his page updated regularly deals with securitization developments in Belgium. If you have any news or development to contribute to this, please write to me. This page has been updated by Anurag Pareek.


  1. Global White Page, “Increasing Activity In The Belgian Market”

  2. PricewaterhouseCoopers, “Structuring Securitisation Transactions in Belgium”

  3. PricewaterhouseCoopers, “Overview: The Belgian Securitisation Market”

  4. Freshfields Bruckhaus Deringer, “Changes to the Belgian Legal Framework for Securitisation”

  5. Stibbe, “Belgium: Regulatory Perspectives”

SECURITISATION IN BELGIUM – An Overview of the Market, Legal  & Regulatory Framework and the Tax Schemes

 Market Overview:

THE BEGINNING:-The Belgian securitisation market is not very old: present form of securitisation transactions originated in 1996. The first deal on record is BACOB's Atrium – 1, a securitisation of housing loans guaranteed by the Flemish government. Soon thereafter, there was an auto loans securitisation transaction originated by BBL.

The market got its momentum in 1997 with several issues – with a mortgage-backed securitisation deal structured on sequential CMO basis, and several asset-backed deals. The development process carried through to 1998, with transactions by Kredietbank, BACOB, SCA, etc.

One of the notable transactions to emanate from Belgium is the Euro 4.3 billion synthetic securitization by KBC – click here for the news item.

RECENT TRANSACTIONS:- In 2004, two RMBS transactions came to the market with a total issued volume of €1.04 billion. Diamond Mortgage Finance 2004, with an issued volume of €950 million, is the second public Belgian transaction since 1999, following the Atomium transaction that came to market in 2003. The originator, Krefima, is a financial institution in Belgium specialising in residential mortgage loans and consumer loans.

An Overview of the Legal Framework:-

INTRODUCTION:-The general legal system in Belgium is civil law. Under Belgian law there is no general definition of securitization (titrisation/effectisering). However, for several years now Belgian law has been adapted to allow for the securitization of receivables. On the one hand, the hindrances found in the civil law rules relating to the formalities for transferring receivables have been removed. On the other hand, a specific regulatory scheme has been created which has been made progressively more flexible and better adapted to international market practice. Tax provisions have also been enacted to make securitization transactions practically tax neutral at the SPV level and more attractive to investors.


The Act of 5 August 1992 amending the Financial Transactions and Markets Act of 4 December 1990 introduced into Belgian law a legal, regulatory and tax framework for securitisation of receivables that forms part of the body of rules governing collective investment schemes.

Further regulation came with the Royal Decree of 29 November 1993 governing "all necessary aspects of securitisation" (which was extensively amended in 1995).

Also with a view to facilitating securitisation transactions, the legal rules set forth in the Belgian Civil Code regarding transfers of debts were amended in 1994. Major changes to the Belgian rules came with the Act of 12 December 1996, implemented by Royal Decree of 8 July 1997. This Act essentially allows the creation of two alternative special purpose vehicles ("SPV") similar to pass-through and corporate-bond structures: these are the SIC ("Société d'investissement en Créances")/VBS ("Vennootschap voor Belegging in Schuldvorderingen") and the FPC ("Fonds de placement en Créances")/FBS ("Fonds voor Belegging in Schuldvorderingen").

Other changes to Belgian regulations are included in the recent Act dated 20 July 2004implementing the UCITS III Directive. The key changes involved were:-

·  the requirement to establish a VBS (a Belgian SPV) as a public entity with shares that have to be at least partially offered to the public;

·  stronger language on the bankruptcy-remoteness of local SPV’s;

·  the requirement that servicing activities can now be delegated only to entities that are approved by the regulators;


1.      Definition of Securitisation:- Under Belgian law, there is no general definition of "securitisation". However, for several years now, Belgian law has been undergoing developments that allow for the securitisation of receivables. The concept is based on international market practices: it involves a financial transaction in which an enterprise pools financial assets, mostly receivables, which are subsequently transferred to an SPV, which finances the acquisition by issuing securities.

 2.      Rules on securitized receivables

Rules governing the transfer:- A securitization transaction necessarily implies a transfer of receivables.

Under Belgian law, three sets of rules govern the assignment of receivables which june be securitized:

·  Article 1690 of the Civil Code, on transfer of receivables in general – this law covers the general rules regarding assignments. After amendments made in 1994, it is no more necessary to notify debtors of an assignment;

·  Article 51 of the Law of August 4 1992, on transfer of receivables linked to (real estate) privileged or mortgage-backed loans; and

·  Article 26 of the Law of June 12 1991, on transfer of receivables from consumer credit agreements.

Before the Law of July 6 1994, the rules of civil law governing the assignment of receivables constituted one of the main obstacles to the development of securitization in Belgium. The 1994 amendment removed the feature commonly found in civil law jurisdictions: that of notice to debtors.

General rule of assignment of receivables

Up to the Law of July 6 1994, Article 1690 of the Civil Code provided that receivables were transferred as between the assignor and assignee by their sole consent, but that this assignment did not become effective vis-à-vis third parties, including the debtor, unless the assignor or assignee gave notice of the assignment to the debtor through a bailiff act, or unless the debtor had acknowledged, by means of an authentic deed, the existence of the assignment. The July 6 Law altered Article 1690 substantially.

