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Citation: 1996 Int'l Bus. L.J. 341 1996

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In the United States, asset securitization is one of the most
significant financial innovations of the -1st.Wentyyears and
has greatly increased the efficiency of capita-f4tnancing. In
part because of its domestic success, asset securitization
has taken on international importance in at least two res-
pects: United States issuers of asset-backed securities are
gaining access to markets on a world-wide basis and assets
outside the United States are being securitized with growing
frequency.
I. DEFINING SECURITIZATION
No uniform definition of securitization presently exists (1). A
broad definition describes securitization as "the transforma-
tion of an illiquid asset... into tradable securit[ies] with a
secondary market" (2). A narrower definition describes secu-
ritization as "the sale of equity or debt instruments, repre-
senting ownership interests in, or secured by, a segregated,
income-producing asset or pool of assets, in a transaction
structured to reduce or reallocate certain risks inherent in
owing or lending against the underlying assets and to
* Avocat au Barreau de Bruxelles, Collaborateur au sein de I'association Stibbe
Simont Monahan Duhot.
Aux Ittats-Unis Ia litrisalion de creances constitue
l'une des innovations financi~res majeures de ces
vingt dernibres anndes et a grandement am6lior6
l'efficacite du financement de capital. Notamment en
raison de ce succ~s inteme, ]a titrisation de cr6ances
a acquis une importance internationale au moins A
deux 6gards : las 6metteurs de titres reprdsen-
tant des cr6ances ont acc6s A des march6s de plus
en plus nombreux sur le plan international et les
cr6ances situ~es hors des Etats-Unis font de plus en
plus souvent 'objet d'une titrisation.
I. DIFINIR LA TITRISATION DE CRIANCES
Actuellement, il nexiste pas de difinition uniforme de
la titrisation. Une definition large d6crit la titrisation
comme , la transformation d'une cr6ance non liquide
-en titre(s) n6gociable(s) dans un march6 secon-
daire,. Une definition plus 6troite ddcrit la titrisation
comma -, a vente d'actions ou d'obligations repr6sen-
tant des int6r~ts de propr6t6, ou 6tant garanties par
une creance ou un portefeuile de cr6ances, produc-
trice de revenus, cans une transaction destin6e 4
r6duire ou a r~partircertains risques inh6rents a /a
proprit de cr~ances ou aux garanties de pr~ts sur
0 3 1996
RDAI/IBU, W
 ASST SECURIIZATION: A COMPARATIVE STUDY BETWEEN THE UNITED STATES AND BELGIUM
crdances, et destines i assurer un caractre plus
rapidement n~gociable et donc plus liquide de ces
intr&ts que des titres de crdances ou des garanties
de prats sur cr~ance,,. La definition 6troite se limite
& la titrisation de portefeuille de cr~ances, qui est la
plus courante aux tats-Unis du fait de la progression
exponentielle des titres sur hypothbques durant les
anndes 70, et qui est la forme de titrisation sur
laquelle cette dtude se concentre.
II n'existe pas non plus de definition legale de Ia titri-
sation en Belgique. Celle-ci est g6n6ralement d6finie
comme une technique financibre par laquelle une
personne qui a consenti un credit cede les cr6ances
qui en resultent, non pas sous leur forme originelle,
mais sous la forme de titres ndgociables, rmis par un
,, organisme de placement en crdances,,, institud afin
de representer lea creances ceddes.
II. LES ORIGINES DE LA TITRISATION
DE CRtANCES
La titrisation de cr6ances, qui a debute aux tats-
Unis dans lea anndes 1970, a dt6 developpde au
depart par I'agence quasi gouvernementale Federal
National Mortgage Association (FNMA ou - Fannie
Mae,,) et plus rdcemment par la Governmental
National Mortgage Association (GNMA ou -Ginnie
Mae-) et la Federal Home Loan Mortgage (FHLMC
ou -Freddie Mac-). Ces agences quasi gouverne-
mentales acqui~rent des creances hypothecaires
auprbs des etablissements prteurs, lea rassemblent
en un portefeuille garantissant lea titres, apportent
certaines garanties et revendent ces titres sur le
marche. Les instruments qui en rdsultent sont quali-
flids de -titres sur hypothbques,. Le march6 secon-
daire de ces titres, qui est trbs actif, fournit une
source importante et permanents de fonds hypoth6-
caires et reste le plus grand marchd de crdances
titrisees aux tats-Unis.
