of the EU Securitisation Regulation, as discussed under 4.2 General Disclosure Laws or Regulations and under 4.4 Periodic Reporting, sets forth transparency requirements which seek to protect investors as well as potential investors;
• Article 6 enhances a “skin in the game” model; by imposing the obligation on the originator, sponsor or original lender to retain a certain percentage of the total amount of transferred risk, investors should be protected from moral hazard risk;
• Article 8 bans re-securitisations, the aim being to ensure the quality and integrity of the transferred assets;
• Article 9 sets stringent parameters for credit-granting criteria; and
• Article 5 provides for a certain form of self-protection, as institutional investors are subject to due diligence requirements which must be fulfilled before the allocation of funds.

Principal legislation applicable to banks that securitise (some of) their assets or hold positions in securitisations on their balance sheets contain the EU Securitisation Regulation, CRR III, the Dutch Financial Markets Supervision Act (Wet op het financieel toezicht, or FMSA), the Dutch Civil Code (Burgerlijk Wetboek, or DCC) and the Dutch Bankruptcy Act (Faillissementswet).

The Dutch legal framework does not provide much specific legislation with respect to SPVs. In securitisations that relate to consumer receivables, the Dutch regulatory framework does provide for an exemption of the normal licencing requirements for “servicing consumer credit” if the SPV expedites such servicing to a third party that holds the relevant licence (usually the originator).

There is no legislation under the Dutch legal framework that pushes SPVs to avoid certain activities. However, it is common for transaction parties under a Dutch securitisation transaction to limit the SPV’s capacity to undertake other activities than those in relation to the securitisation transaction(s) in order to optimise the SPV’s assets to the benefit of its counterparties under the securitisation transaction(s).

Government-sponsored entities currently do not participate in the Dutch securitisation market.

A variety of entities invest in securitisations in the Netherlands. These include pension funds, banks, investment funds and insurance companies. As set out under 4.8 Investor Protection, investors are subject to a due diligence obligation with respect to the securitisations that they invest in.

See preceding sections.

Synthetic securitisations are permitted in the Netherlands. Similar to the legal framework for traditional securitisations, there are no specific Dutch laws or regulations applicable to synthetic securitisations. The main legal framework for synthetic securitisations includes the EU Securitisation Regulation, CRR III and, possibly, the EMIR.

Dutch synthetic securitisations usually aim to transfer the risk of underlying exposures to an external investor or investors but without transferring legal ownership of these exposures. These types of securitisations are also referred to as “balance sheet securitisations”. Two main structures exist to achieve the risk transfer: (i) hedging arrangements with the use of collateral (ie, funded synthetic securitisation) and (ii) hedging arrangements without the use of collateral (ie, unfunded synthetic securitisation).

Funded Synthetic Securitisation

With a funded synthetic securitisation, the originator enters into a credit default swap (CDS) agreement with a newly established orphan SPV. Under the CDS agreement, the originator agrees to pay risk premiums to the SPV and the SPV agrees to pay the originator a certain amount of compensation if a pre-determined credit event with respect to a reference portfolio occurs. To fund its financial obligations under the CDS agreement with the originator, the SPV issues credit-linked notes (CLNs) that will reflect different risk profiles. The issue proceeds will be allocated to purchase highly liquid assets that will serve as collateral for the SPV’s payment obligations under the CDS agreement with the originator. In return for their investment in the CLNs, noteholders will receive an interest rate that reflects the CDS premium paid by the originator, and the principal will reflect the principal amount paid by the investors minus the compensation paid by the SPV to the originator under the CDS agreement.

Unfunded Synthetic Securitisation

Conversely, with an unfunded synthetic securitisation transaction, the parties do not make use of a SPV, and the collateral is not posted to cover payment obligations. Unfunded synthetic securitisations are usually entered into with the most creditworthy institutions, such as central banks. Accordingly, originators directly enter into a CDS agreement or a financial guarantee arrangement with an investor (or multiple investors), which usually has/have the same mechanisms embedded as with a funded structure. The originator will pay risk premiums to the investor(s), and, upon the occurrence of a pre-determined credit event affecting a reference portfolio, the investor(s) will allocate compensation to the originator.

