Countries with banking systems weighed down by large NPL portfolios will be monitoring the introduction of an Italian State guarantee (Garanzia Cartolarizzazione Sofferenze - GACS) later this year.  The government guarantee will only apply to eligible investment-grade senior notes in NPL securitisations, and it is expected that the fee to be paid for the government guarantee will be priced at arm's length and will therefore not be classified as State aid.  The goal of the guarantee scheme is to maximise the value of the NPLs being securitised, especially when compared with the unattractive alternative of a fire sale of the distressed assets.  However, it remains to be seen whether the pricing of the transferred NPLs will be attractive enough to generate sufficient investor appetite in the junior tranches.  If this mechanism proves successful, it may prove to be an interesting model for other countries....
A number of countries have successfully used government guarantees to improve banks’  access to funding, and to support the proper functioning of their national securitisation markets - primarily in mortgage-backed securitisations.   These include Canada, the USA and the Netherlands.  In the Netherlands, the fear of having to sell a home while in negative equity is eased in many cases by the National Mortgage Guarantee, which covers the borrower’s residual debt, subject to a maximum of €245,00 (€225,000 from 1 July 2016).

Ireland is one of the early adopters of the OECD Common Reporting Standard (CRS) for the automatic exchange of tax information, and Irish implementing legislation is in effect since 1 January 2016. The first CRS annual reporting by financial institutions/Irish Section 110 companies, relates to the 2016 calendar year and the returns will need to be filed by end-June 2017. I am sharing here some personal thoughts on the impact of CRS on Irish Section 110 SPVs from a corporate services provider perspective; please consult with a tax advisor for formal guidance.
The CRS framework is broadly similar to the recently implemented reporting requirements of the US Foreign Account Tax Compliance Act (FATCA), with some notable differences:

• Much larger numbers of reporting financial institution are affected and exemptions from reporting are not as wide as in FATCA. Active Section 110 entities will usually be classified as reporting financial institutions for CRS purposes.
• No FATCA-type egistration. Reporting is to local tax authorities, i.e., the Irish Revenue Commissioners, rather than with foreign tax authorities.
• Reportable account classification is based on tax residency, instead of nationality/citizenship. Irish Section 110 SPVs engaged in listed securitisation transactions will normally not have reportable accounts and accordingly will file CRS returns with nil balances.
• No minimum balance threshold applies for review/reporting. A USD250,000 threshold for pre-existing accounts may be specifically applied at the discretion of local jurisdictions .
• Unlike FATCA, CRS is not centred on withholding tax and does not contain punitive withholding tax penalties. However, Irish legislation will enable the Revenue Commissioners to apply significant penalties for non-compliance.

For all new clients of Irish corporate services providers, on-boarding procedures (AML/KYC analysis) and IT systems should already have been modified to take account of CRS requirements. In addition, SPV administration agreements must now incorporate specific provisions for CRS reporting.

QSV Group will be providing SPV management services for Irish-domiciled securitisations, aviation leasing structures and other Section 110 entities from the beginning of March 2016.  
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Kieran Desmond, QSV Group's managing director said:
"We are delighted to announce that QSV Group  will be launching SPV management services from its new Dublin offices.  QSV Group will bring a unique blend of quality, service and value to SPV management in the Irish market.  A team of experienced structured finance accountants and compliance professionals will deliver a highly-competitive, reliable and responsive service in the heart of Dublin's International Financial Services Centre (IFSC).   We look forward to supporting Ireland's growing success as the location of choice for international debt capital markets structures. "  
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