Ces derni~res ann~es, des crdances tr~s varides ont
donn6 lieu &titrisation. Lorsque des titres 6mis par un
Fonds de placement sont offerds sur un march6 fai-
sant appel A '6pargne publique, et que des agences
de notation lea evaluent, lee crdances acquises par
le Fonds de placement tendent a constituer des flux
dencours passds et futurs pr6visibles. Ceci comprend
notamment lea portefeuilles d'hypotheques commer-
ciales et au logement, de cr~ances commerciales, de
credits pour I'achat d'automobiles ou de credits sur
lea encours lids A lutilisation de caries de crddit.
En revanche, lorsque lea titres sont emis sans appel
public a '6pargne, lea investisseurs eux-m~mes
effectuent I'analyse ncessaire au regard de ces flux
d'encours particuliers. Par example, des transactions
rdcentes de placement priv6 ont inclus des flux
ensure that such interests are more readily marketable and,
thus, more liquid than ownership interests in and loans
against the underlying assets" (3). The narrower definition
is limited to the pooling form of securitization more prevalent
in the United States as a result of the exponential growth of
mortgage-backed securities during the 1970s (4) This study
focuses on this form of securitization (5).
As in the United States, there is no legal definition of securi-
tization under Belgian law. Securitization is usually defined
as a financial technique by which a person who has granted
credit assigns the receivables resulting from these credits,
not under their original form, but in the form of securities,
issued within a "Organisme de placement en crdances"
created to represent the assigned receivables (6).
II. ORIGINS OF ASSET SECURITIZATION
The securitization of financial assets, which first began in
the United States in the 1970s (7), was developed originally
by the quasi-governmental Federal National Mortgage Asso-
ciation (FNMA or "Fannie Mae") and more recently, the
Government National -Wrtgage Association (GNMA or
"Ginnie Mae").Jhe-e quasi-government agencies buy qua-
lifying hojTe mortgages from lenders, package them into
securities backed by a pool of mortgages, provide certain
guarantees, and then resell the securities on the open mar-
ket. The resulting instruments are referred to as mortgage-
backed securities. The active secondary market for these
securities provide an important continuing source of home
mortgage funds in the United States and remains the largest
market for securitized financial assets in the United States
(8).
In recent years, many different types of assets have been
the subject of securitization. When the securities issued by
a special purpose vehicle (SPV) (9) publicly issued, and
rating agencies rate those securities, the assets purchased
by the SPV tend to be payment streams that have proven
histories of past payments and predictable expectations of
future payments (10). Examples would include pools of resi-
dential and commercial mortgage loans, trade receivables,
automobile loans and credit card receivables (11).
On the other hand, when securities are privately placed,
investors themselves do the analysis needed with regard to
these non-standard payment streams. For example, recent
private placement transactions have involved payment
 ~ASSET SE URITIZAION: ACOMPARATIVE STUDY BETWEEN THEUNITED STATES AND BELIUM
streams consisting of franchise fees, equipment leases,
subrogation claims, junk bonds, health care receivables,
future media revenues, and even utility surcharges (12).
Ill. SECURITIZATION'S AIMS
The benefits offered by securitization are three-fold:
- offsetting the disintermediation's effects on depository
institutions;
- better management of the risks;
- enhancing capital and financial ratios.
A. Offsetting the Disintermediation's Effects
on Depository Institutions
The government's renewed efforts in the 1960s and 1970s
to develop the secondary mortgage market were in part the
consequence of political recognition of depository institu-
tions' evolving role as financial intermediaries.
Banks traditionally gather liabilities (typically deposits) to
fund assets (typically loans) and retain-as profit the spread
between the total cost of the liabilities and the total yield of
the assets (13). Over the last two decades, depository insti-
tutions' roles have changed, both on the liability and- the
asset sides of their balance sheets. On the liability side,
banks have been losing billions of dollars in investible funds
as depositors have withdrawn funds and redirected them to
more lucrative investments (14). On the asset side, banks
have become less important suppliers of credit with large
corporations often selling their commercial paper directly
(15).
