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)
Date: 2004-09-14
Institutions: European Central Bank
Subjects: France, bond, credit policy, financial stability, liquidity control, national law

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 consultation of the European Central Bank by national 

authorities regarding draft legislative provisions2, 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 merit 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  

2  
3  

4  

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’). 
OJ L 189, 3.7.1998, p. 42. 
ECB  Opinion  CON/2004/3  of  4  February  2004  at  the  request  of  the  Ministry  of  Finance  of  the  Grand  Duchy  of 
Luxembourg on a draft law on securitisation. 
The  Commission  chairs  this  group  composed  of  industry  representatives  that  was  established  in  the  framework  of  the 
post-Financial Services Action Plan debate. 

 
 
 
 
                                                      
financing, funding, arbitrage and risk-shifting mechanism’. 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 framework applicable to these operations is necessary at 

EU  level,  thereby  facilitating  a  more  harmonised  framework  while  simultaneously  encouraging 

innovation in securitisation markets across Europe’. The ECB also shares this view. 

4. 

The  ECB  notes  that  the  Law  on  financial  security  of  1  August  2003  (hereinafter  the  ‘Law’) 

introduced substantial changes to the existing French 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  Law5,  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 draft decree, the provisions of the draft decree are 

in  several  respects  so  closely  intertwined  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  submitted  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 result 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  security  for  some  mechanisms,  including  accounts 

specifically  dedicated  to  FCCs,  in  order  to  reduce  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 particular regarding the 

composition of FCCs’ liabilities. The ECB understands that under current rules, the units issued by 

FCCs  represent  co-ownership  rights  in  assets  that  FCCs  have  acquired.  These  units  are  neither 

shares  nor  debt  securities  and  therefore,  due  to  their  hybrid  legal  nature,  might  be  considered 

unattractive to international investors. One of the 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 securitisation 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  commercial  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. 

2 

 
                                                      
any foreign law). The ECB understands that this new provision is intended to enlarge the investor 

base  and  to  avoid  setting  up  a  two-tier  structure  for  securitisation  transactions  involving  the 

subscription of units by a repackaging special purpose vehicle. The statement of reasons notes that 

the draft decree does not affect the legal regime applying to any bonds 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 regime for bonds issued by FCCs would have to 

be  governed by  law  and  that  the  draft  decree  simply  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 qualified 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 derivatives 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 Directive7 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  derivatives  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  management  company  will  have  to  comply  with 

certain specific requirements where the FCC regulations 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  

7  

8  

As regards negotiable debt securities issued under French law (titres de créance négociables -TCN), the ECB understands 
that the general rules of issuance will also apply to FCCs.  
Decree No 89-623 of 6 September 1989; Decree adopted pursuant to Law No 88-1201 of 23 December 1988 relative aux 
organismes de placement collectif en valeurs mobilières et portant création des fonds communs de créances (Decree on 
undertakings for collective investment in transferable securities and creating securitisation funds). 
See the AMF’s draft General Regulation of 30 July 2004. 

3 

 
                                                      
The ECB would suggest, in line with the practice for the other provisions of the draft decree, that 

the FCC regulations should determine the conditions 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 the mechanism of the account specifically dedicated 

to  an  FCC  to  which  sums  recovered  with  respect  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 such 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 insolvency proceedings. The ECB notes 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 dedicated 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  provides  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  Article  17(3)  means  the  same  as  the  cash  holdings 

defined  in  Article 4  of  the  draft  decree.  The  ECB  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 amended 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 validity 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. 

4 

 
 
                                                      
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  enforceability  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 formality being required, and 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  Convention  on  the  assignment  of  receivables  in 

international  trade  (hereinafter  the  ‘UN  Convention’)  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 the legal uncertainty surrounding a number of issues 

arising  in  the  context  of  important  receivables  financing  transactions,  including  inter  alia  asset-

based  lending  and  securitisation13.  In  addition,  under  the  UN  Convention,  the  law  where  the 

assignor  has  its  place  of  business  governs  the  enforceability  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 international 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’.  Furthermore,  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 ensure 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 regulations14. The ECB also understands that some of these disclosure 

provisions  date  back  to  Decree  No  89-158  and  will  be  further  detailed  in  the  framework  of  the 

10   OJ L 266, 9.10.1980, p. 1. 
11  
12  
13    United Nations Convention on the Assignment of Receivables in International Trade, UN, New York, 2004, explanatory 

Paragraph 8 of Article L. 214-43 of the Code. 
This UN Convention is not yet into force. 

note, p. 28. 
See, for instance, Articles 11, 13, 18 of the draft decree. 

14  

5 

 
                                                      
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  decree  needs  to  be  compatible  with  the  specific 

disclosure  rules  for  the  different  types  of  instruments  issued  by  FCCs  (units,  debt  instruments, 

commercial  paper,  etc.),  and  also  with  the  new  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 reliable 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  agents  using  a  combination  of  criteria  based  on  EU 

law and national regulatory provisions, including supervisory 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  information  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 data 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 statistical obligations imposed by the ECB. 

Use of asset-backed securities as collateral 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 operations (i.e. liquidity-providing operations) have 

to be based on adequate collateral. As mentioned in Opinion CON/2004/3, asset-backed securities 

may  be  accepted  as  collateral  for  Eurosystem  monetary  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 however that the General 

15  

16  

17  

See  in  this  respect  the  Information  Report  of  the  French  Senate  on  the  application  of  the  Law  of  1  August  2003  on 
financial security by Mr  P. Marini of 27 July 2004. 
Commission  Regulation  (EC)  No  809/2004  of  29  April  2004  implementing  Directive  2003/71/EC  of  the  European 
Parliament and of the Council as regards information contained in prospectuses as well as the format, incorporation by 
reference and publication of such prospectuses and dissemination of advertisements, OJ L 149, 30.4. 2004, p. 1. 
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. 

6 

 
 
                                                      
Documentation provides that ‘debt instruments affording rights to the principal and/or the interest 

that are subordinated to the rights of holders of other debt instruments of the same issuer (or, within 

a structured issue, subordinated to other tranches of the same issue) are excluded from tier one’18.  

16.  Article  14  of  the  draft  decree  provides  that  the  FCC  regulations  will  stipulate  the  priority  rules 

among the various categories of units, debt securities 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. subordinated units traditionally subscribed for 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 issued 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  opinion  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 

19  

Guideline ECB/2003/16, Chapter 6. Eligible assets, 6.2. Tier one assets. The Eurosystem 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 debt 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  national  financial  markets  and  banking  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  introduction  of  a  single  list  in  the  collateral  framework  of  the 
Eurosystem (see press release of 10 May 2004) to replace the current two-tier system of eligible collateral. 
As a result of the on-going reform, FCCs will be composed at any time of a minimum number of two units representing 
the FCC’s assets. 

7