For most asset classes, transfers of receivables do not come up against any Dutch insolvency law issues, as most financial assets that are transferred within the context of a Dutch securitisation transaction qualify as existing receivables (bestaande vorderingen). However, the transfer of operating lease receivables is considered problematic from an insolvency law perspective as these lease arrangements fall within the scope of the legal framework for rental agreements. It follows based on jurisprudence that receivables resulting from rental agreements only “come into existence” once the lessor has performed its obligation corresponding to right of payment. Consequently, almost every operating lease receivable qualifies as a future receivable (toekomstige vordering). It also follows from the Dutch Bankruptcy Act (Faillissementswet) that receivables that have not come into existence prior to the day of the originator’s/seller’s insolvency will remain part of the originator’s/seller’s estate, which makes it challenging for transaction parties to transfer the operating lease receivables via assignment without accepting significant originator bankruptcy risk. Nevertheless, various alternative structures to transfer interest in operating lease receivables have been adopted in the Dutch securitisation market.

SPVs set up for Dutch securitisation transactions are usually structured as orphan SPVs, with their legal form being a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) and their shares held by a foundation (stichting). Independent corporate service providers are usually mandated with the management of the SPV and its shareholder.

Transaction parties undertake various measures to enhance bankruptcy remoteness of the SPV and maximise the expected flow of payments to the SPV’s claimants, as follows:

• the scope of the SPV’s activities is limited by delineating the company’s objects in its articles of association so as to only include activities related to the specific securitisation transaction(s) for which it has been incorporated;
• the ability to hire employees is contractually restricted to prevent cash flow leakage;
• the undertaking of debt obligations and the creation of security other than in relation to the specific securitisation transaction(s) for which it has been incorporated is contractually limited; and
• transaction documentation will include limited recourse and non-petition provisions to prevent each transaction party from recovering their claim(s) beyond the value of the issuer SPV’s assets, and to protect securitisation transaction waterfalls.

As briefly discussed under 3.1 Bankruptcy-Remote Transfer of Financial Assets, a valid and enforceable transfer of receivables requires: (i) a seller with the power to dispose (beschikkingsbevoegdheid) of the receivables; (ii) a valid title (geldige titel) for the transfer of the receivables; and (iii) valid delivery (levering) of the receivables.

The common method for delivering existing receivables is through undisclosed assignment. If the assignment is undisclosed, it is still possible for the underlying obligors to make payment under the relevant receivables to the seller. To prevent a valid discharge (bevrijdende betaling) occurring upon payment by the underlying obligor to the seller, disclosure of the assignment to the underlying obligor is required. After notification, discharge of its payment obligations under the receivable is only possible for the underlying obligor by making payment the SPV/purchaser.

This is relevant in the event of bankruptcy of the seller. If the underlying obligors are not notified of the assignment, payments under the receivables by the obligors will flow into the estate of the insolvent party. Consequently, the SPV/purchaser will most likely not be ranked first in the payment waterfall with respect to these payments.

See 1.2 Structures Relating to Financial Assets and 3.1 Bankruptcy-Remote Transfer of Financial Assets.

Please see 6.2 SPEs.

Other than real estate transfer tax (RETT), the Netherlands does not levy any transfer taxes, stamp duties or other (documentary) taxes.

RETT should not be triggered as a result of the transfer of financial assets (including performing mortgage-backed loans) from the originator to the SPE, as such financial assets do not represent an interest in real estate for RETT purposes.

The Netherlands imposes value added tax (VAT) on the sale of certain goods and services. The sale and transfer of financial assets is, however, generally exempt from VAT. In addition, VAT may be due over certain services fees (see section 7.4 Other Taxes).

The SPE will be subject to corporate income tax over its actual net profits, as shown in its commercial accounts. Such profits will, in principle, consist of the difference between all of the SPE’s income and its expenses.