Under the new provisions, the transfer of receivables is, with the mere consent of assignor and assignee, effective towards all third parties, including the creditors of both the assignor and assignee, with the sole exclusion of the debtor itself. The assignment is only effective as regards the debtor after it has either received notice of the assignment or has acknowledged it. In the absence of a notice or acknowledgment, the assignment is a 'silent' one, effective against all parties except the debtor. In this case, the debtor will further be entitled to pay the assignor, and such a payment will be effective. The procedure of silent transfer is well suited to securitization, because it is not detrimental to third parties and preserves the assignor's relationship with the debtor. In a securitization transaction, the originator (assignor) will indeed often act as the collecting agent and servicer on behalf of the SPV (assignee).

Rules of transfer of (real estate) privileged or mortgage backed receivables

As a rule, the transfer of these types of receivables is only effective towards parties other than the assignor and the assignee, after transfer has been recorded in the margin of the register of (real estate) privileges and mortgages, which requires an authentic deed and triggers registration duties of 1%.

The Law of July 6 1994 waived this requirement where the assignee is an SPV by introducing a new Article 51 in the Law of August 4 1992. In consequence, if a (real estate) privileged or mortgage-backed receivable is transferred to a SPV, the transfer is only subject to the provisions of Article 1690 of the Civil Code, as amended.

A transfer of (real estate) privileged or mortgage-backed receivables by a regulated Belgian 'mortgage enterprise' made in accordance with the above-mentioned Article 51, however, requires the SPV to be licensed and subject to supervision as a 'mortgage enterprise' by the Office of the Control of Insurance. A Royal Decree facilitating the obtaining of a licence of mortgage enterprise for securitization transactions is in preparation.

Rules covering transfer of receivables resulting from consumer credit agreements

The transfer of receivables resulting from a consumer credit agreement to an SPV june be accomplished simply by applying the rules provided by Article 1690, as simplified by the Law of July 6 1994. In such a case, the more stringent transfer rules mentioned in Article 26 of the Law of June 12 1991 do not apply.

Basic conditions concerning the receivables. The basic conditions concerning the receivables to be transferred are to be found in the agreements from which the receivables result and in the specific regulations on securitization.

These conditions can be outlined as follows:

·  The receivables must be freely transferable and must not be of a personal (intuitu personae) character.

·  The receivables should be 'homogeneous'. This implies that a single receivable cannot normally be securitized, although the BFC can permit otherwise. The requirement of homogeneity also implies that groups of receivables to be transferred should have similar characteristics, mainly from a financial point of view, although the regulations do not specify this.

·  The conditions of repayment must be contractually determined as to their due dates and amounts. It is therefore not sufficient that these conditions are determinable: they should be determined on the date the securitization takes place. The securitization of future receivables is not possible under Belgian regulations.

An Overview of the regulatory framework

Belgium adopted a regulatory framework modelled on French law for securitization transactions in receivables which forms part of the regulations on collective investment undertakings found in Book III of the Law of December 4 1990 relating to financial transactions and financial markets. The framework was introduced by a law of August 5 1992 creating a new type of collective investment vehicle, the 'collective investment undertaking in receivables' (OPCC/IBS). The Law of 1990 has been amended several times and most recently by the new law. Additional rules for undertakings for collective investments in receivables are set out in a Royal Decree of November 1993, as amended.

It should be noted that the application of the Belgian regulatory framework is not compulsory. A securitization transaction can thus be realized by Belgian entities through a foreign SPV structure, as indeed has been done in a few cases. However, there is a strong incentive to choose the Belgian regulatory framework because the tax advantages and certain of the simplified rules applicable to the transfer of receivables are conditional on the application of the Belgian framework.

Under Belgian regulations, a securitization of receivables will require as a rule — at least in the event of a public transaction — the intervention, in addition to the originator (which does not have to be a credit institution) and the SPV, of a management company, a depository, a custodian, a supervisory company, an auditor, a rating agency and possibly a separate servicer and collecting agent and a representative of bondholders (see box on page 40 for a summary of the conditions and functions that these different bodies must fulfil, under present regulations). The introduction of a management company is a unique feature of the Belgian law.

Securitisation of future receivables is not recognised in Belgian system.

Prudential regulation

The Belgian Banking and Financial Commission (BFC), the public body entrusted with the supervision of credit and other financial institutions and of public solicitation of savings, has extensive supervisory powers over securitization transactions. Not only will the intervention of the different operators have to obtain its prior approval, but the SPV will also be submitted, like all other collective investment undertakings, to its prudential supervision.

The prudential norms require that the originator of a securitisation transaction, in order to qualify for off-balance-sheet treatment, should not be under any legal or moral obligation to support the transaction.

Taxation Scheme:

Mortgage-backed receivables come under compulsory registration requirements – this entails a registration cost of 1%. No registration requirements apply on non-mortgage securitisations.

Entity level tax on the SPV – SIC or FPC can be avoided altogether. Further, VAT is not chargeable on transfers of receivables, but servicing fees, as any other income, will be subject to VAT.

Withholding taxes on interest are normally applicable, but FPCs being pass through entities are not covered by the requirements. SICs have been granted exemption from withholding tax on interest received by them.

Originator taxation The transfer of loans to SICs will be subject to the normal applicable fiscal provisions, which means a taxable gain or loss may arise upfront.

No indirect tax is payable on transfer of the receivables to the SPV.

SPV taxation The SICs themselves are in principle subject to corporate income tax. However, the SICs are liable for income tax only on the total amount of the abnormal or gratuitous advantages received and disallowed expenses.

Investor taxation Tax implications for investors depend on the nature of the instrument acquired by them. The return will be classified as interest or dividends depending on whether the instrument was a share or a bond. A withholding tax of 15% may be applicable.