Securitization markets in Spain
This page updated regularly deals with securitization
developments in Spain. If you have any news or development to contribute
to this, please write to me.
Late breaking additions:
14th Jan 2003/ 13th Feb 2003: Market data for 2002 and prospects
for 2003 - see our report here
18th Feb 2002: Market data for year 2001 have been incorporated.
9 Jan 2002: For a news report for issuance upto end of 2001, see
our news page here
22 Oct 2001: For a news report for issuance upto 3rd quarter of
2001, see our news page here.
25th June 2001:
Spanish securitisation is completing a decade and Moody's releases a special
report - see our news page here.
19th March 2001
For market updates for 2000 and the outlook for 2001,
see our news report here.
3 May, 2000:
The entire page was revised and enlarged.
Added 2 April 2000
Spanish bank Banesto has proposed a mega securitization
of mortgage loans - click
here for the news item.
Added 8 Feb. 2000
Spanish Bank Banco Bilbao Vizcaya Argentaria is launching
the first ABS issue in Spain - click
here for the news item.
Added 8 Feb. 2000
Comprehensive article on Spanish securitization law from
law firm Uria and Menendez, http://www.securitization.net/international/europe/sp_mortg.html
Added 1st Feb., 2000:
4 regional savings banks joined to launch 2000's first
MBS issue - see news here.
More on this site:
For detailed treatment of mortgage-bond markets in Spain, please
see this article on this site.
State of the Market:
The traditional mortgage funding product in Spain was the pfandbriefe
- see more about this market in the link above. Securitization of the
US-style was introduced only recently. Spain is one of those few markets
where Government initiative has been behind the growth in securitisation
markets. While securitisation transactions originated around 1991, the
Government passed an enabling law in 1992. Over a period of time, the
Government has been reshaping and reforming the law making it more permissive
and market-friendly - the most recent legal initiative was taken in 1998.
Spanish securitisation market for last many years has been a mortgage-dominated
market. The first transaction in 1991 was one where Citibank Hipotecas
I and Sociedad Española issued 19.8 billion pesetas (US$141 million)
of "Participaciones Hipotecarias " (PHs) (participation certificates),
secured by an issuer's specific portfolio of mortgage loans. There was
an exceptional deal in 1996 to help the restoration of enterprises whose
revenues were affected by the moratorium on the government's nuclear program.
Some innovative deals have been struck recently. For example, the Government
subsidies to certain universities have been securitised enabling the universities
to raise immediate funds. There has also been a securitisation of electricity
bills receivables, to part finance the transition of the electric utilities:
this is more or less on the lines of securitisation of stranded costs
by US electric companies.
In 1998, the total volume of securitisation issues in Spain was estimated
at around USD 4 billion. [Article in Lawmoney, April 1999].
In year 2001, this volume reached approx Eur 10 billion. Main market
participants are banks and financial intermediaries including the local
version of savings and loans companies (cajas).
Historically, Spain has been a country following the civil law tradition,
but securitization law presents an attempted shoehorning of a UK common
law into Spanish legal framework. Not being a common law country, the
concept of trusts is unknown in Spain. Similarly, mortgages of the UK
common law type do not exist. Spain's own variant of land or property
funding is called hipoteca, which has some similarities but many differences
as compared to the UK mortgage system. The Spanish mortgage is limited
only to immovable properties, cannot be negotiated, and needs compulsory
registration. Under Spanish law, mortgages cannot be fractionalised or
converted into securities as that would imply creation of a trust. In
other words, in Roman Dutch law or Spanish law, there is no distinction
between legal and equitable interests in property.
Apparently enough, as in any Roman-Dutch legal system, securitization
would have been impossible except for a specific law.
The Government of Spain had taken early initiatives to promote securitisation
markets. A law permitting mortgage securitisation was passed on July 7,
1992 enabling creation of "Fondos de Titulización Hipotecaria"
or mortgage securitization funds. This law not only permitted transfer
of mortgage receivables but also provided for removal of the transferred
receivables from the books of the originator, as also bankruptcy remote
In 1994, the scope of the law was extended to securitisation of certain
non-mortgage assets, particularly the nuclear moratorium compensation
However, the most remarkable was the Government's recent enactment being
Royal Decree no. 926/1998 dated 14th May 1998. This enactment enables
the creation of securitisation Fondos (funds) which are comparable to
trusts under English law. These funds are managed by Sociedad Gestora
de Fondos de Titulización as trustees.
The major provisions of this law are:
1) The permission to securitize all types of financial assets and future
credit rights as trade receivables and toll road income. However, transactions
based on future flows have to be notified to the Spanish Stock Exchange
and to obtain the approval of the Spanish Ministry of Economy and Finance.
The exception to this rule is the toll road income, already allowed in
the Royal Decree.
2) The creation of open-ended structures. Previously, the Fondo expired
once the bonds were redeemed. Now, the Fondo can add new assets (they
must have similar features to the old ones) and issue new series of bonds.
3) A rating company must asses the quality of the bonds issued by the
Fondo. CNMV can require a minimum credit rating regarding to the features
of the assets and the bonds, although it is not yet clear what that minimum
Because of typical limitations of Spanish law discussed above, the participation
certificates issued by the issuers in Spain do not exactly involve an
SPV who acts as a trustee for the investors: in fact, each investor acquires
a fractional interest in the mortgage, title in which continues to be
held by the originator. Thus, the originator cannot transfer the whole
of the mortgage: at best, it can transfer only 99%. The investor, called
the participant, can directluy sue the obligor.
For a detailed article by Sergio Nasarre-Aznar on the
law of securitization in Spain, refer to Common
law Securitization in civil law Spain International
Financial Law Review; London; Mar 2000.