In most securitisation transactions, an SPE with a de minimis equity at risk is typically treated as an agent of the originator(s) for corporate income tax purposes on the basis that it only acquired the legal ownership of the relevant financial assets, and not the economic ownership. Accordingly, the originator(s) is (are) deemed to have retained the economic ownership of the relevant financial assets, and for corporate income tax purposes the SPE does not take into account the actual income and expenses relating to the financial assets and their funding. Instead, the SPE is subject to corporate income tax over an agency fee, which is the (only) remuneration it is entitled to receive on the basis of the transaction documentation, and which is typically determined on a cost-plus basis.

Depending on the laws of the jurisdiction of the debtor/payor of the relevant financial asset, cross-border payments received by the SPE may be subject to withholding taxes. If the SPE is treated as an agent of the originator(s) (see 7.2 Taxes on Profit), the SPE will not be able to obtain an unqualified certificate of residence (which may be needed to reduce such taxes) or to credit any withholding taxes against its corporate income tax liability. Payments received by the SPE from Netherlands’ debtors/payors under the financial assets are not subject to withholding taxes unless the relevant financial assets have certain equity-like characteristics.

Expenses

Payments made by the SPE under the bonds/notes that it issues will generally not be subject to Netherlands’ withholding taxes unless the bonds/notes have certain equity-like characteristics and effectively qualify as equity for Netherlands’ tax purposes (in which case such payments will be treated as dividends, with the consequences set out in the last paragraph of this section), although this can be avoided in securitisations. The Netherlands levies a conditional interest withholding tax on (deemed) interest payments made to entities affiliated (gelieerd) to the SPE (or, where the SPE is treated as an agent of the originator, to entities affiliated to the originator – see 7.2 Taxes on Profit) in situations involving low-tax jurisdictions or hybrid/abusive structures. Accordingly, this withholding tax does not apply on interest payments made by the SPE to unaffiliated bond/noteholders.

Any dividends paid by the SPE will generally be subject to dividend withholding tax at a rate of 15% (or, where the shareholder qualifies as an entity affiliated to the SPE and is resident in a low-tax jurisdiction or is holding its shares through a hybrid/abusive structure, at a rate of 25.8%). In certain situations, this rate may be lowered based on domestic or tax treaty-based reductions or exemptions.

Depending on their specific nature, certain services provided to the SPE may be subject to VAT. Due to the fact that the SPE typically does not provide any services subject to VAT, the SPE will generally not be able to recover (all) VAT that it incurs. Accordingly, any such irrecoverable VAT would constitute an actual cost to the SPE.

Services provided to the SPE that relate to the collection of the relevant financial assets are typically exempt from VAT unless such collection services concern non-performing receivables.

Certain other services provided to the SPE may be exempt from VAT on the basis that they qualify as services relating to the management of special investment funds. In order for services to benefit from this exemption, however, a number of (cumulative) conditions must be met which, inter alia, relate to the applicable regulatory treatment of the SPE. This will require careful consideration based on all relevant facts and circumstances surrounding an individual securitisation transaction.

It is common for practitioners to provide a tax opinion on securitisation transactions. Items typically covered in such opinions cover, but are not necessarily limited to, the following:

• the non-applicability of stamp duties/transfer taxes (see 7.1 Transfer Taxes);
• the corporate income tax treatment of the SPE (see 7.2 Taxes on Profit);
• the non-applicability of withholding taxes (see 7.3 Withholding Taxes);
• absence of corporate income tax liability for bond/noteholders;
• the non-applicability of VAT for bond/noteholders; and
• accuracy of the tax disclosure set out in the prospectus/information memorandum.

Typical assumptions/qualifications include (but are not necessarily limited to):

• the arm’s length character of the transactions covered in the transaction documentation;
• lack of affiliation (gelieerdheid) between the SPE and bond/noteholders; and
• absence of nexus of the bond/noteholders with the Netherlands other than by way of holding the bonds/notes.

Originators will typically obtain separate accounting advice from accounting firms – for example, ensuring that, if so desired, the securitisation achieves the objective of the receivables no longer being part of the originator’s balance sheet.

As set out above, any accounting advice is usually provided separately from legal advice. However, at times, lawyers are asked to provide a true sale opinion which may support the conclusion that the receivables have truly transferred to the SPV and should no longer be part of the originator’s balance sheet. The main qualification to this opinion pertains to the originator not being bankrupt at the time of transfer.