The resulting decline in bank profitability from the late 1970s
through the early 1980s (16) created pressures on the banks
to locate alternatives to deposits as funding sources and to
increase income through means other than spreads bet-
ween deposits and loans (17). For many depository institu-
tions, one response was the resort to securitization of
assets. Asset securitization helps offset the effects of disin-
termediation by providing an effective method of raising
funds and generating cash flow.
As a funding source, securitization offers several advantages
over deposits and other funding alternatives. First, asset
securitization avoids certain "regulatory taxes" (18). Second,
securitization is often more cost effective than sales or loan
constituds de redevances de franchise, de baux
d'6luipement, d'actions subrogatoires, de junk bonds,
de creances d'assurance maladie, de revenus futurs
des media et m~me de dettes publiques.
II1. LES OBJECTIFS DE LA TITRISATION
Les b~n6fices apport~s par la titrisation sont de trois
ordres :
- compenser les effets de la d~sintermddiation ban-
caire;
- mieux g6rer les risques;
- valoriser les ratios capitalistiques et financiers.
A. Compenser les effets de la d6sinterm6diation
bancaire
Les efforts renouveles du gouvernement dans les
ann6es 1960 et 1970 dans le but de d6velopper le
march6 hypoth6caire secondaire 6taient notamment
la cons6quence de la reconnaissance politique de
I'Avolution du r6le des institutions de d~p6t en tant
qu'intermediaires financiers.
Traditionnellement, les banques rassemblent leur
passif (en g~n~ral des d~p6ts) afin de financer des
cr6ances (en g6n6ral des pr.ts) at retiennent comme
profit la marge entre le coOt total des dettes at le
revenu total des cr~ances. Durant ces vingt derni~res
ann6es, le r6le des institutions do ddp~l a chang6
aussi bien en ce qui concerne leur passif que leur
actif. Du c6t6 du passif, les banques ont perdu des
milliards de dollars an fonds investis alors qua les
d~positaires retiraient leurs fonds pour les consacrer
A des investissements plus lucratifs. Du c~t6 de
I'actif, lea banques sont devenues des fournisseurs
de cr6dit moins importants dans la mesure o6 les
grandes soci6t6s vendent souvent directement lours
effets de commerce.
Le d6clin de la profitabilit6 des banques qui en a
r6sultd h partir de ]a fin des annees 70 jusqu'au
d~but des anndes 80 a constitud une pression sur
les banques pour qu'elles trouvent des sources de
financement alternatives aux d6p6ts at pour qu'elles
augmentent leurs revenus A partir de moyens autres
que las marges entre les ddp6ts et las prdts. Pour
de nombreuses institutions de d6p6t, le recours A la
titrisation de cr6ances constituait une r6ponse. La
titrisation de cr~ances permet de compenser les
effets de la desinterm~diation en fournissant une
m~thode efficace pour lever des capitaux at gdn~rer
du cash flow.
En tant qua source de financement, la titrisation offre
certains avantages par rapport aux d6p~ts at A
d'autres alternatives. Tout d'abord, la titrisation do
cr~ances 6chappe A certaines taxes r6glementaires.
 ASSET ECURITZATI[O: ACOMPARATIVE STUDY BETWEEN THE UN4ITED STATES AND BELGIUMI
La titrisation a aussi souvent un mailleur rendement
que des ventes ou des pr~ts participatifs dans la
mesure o6 ella offre aux investisseurs un investisse-
ment plus liquide (un titre ndgociable) avec de
meilleures caracteristiques de risque Elle s'adresse
donc a un 6ventail plus large d'acheteurs potentiels.
Enfin, en utilisant Ia titrisation comma source de
financement, lesinstitutions de d6p6t r6duisent leurs
coOts de maintien de capital en application des exi-
gences r~glementaires.
B. Mieux g6rer les risques
Une institution de d~p6t pout @treconfront6e 9 trois
types de risques :lerisque de taux d'intdr~ts quipeut
resulter du d~sequilibre entre lescr6ances et les
detes, lerisque de prepaiement c'est--dire lerisque
qua leprdt sera rembours6 avant 6chdance, entral-
nant le retour de Lasomme an principal au prteur
avant I'arrivLe A maturitA du pr~t et le risque de credit
qui est lerisque que ledebiteur du pr~t ou de la
creance n'effectue pas lepaiement complet du prin-
cipal at des intdrdts an temps utile.
