Structured Finance and Securitisation 2010

Author: Gárdos István

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Practical Law Company Cross-Border Handbooks 2010, page 105-111

MARKET AND LEGAL REGIME

1. Please give a brief overview of the securitisation market in your jurisdiction. In particular:
-         How active and/or developed is the market and what notable transactions and new structures have taken place recently?
-         To what extent have central bank liquidity schemes assisted the securitisation market in your jurisdiction? Were retained securitisations common in the last 12 months?
-         Is securitisation particularly concentrated in certain industry sectors?

The securitisation market is not developed in Hungary. No recent transactions have been reported. This is partly due to the lack of legislation and the fact that assets which are usually securi-tised (residential mortgage loans, car loans and credit card loans) have only recently increased to a level that would allow cost-effective securitisation. This might also be due to the fact that German-type mortgage bonds can be used to achieve a similar result. These are widely used in Hungary and are regulated under Act XXX of 1997 on Mortgage Loan Companies and on Mortgage Bonds. However, based on the number of articles written on the subject, there is a growing interest in securitisation on the market. The central bank accepts bonds and other securities issued by special purpose vehicles (SPVs) provided they meet the general eligibility criteria, but this in itself has not resulted in any increase in securitisation.

2. Is there a specific legislative regime within which securitisations in your jurisdiction are carried out? In particular:
-         What are the main laws governing securitisations?
-         Is there a regulatory authority?
-         A government decree on capital adequacy in the case of securitisation involving credit institutions.

There is a draft government proposal for the regulation of securitisation (Bill). Unfortunately, the Bill is not currently a high priority in the legislation process.

Transfer of receivables is regulated by the Civil Code (Act IV of 1959). Parliament adopted Act CXX of 2009 on the new Civil Code in November 2009. It was initially intended that the new Civil Code would be effective from 2010, but this is not predictable as parliament has not yet adopted the act that would bring the new Civil Code into force.

There is no specific regulating authority relating to securitisation or to SPVs. Purchasing receivables may be regarded as factoring or another type of financial services, if it is carried out in a businesslike manner. Authorisation from the Hungarian Financial Supervisory Authority (HFSA) is required to provide financial services. The public offering of the bonds issued by the SPV requires the approval of the HFSA. The Bill (see above) would clarify that securitisation should not be regarded as financial services, so that no approval would be required to set up and operate an SPV.

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