EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 14 September 2004 
at the request of the French Ministry of Economic Affairs, Finance and Industry 
on a draft decree concerning fonds communs de créances  (securitisation funds) 
(CON/2004/30)  
 
1. On 3 August 2004 the European Central Bank (ECB)  received a request from the French Ministry 
of Economic Affairs, Finance and Industry for an opinion on a draft decree (hereinafter the ‘draft 
decree’1) concerning fonds communs de créances  (FCC), which are French securitisation vehicles.  
The draft decree takes over and amends Decree No  89-158 on the same subject, and repeals it. 
2. The ECB’s competence to deliver an opinion is based on the second indent of Article 105(4) of the 
Treaty establishing the European Community and the sixth indent of Article 2(1) of Council Decision 98/415/EC of 29 June 1998 on the consul tation of the European Central Bank by national 
authorities regarding draft legislative provisions
2, as the draft decree relates to rules applicable to 
financial institutions insofar as they materially influence the stability of financial institutions and 
markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the 
European Central Bank, the Governing Council has adopted this opinion. 
 Preliminary remarks
 
3. In its recent opinion3 on a draft Luxembourg law, the ECB pointed out that securitisation is ‘an area 
where considerable progress in integrating European  financial markets could still be made notably 
in terms of the convergence of market practices , instruments and legal rules. (…) Looking beyond 
the Financial Services Action Plan, the ECB sees me rit in a strategy of increased harmonisation in 
the area of securitisation at EU level’.  The Securities Expert Group4 supported this analysis in its 
final report of May 2004, stating that ‘one of  Europe’s most innovative and rapidly growing 
financial market sectors is securitisation, which has developed as an alternative capital markets 
                                                      
1  The draft Decree is to be adopted pursuant to the Law on financial security No 2003-706 of 1 August 2003 that amended 
Articles L. 214-43, L. 214-44, L. 214-46 and L. 214-48 of the Monetary and Financial Code  (hereinafter the ‘Code’). 
2  OJ L 189, 3.7.1998, p. 42. 
3  ECB Opinion CON/2004/3 of 4 February 2004 at the reques t of the Ministry of Finance of the Grand Duchy of 
Luxembourg on a draft law on securitisation. 
4  The Commission chairs this group composed of industry repr esentatives that was establis hed in the framework of the 
post-Financial Services Action Plan debate. 
2 financing, funding, arbitrage and risk-shifting mech anism’. The Expert Group also considered that: 
‘while several Member States have taken steps to create a more hospitable environment for securitisation, and many of these initiatives are similar in concept and purpose, (…) more 
coordination of some aspects of the legal framewo rk applicable to these operations is necessary at 
EU level, thereby facilitating a more harmonised  framework while simultaneously encouraging 
innovation in securitisation markets across Eu rope’. The ECB also shares this view. 
4. The ECB notes that the Law on financial security  of 1 August 2003 (h ereinafter the ‘Law’) 
introduced substantial changes to the existing Fren ch legal framework on securitisation which dates 
back to 1988. The ECB notes in this respect that, although the French authorities consulted it on an 
early draft of the Law
5, they did not consult it on those amendments relating to securitisation 
transactions which Parliament only introduced late in the legislative process. Although the ECB is 
aware that it is now only being consulted on the dr aft decree, the provisions of the draft decree are 
in several respects so closely in tertwined with those of the Law that any comments on the draft 
decree will also apply to related provisions of the Law. 
 Reform of the French securitisation vehicles
 
5. The ECB notes from the statement of reasons s ubmitted with the draft decree that the French 
securitisation market has developed significantly over  the past few years. Securitisation transactions 
have become more and more complex with the resu lt that it has become necessary to adapt French 
law to changing market requirements. Under the new rules contained in the Law, as implemented 
by the draft decree, FCCs will be allowed inter alia  to issue debt instruments; to use credit 
derivatives in synthetic securitisation transactions ; to assign receivables during their life except in 
cases of liquidation; and to increase the secur ity for some mechanisms, including accounts 
specifically dedicated to FCCs, in order to redu ce costs and to increase the efficiency of these 
arrangements.  
6. The draft decree introduces, as a result of the Law, new rules for FCCs, in pa rticular regarding the 
composition of FCCs’ liabilities. The ECB understands that under current rules, the units issued by 
FCCs represent co-ownership ri ghts in assets that FCCs have acquired. These units are neither 
shares nor debt securities and therefore, due to th eir hybrid legal nature, might be considered 
unattractive to international investors. One of th e main changes introduced by Article L. 214-43 of 
the Code, as amended by the Law, is that FCCs  may now issue negotiable debt securities. The ECB 
welcomes the opportunity given to French securitisati on vehicles to issue such instruments directly, 
as well as the flexibility under the draft decree as to the type of debt instrument (FCCs may now 
issue instruments such as notes, bonds or commerc ial paper – including Euro commercial paper) 
and as to the law governing the debt instrument (the debt instruments can be issued under French or 
                                                      