Alors qua lesprdts A taux variable at lavente de prts
parlicipatifs permettent & un pr6teur de partager le
risque de taux avec lesemprunteurs ou d'autres ins-
titutions de dep6t, ts titrisation de crances permet
au prAteur d'extraire lacreance de son portefeuille,
r6duisant d'autant la maturit6 moyenne du porte-
feuille, at d'eliminer le risque lidaux taux d'int6r.ts
qui y estassoci6. Le risque de pr6paiement du pre-
teur associ6 A une criance paut tre 6limin6 en titri-
sant is crdance at an faisant coincider lerisque de
prdpaiement avec lesegment de march6 dont elle
remplit lebesoin. Enfin, la titrisation permet aux
banques de r6duire ou de repartir leursrisques de
credit sur Iacrdance titris~e en raison de Iexamen
minutieux du risque de credit effectue par une ou
plusieurs agences de notation at parfois par un tiers
le ,valorisateur de cr6dit-, dans une transaction
titris6e typique.
C. Valoriser lesratios capitalistiques at financiers
En vertu de I'Accord de BAle, adopte en juillet 1988
par les Gouverneurs des Banques Centrales du
Groupe des 10 at du Luxembourg, lesbanques doi-
vent atteindre un niveau de capital 6gal A 8 % des
creances comportant un risque, ce qui estplus 6lev6
qua leminimum requis par lesanciennes ,,capital
guidelines-, Son application A des 61ments hors
bilan forcera de nombreuses banques A lever des
capitaux ou & r6duire lescrdances dens [a but de
satisfaire lesnouvelles exigences relatives au capital.
Les capitaux etant de plus en plus coOteux A lever,
lescessions ou titrisations de crdances peuvent se
r6v6ler beaucoup plus rentables.
participations because it offers investors a more liquid
investment (a tradable security) with more desirable risk
characteristics and thus appeals to a wider pool of potential
purchases. Finally, by using securitization as a funding
source, depository institutions reduce the costs of maintain-
ing capital in compliance with regulatory requirements (19).
B. Better Management of the Risks
A depository institution can be confronted to three risks: the
interest rate risk which can arise from a mismatch of assets
and liabilities (20), the prepayment risk which is the risk that
a loan will be prepaid, causing a return of the lender's prin-
cipal prior to the maturity of the loan (21), and the credit risk
which is the risk that the obligor on the loan or receivable
will not make full and timely interest and principal payments
(22).
While variable-rate loans and the sale of loan participations
enable a lender to share interest rate risk with borrowers or
other depository institutions, asset securitization permits a
lender to remove the asset from its portfolio altogether,
thereby shortening thapoitfolio's average maturity, and to
eliminate all interest rate risk associated therewith (23). The
lender's prepayment risk associated with an asset can be
elimirated by securitizing the asset and matching the pre-
payment risk with the segment of the market whose need it
meets (24). Finally, securitization permits banks to reduce
or reallocate its credit risk exposure with respect to the secu-
ritized asset because of the credit risk's scrutinization done
by one or more rating agencies and, sometimes, a third-party
credit enhancer in a typical securitized transaction (25).
C. Enhancing Capital and Financial Ratios
According to the Basle Accord (26) endorsed in July 1988
by central banks governors of the Group of Ten Countries
and by Luxembourg (27), banks must attain a level of total
capital equal to eight percent of total risk-weighted assets
(28), which is higher than the minimum required by the old
capital guidelines (29). Its application to off-balance sheet
items will force many banks to raise capital or reduce assets
in order to comply with these new capital requirements (30).
With capital becoming increasingly more expansive for banks
to raise, asset sales or securitizations may prove to be far
more cost effective.
