A Cross-Jurisdictional Study of Securitisation: Need for a Uniform Legal Regime

Abstract

Securitisation is the process of bundling financial assets and raising funds by issuing securities backed by those financial assets. The process of securitisation can be carried out by establishing the special purpose vehicle (SPV) in a jurisdiction different to the originator’s jurisdiction. This results in a situation where the process of securitisation would be regulated by more than one legal system. Hence, compliance with the provisions of both the legal regimes would be necessary. However, dual compliance is may not be feasible in several situations owing to the differences in risk retention requirements, homogeneity thresholds and even the definition of securitisation. The discrepancies in the securitisation laws across legal regimes create problems for multinational securitisations. The aim of this project to compare and contrast the EU and US legal regimes on securitisation to demonstrate the legal challenges that arise in cross-border securitisation. The first part of this paper delves into the relevant legal provisions in the European Union and it is followed by a section on US securitisation laws. The third part analyses the fundamental differences in the two legal systems and exposits the compliance challenges and practical problems arising from the same. The conclusion sums up the discussion and builds a case for harmonizing securitisation laws within the OECD framework to develop a uniform global regime.