5  ECB Opinion CON/2002/32 of 18 December 2002 at the request of the French Minister of Economy, Finance and 
Industry on a draft law on financial security. 
3 any foreign law). The ECB understands that this ne w provision is intended to enlarge the investor 
base and to avoid setting up a two-tier structur e for securitisation transactions involving the 
subscription of units by a repackaging special pur pose vehicle. The statement of reasons notes that 
the draft decree does not affect th e legal regime applying to any b onds that FCCs may issue to the 
extent that the general rules applying to bonds  do not apply, since FCCs do not have legal 
personality. The ECB understands that a specific re gime for bonds issued by FCCs would have to 
be governed by law and that the draft decree simp ly refers to the FCC regulations governing the 
conditions under which the FCC may issue debt instruments6. 
7. Article 9 of Decree 89-158 provides that coverage of  the debts acquired by the FCC against the risk 
of default by debtors may be obtained inter alia  by issuing specific units bearing the risk of default 
of the acquired debts. Article 5(1) of the draft decree maintains this rule  according to which only 
qualified investors are entitled to subscribe for or acquire such risk-bearing units in FCCs for the 
purpose of achieving their management objectives. The ECB notes however that the draft decree no 
longer expressly refers to the distinction between FCC units ( parts ordinaires ) and FCC 
subordinated units ( parts spécifiques ). The ECB questions whether the wording of Article 5(1) of 
the draft decree clarifies sufficiently that only qua lified investors are entitled to subscribe for units 
having the same degree of subordination as parts spécifiques . 
 Synthetic securitisation and credit derivatives
 
8. Another innovation of the Law and the draft decree  is the use of securitisation as a risk transfer 
technique by allowing FCCs to enter into credit de rivatives transactions, as either buyers or sellers 
of credit protection. The ECB notes the introduction into French legislation of these new arrangements developed by the financial markets,  following the recent Decrees of November 2003 
implementing the UCITS Directive
7 and defining in particular the rules applying in case of recourse 
to credit derivatives by UCITS. The draft decree determines the conditions under which an FCC, or 
the compartments of an FCC, may enter into deri vatives contracts. To that end, Article 1 of the 
draft decree defines the FCC’s management objectives which consist of acquiring receivables or bearing the credit risk relating to one or more reference entities of any kind. The ECB notes from Article 19 of the draft decree that the FCC’s ma nagement company will have to comply with 
certain specific requirements where the FCC regula tions provide for recourse to credit derivatives. 
In particular, these requirements will be further detailed in the Règlement Général de l’AMF 
(General Regulation of the French Financial Markets Authority (AMF)
8, hereinafter the ‘AMF’s 
General Regulation’) and taken into account when granting a licence to the management company. 
                                                      
6  As regards negotiable debt secu rities issued under French law ( titres de créance négociables  -TCN), the ECB understands 
that the general rules of issuan ce will also apply to FCCs.  
7  Decree No 89-623 of 6 September 1989; Decree adopt ed pursuant to Law No 88-1201 of 23 December 1988 relative aux 
organismes de placement collectif en valeurs mobilière s et portant création des fonds communs de créances  (Decree on 
undertakings for collective investment in transferab le securities and creatin g securitisation funds). 
8  See the AMF’s draft General Regulation of 30 July 2004. 
4 The ECB would suggest, in line with the practice for the other provisions of the draft decree, that 
the FCC regulations should determine the conditi ons under which the FCC may have recourse to 
credit derivatives and, in particular, bear a credit risk.  
 Reducing commingling risk
 
9. Article 22 of the draft decree further specifies th e mechanism of the account specifically dedicated 
to an FCC to which sums recovered with r espect to assigned receivables may be credited, as 
described in the third paragraph of Article L. 214-46 of the Code. The ECB understands from this 
mechanism that the account distinguishes the titulaire facial  (apparent holder) and the actual 
beneficiary or creditor of any sum credited to su ch account. Any sums on such an account neither 
form part of the servicer’s assets nor can they be targeted by the servicer’s creditors, regardless of 
the fact that the servicer is the subject of insolv ency proceedings. The ECB not es in this respect that 
Article 22 of the draft decree further specifies the respective obligations of the parties to a 
securitisation transaction where a specifically dedicate d account is created, and in particular those 
of the credit institution holding such an account . The ECB understands that this new mechanism 
will reduce commingling risk and thereby improve investor protection. 
10. As regards the responsibilities of the depository ensuring the safe custody of an FCC’s assets, 
Article L. 214-48 II of the Code provides that it acts as the depositary of the cash (‘ trésorerie ’). 
This concept does not appear in the draft decree  which refers instead to the concept of cash 
holdings (‘ liquidités ’) including deposits, debt securities, UCITS units and FCC units9. 
Article 17(3) of the draft decree also provi des that an FCC may only commit itself through 
repurchase transactions by paying within the liquidity limits it holds at the time of payment. Doubts could arise as to whether the ‘liquidity’ in Ar ticle 17(3) means the same as the cash holdings 
defined in Article 4 of the draft decree. The E CB therefore suggests using the same terminology 
consistently in the draft decree in the interests of clarity.  
11. According to Article L. 214-48 of the Code, as amen ded by the Law, FCCs must entrust their assets 
to the custody of a credit institution established in France. The ECB notes that this provision 
includes French branches of credit institutions  established in the European Economic Area and 
welcomes this clarification. 
 International assignments of receivables and applicable law
 