 ASS T SECURITIZATION: A COMPARAT VE STUDY BETWEEN THE UNITE
IV. SECURITIZATION IN THE U.S.
A. Parties Involved in a Securitization Transaction
Securitization transactions involve some or all of the follow-
ing parties (31): 1) the initial owner of the assets (the "origi-
nator" or "sponsor") (32); 2) the issuer of the debt or equity
instruments; 3) the investment bankers who assist in struc-
turing the transaction and who underwrite or place the secu-
rities; 4) the rating agencies, who assess the credit quality
of certain types of instruments and assign a credit rating; 5)
a credit enhancer, who provides credit support through a
letter of credit, guarantee, or other assurances that there will
be a source of funds available for payments as they become
due on the securities; 6) a servicer, usually the originator or
an affiliate, who collects payments due on the underlying
assets and, after retaining a servicing fee, pays them over
to the security holders or their trustees; 7) a trustee, who
deals with the credit enhancer, servicer, and issuer on behalf
of the security holders; and 8) legal counsels, who partici-
pate in the structuring of the transaction and who may pro-
vide advice to the rating agency or others in the form of
legal opinions.
B. Mechanism of Securitization
The asset to be securitized is generally an income-produ-
cing asset, and the cash flow produced by the asset is used
as the source of funds for the payments to be made to the
purchasers of the debt or equity instruments. Most transac-
tions involve large numbers of homogeneous assets pooled
together. Assets are typically pooled for three reasons:
- to achieve a sufficiently large asset value to make securi-
tization economically feasible from a transaction cost view-
point,
- to reduce certain risks inherent in the assets through
diversification, and
- to create a large enough dollar volume to make a secon-
dary market in the asset-backed securities feasible (33).
The source of payment must be separated from the origina-
tor in the event the originator becomes troubled or bankrupt.
Segregation is accomplished by transferring the assets to a
distinct entity, the SPV, that is restricted from engaging in
any activity other than owing and servicing the securitized
STATEA$D BEL GILM
IV. LA TITRISATION AUX ItTATS-UNIS
A. Lea parties A une transaction do titrisation
Les transactions de titrisation comprennent certaines
ou rensemble des parties suivantes: 1) Is propri~taire
initial des crances (,, 'originateur ou , sponsor) ;
2) Lmetteur de 'action ou de obligation ; 3) les
banques d'investissement qui apportent leur contri-
bution &la structure do Is transaction et qui souscri-
vent ou placent les actions ; 4) les agences de
notation qui 6valuent Ia qualit6 de credit de certains
types d'investissements et accordent une notation,
5) un valorisateur de cr6dt, qui fournit le support du
cr6dit par le biais d'une lettre de cr~dit, d'une garantie
ou d'autres assurances qu'il y aura une source de
fonds disponibles pour le paiement lorsqu'il sara dO
au terme du titre, 6) un ,servicer", gdneralement
l'originaleur,,, ou une personne 1i6e, qui collecte les
paiements dus au titre des crdances sous-jacentes
et, aprbs avoir retenu des frais de ,collecte,,, les
transmet aux porteurs des titres ou A leurs -trus-
tees- ; 7) un -trustee,, qui trate avec le valorisateur
de credit, lintermddiaire et 1'6metteur au nom des
porteurs de titres ; at 8) des conseils juridiques qui
participant a l'organisation de Is structure de la tran-
saction et qui peuvent fournir leurs conseils h
ragence de notation ou A d'autres, sous forme de
consultation.
B. Le m6canisme do Ia titrisation
La cr~ance devant Otre titris6e ast gdndralement une
creance productrice de revenus et le -cash flow,,
produit par cette creance eat utilis6 comme source
de financement pour les paiements A effectuer au
profit des acheteurs des actions ou obligations. La
plupart des transactions comprennent un grand
nombre de creances homogbnes rassembl6es dans
un portefeuille pour trois raisons :
- obtenir une valour de cr~ance suffisamment impor-
tante pour qua Ia titrisation soit 6conomiquement
r6alisable du point de vue du coOt de Ia transaction,
- r~duire certains risques inhrents aux creances A
travers la diversification at,
- crer un volume dollar suffisamment important
pour qu'un marche secondaire en titres sur creances
puisse 6tre institue.
La source de revenu doit 6tre distinguee de - l'origi-
nateur, dans 1'ventualitM o celui-ci connatrait des
difficultes financibres ou serait ddclarA en faillite. La
s~paration est accomplie par Ia transfert des cr~an-
ces A une entitd distincte, Ie Fonds de placement,
dont les activitds sont limit~es A Is d6tention at A Ia
 ASSET SECURITIZATION: A COMPARATIVE STUDY BETWEENf'THE UNITED STATES AND BELGIUM
gestion des cr6ances titrisees. Le Fonds de place-
ment est I'emetteur des titres et prend g~n6ralement
Ia forme Igale d'un trust ou d'une soci6te commer-
ciale, bien qu'il puisse aussi 6tre constitue en asso-
ciation.