12. Conflict of law issues which may affect the valid ity or enforceability of international assignments 
of receivables are an increasing concern in the context of international securitisation transactions. 
Under Article 12 of the Rome Convention 80/934/ EEC of 19 June 1980 on the law applicable to 
                                                      
9  Article 2(2) and Article 4 of the draft decree. 
5 contractual obligations10, the enforceability of a receivables assignment against a debtor is 
governed by the law of the assigned receivable. However, the Rome Convention does not provide 
any clear-cut solution with respect to the enfo rceability of an assignment of a receivable against 
other third parties. As a result, national legislators have recently taken steps to address this issue in their domestic legal frameworks. In this context, the relevant provision of French law applying to 
FCCs (but also to sociétés de crédit foncier  and Dailly assignments) provides that an assignment of 
receivables ‘shall take effect between the parties and bind third parties on the date stated on the note on delivery (“ acte de cession de créances ”), regardless of the date of creation, maturity or 
payment of the receivables, without any further fo rmality being required, a nd regardless of the law 
governing the assigned receivables and the law of  the country of residence of the assigned 
debtors’
11. At the international level, on 12 December  2001 the General Assembly of the United 
Nations meeting in New York adopted the Co nvention on the assignment of receivables in 
international trade (hereinafter the ‘UN Conven tion’) which may contribute to harmonising these 
conflicts of laws rules12. The explanatory note to the UN Convention by the UNCITRAL 
Secretariat states that it is intended to remove th e legal uncertainty surrounding a number of issues 
arising in the context of important re ceivables financing transactions, including inter alia  asset-
based lending and securitisation13. In addition, under the UN C onvention, the law where the 
assignor has its place of business governs the enfor ceability of a receivable’s assignment against 
third party creditors. As already mentioned in Opinion CON/2004/3, the ECB hopes that the solutions adopted and/or examined at internationa l level will lead to an increased harmonisation of 
the rules applying in this area at EU level and reduce legal uncertainty and inefficiency in the 
context of cross-border commercial and financial transactions. 
 Protection of investors
 
13. As does Decree No 89-158, the draft decree often refers  to the concept of ‘level of security offered 
to holders of units and debt instruments’. Furthe rmore, Article 24 of the draft decree imposes an 
obligation on the body recognised by the Minister of Economy (presumably a rating agency within the meaning of Article L. 544-4 of the Code) to en sure monitoring of the level of security offered 
by the units and debt securities issued by FCCs and that the conclusions of this monitoring are 
regularly made publicly available. The ECB considers that it could be useful to further clarify this 
concept of level of security offered to holders of  units and debt instruments either in the draft 
decree itself or in the FCC regulations
14. The ECB also understands that some of these disclosure 
provisions date back to Decree No 89-158 and w ill be further detailed in the framework of the 
                                                      
10  OJ L 266, 9.10.1980, p. 1. 
11  Paragraph 8 of Article L. 214-43 of the Code. 
12  This UN Convention is not yet into force. 
13   United Nations Convention on the Assignment of Receivable s in International Trade, UN, New York, 2004, explanatory 
note, p. 28. 
14  See, for instance, Articles 11, 13, 18 of the draft decree. 
6 AMF’s General Regulation15. The ECB suggests making this documentation as well as the FCC 
regulations publicly available at a central access point, for instance, on the FCC management 
company’s website. Furthermore, the  draft decr ee needs to be compatib le with the specific 
disclosure rules for the different types of instru ments issued by FCCs (units, debt instruments, 
commercial paper, etc.), and also with the ne w general disclosure requirements applying to the 
issuance of asset-backed securities contained in the implementing rules of the Prospectus 
Directive16. 
 Statistics reporting
 
14. The regular and timely collection of accurate and reli able statistical data on securitisation vehicles 
and securitisation more generally across Europe is important for monetary policy purposes. Work is 
currently under way to improve euro area statistics on securitisation. In general, in carrying out its 
statistical tasks, the ECB identifies reporting agen ts using a combination of criteria based on EU 
law and national regulatory provisions, including su pervisory agreements or tax provisions. In this 
context, the ECB notes that Article L. 214-45 of the Code imposes an obligation on  FCCs  to 
communicate to the Banque de France any informa tion required for the preparation of monetary 
statistics.  Article 25 of the draft decree specifies that the information referred to in Article L. 214–
45 of the Code will be communicated to the Banque de France by the FCC’s management 
company.  The ECB welcomes these provisions assuming that the concept of monetary statistics is 
covered by the definition in the Decision No 02- 01 of 22 May 2002 of the Governor of the Banque 
de France concerning the collection of statistical da ta by the Banque de France for monetary policy 
purposes, which comprises all types of data, also  on a security-by-security basis, required by the 
Banque de France for the fulfilment of the st atistical obligations imposed by the ECB. 
 Use of asset-backed securities as collate ral for Eurosystem credit operations
 
15. Pursuant to Article 18.1 of the Statute of the European System of Central Banks and of the 
European Central Bank, all Eurosystem credit opera tions (i.e. liquidity-providing operations) have 
to be based on adequate collateral. As men tioned in Opinion CON/2004/3, asset-backed securities 
may be accepted as collateral for Eurosystem mo netary policy and intraday credit operations 
provided they fulfil the eligibility criteria laid down in the General Documentation on monetary 
policy instruments and procedures of the Eurosystem17. It should be noted how ever that the General 
                                                      
15  See in this respect the In formation Report of the French Senate on th e application of the Law of 1 August 2003 on 
financial security by Mr  P. Marini of 27 July 2004. 
16  Commission Regulation (EC) No 809/2004 of 29 April 2004 implementing Directive 2003/ 71/EC of the European 
Parliament and of the Council as regard s information contained in prospectuses as well as the format , incorporation by 
reference and publication of such prospectuses and disse mination of advertisements, OJ L 149, 30.4. 2004, p. 1. 
17  For risk control purposes, they belong to liquidity category IV for tier one assets. Guideline ECB/2003/16 of 
1 December 2003 amending Guideline ECB/2000/7 on monetary policy instruments and procedures of the Eurosystem, 
OJ L 69, 8.3.2004, p. 1. 
7 Documentation provides that ‘debt instruments affording rights to the principal and/or the interest 
that are subordinated to the rights of holders of othe r debt instruments of the same issuer (or, within 
a structured issue, subordinated to other tranch es of the same issue) are excluded from tier one’18.  
16. Article 14 of the draft decree provides that the F CC regulations will stipulate the priority rules 
among the various categories of units, debt secur ities and loans regarding the amounts received by 
an FCC and that the units issued by an FCC will be repaid only after discharge of the FCC’s other 
creditors. The ECB understands from this provision that the holders of FCC units will bear in 
priority the risk of default by debtors. Most of these units issued by FCCs  might therefore constitute 
‘quasi-equity’ units, i.e. subordinate d units traditionally subscribed fo r by the originator or a third 
party19. This provision would not however preclude subordination mechanisms and ‘waterfall’ 
structures within the respective categories of units or  debt instruments issued by an FCC. Therefore, 
based on the current wording of Article 14 of the draft decree, FCC units would no longer meet the criteria to be eligible for collateral purposes where an FCC, or the relevant compartment, issues 
debt instruments. Equally, debt instruments issu ed by an FCC may not be eligible as collateral if 
subordinated to other instruments related to the same FCC or compartment. 
17. The ECB confirms that it has no objection to the competent national authorities making this opinion 
publicly available at their discretion. This opi nion will be published on the ECB’s website six 
months after the date of its adoption. 
  Done at Frankfurt am Main, 14 September 2004. 
 
[signed ] 
 
The President of the ECB 
Jean-Claude TRICHET 
  
                                                     
 
18 Guideline ECB/2003/16, Chapter 6. Eligible assets, 6.2. Tier one assets. The Eurosyst em accepts a wide range of assets to 
underlie its operations. A distinction is made, essentially for purposes internal to  the Eurosystem, between two categories 
of eligible assets: ‘tier one’ and ‘tier two’ respectively. Tier  one consists of marketable de bt instruments fulfilling uniform  
euro area-wide eligibility criteria specified by the ECB. Tier two consists of additional assets, marketable and non-
marketable, which are of particular importance for nati onal financial markets and ba nking systems and for which 
eligibility criteria are established by the national central  banks, subject to ECB approval. In May 2004, however, the 
Governing Council of the ECB approved the gradual introducti on of a single list in the collateral framework of the 
Eurosystem (see press release of 10 Ma y 2004) to replace the current two-tie r system of eligible collateral. 
19  As a result of the on-going reform, FCCs will be composed  at any time of a minimum num ber of two units representing 
the FCC’s assets.