II est par consequent necessaire de garantir en pre-
mier lieu qu'aucun 6v~nement touchant ,l'origina-
teur, ne puisse affecter le Fonds de placement (il y
est souvent fait r6f6rence comme Ia mise A rabri de
Ia faillite du Fonds de placement) et, en second lieu,
que le transfert des creances de -l'originateur,, au
Fonds de placement ne puisse tre entrave. (11y est
souvent fait r6frence comme [a creation d'une " ces-
sion veritable - des cr6ances).
1. Mattre Is Fonds de placement A I'abrido Is faillite
a) Les demandes de faiilite volontaires
ou involontaires
Si le Fonds de placement est poss6de ou contr61e
par ,,l'originateur,,, ce dernier pourra faire d~poser
par le Fonds de placement une demande de faillite
volontaire, en application de Ia section 301 du Bank-
ruptcy Code. Sauf disposition contraire des statuts,
une soci6t6 adopte une tells d6cision par un vote du
conseil d'administration. II est donc important de res-
treindre Ia possibilitA pour -I'originateur,, do faire
d~poser par le Fonds de placement une demande
de faillite volontaire.
La limitation est normalement accomplie par I'inclu-
sion dans les statuts du Fonds de placement ou dans
d'autres documents dorganisation, de clauses limi-
tant les circonstances dans lesquelles une telle
demande peut stre d~pos~e. Les statuts de nom-
breux Fonds de placement recents requi~rent le vote
d'au moins deux membres ind6pendants du conseil
d'administration. Une autre approche consiste A faire
en sorte que I Fonds de placement ne soit ni pos-
s6d6, ni contr616 par -l'originateur-. II pout par
exemple btre d6tenu par un tiers independant. Si le
Fonds do placement continue A collecter lea creances
ot a r6gler ses titres bien que ,l'originateur- ait 6t6
mis en faillite, lo tiers n'aura aucune raison de mettre
Ie Fonds de placement en faillite. Afin de mettre en
ceuvre une telle protection, le transfert des cr6ances
de ,l'originateur- au Fonds de placement ind6pen-
dant doit dtre une -cession veritable -.
Une troisi6me approche est de constituer Ie Fonds
de placement en entit6 no pouvant pas faire I'objet
d'une faillite. C'est le cas du trust, entit6 n'ayant pas
ia personnalit6 morale, g6n6ralement cr66e confor-
m~ment au droit d'un des ttats amdricains par un
d6positaire apportant des biens devant tre dtenus
par un -trustee- en application d'un accord de
"trust- 6crit entre le d6positaire ot le -trustee-. Le
d6positaire peut tre propri~taire en usufruit du bien
assets. The SPV is the issuer of the instruments and gene-
rally takes the legal form of a trust or corporation, although
such vehicle may also be partnership (34).
It is therefore necessary, first, to ensure that whatever hap-
pens to the originator cannot affect the SPV (often referred
to as making the SPV "bankruptcy-remote"), and, second,
to ensure that the transfer of the receivables from the origi-
nator to the SPV cannot be interfered with (often referred to
as creating a "true sale" of receivables) (35).
1. Making the SPV "Bankruptcy-Remote"
a) Voluntary and Involuntary Bankruptcy Petitions
If the SPV is owned or controlled by the originator (36), the
originator may have the power to cause the SPV to file a
petition for voluntary bankruptcy under section 301 of the
Bankruptcy Code (37). Unless restricted in its charter or by
laws, a corporation normally makes this decision by a vote
of its board of directors (38). It is therefore important to limit
the ability of the originator to cause the SPV to file a petition
for voluntary bankruptcy.
The limitation is normally accomplished by drafting the
SPV's charter or articles of incorporation or other organiza-
tional documents to restrict the circumstances under which
it may file it (39). The charters of many recently formed SPVs
require the vote of at least two independent members of the
board of directors in order to file a petition for voluntary bank-
ruptcy (40). A second approach is for the SPV to be neither
owned nor controlled by the originator. It may be owned, for
instance, by an independent third party (41). If the SPV
continues to collect the receivables and pay on its securities
even after the originator went bankrupt, the third party would
have no incentive to place the SPV in bankruptcy. In order
to achieve this bankruptcy-remote structure, the transfer of
receivables from the originator to the independent SPV in
bankruptcy. In order to achieve this bankruptcy-remote
structure, the transfer of receivables from the originator to
the independent SPV has to be a "true sale" (42).
A third approach is to structure the SPV as an entity that
cannot become the subject of a bankruptcy case. One such
entity is a trust (43), that is an unincorporated entity gene-
rally created under state law by a depositor contributing
property to be held by a trustee pursuant to a written trust
agreement between the depositor and the trustee. The
depositor may be the beneficial owner of the trust property,
 ASTSECURITZATI0N: ACOMPARATIVE STUDEY BETWEN THE4
UNITED STATS AND BEGIM
or the ownership of the property may be conveyed to third
parties. The trustee is responsible for managing the trust
property on behalf of the depositors (44).
Once the SPV's power to file a voluntary bankruptcy petition
is restricted, the next step is to limit the circumstances under
which creditors can force the SPV into involuntary bank-
ruptcy. A creditor cannot force an SPV into involuntary bank-
ruptcy unless the SPV meets the criteria required for filing
(45). An SPV may be protected against involuntary bank-
ruptcy by limiting both the debt that it can issue and the
number of its trade creditors (46).
b) Substantive Consolidation
Eliminating creditors does not guarantee that the SPV will
be protected from the originator's bankruptcy. An equitable
doctrine of law, known as substantive consolidation, may
allow a court, under appropriate circumstances (47), to
consolidate the assets and liabilities of the originator and
the SPV (48). Although substantive consolidation usually
arises in the context of the bankruptcy of both the originator
and the SPV, a court could order a substantive consolida-
tion even if the SPV were not in bankruptcy (49).
Courts do not order substantive consolidation lightly (50)
and have held that because substantive consolidation is an
equitable remedy, it should not be used to harm innocent
holders of securities of the SPV that is the target of the
consolidation (51).
2. Organizing a "True Sale" of the Receivables
The trustee of an insolvent seller can claim that the transac-
tion is not a "true sale" of the receivables but a "loan" from
the "buyer" to the "seller", and that the transfer of the recei-
vables to the "buyer" represents an unperfected security
interest. If the bankruptcy court agrees, the trustee can avoid
the security interest and add the receivables to the insolvent
seller's estate as its own assets (52). The buyer would then
have to share the value of the receivables with the seller's
other creditors on a prorata basis. This tactic has been called
the "trustee's attack" (53) and is made possible through the
inconsistent characterization of the transaction by the courts
and the joint application of the Bankruptcy Code and the
Uniform Commercial Code (54).
The term "true sale" most often is used in analysing whether
the transfer of receivables effectively has removed them
faisant lobjet du -trust-, ou encore Ia propri6t6 peut
6tre c6dee & des tiers. Le -trustee- est responsable
de Ia gestion du trust pour le compte des d~posi-
taires.
La capacite du Fonds de placement de demander
une faillite volontaire une fois limitde, il convieni
ensuite de restreindre les cas dans lesquels des
cr6anciers pourraient contraindre le Fonds de place-
ment &une faillite involontaire. Un cr6ancier ne peut
agir ainsi que dans la mesure oi il remplit les condi-
tions d'une telle demande. Un Fonds de placement
peut Atre proteg6 de Is faillite involontaire par ]a limi-
tation des dettes qu'il peut encourir et par Ia limitation
du nombre de ses cr6anciers.
b) La -substantive consolidation ,
:liminer les cr~anciers ne garantit pas que Ie Fonds
de placement sera protdgd de Ia liquidation de , I'ori-
ginateur-, La doctrine de Ia -substantive consoli-
dation" autorise le juge, dans les circonstances
appropri6es, & consolider I'actif et le passif de - rori-
ginateur, et du Fonds de placement. Bien que Ia
,substantive consolidation. ait le plus souvent lieu
dans le contexte d'une faillite simultande de , lorigi-
nateur- et du Fonds de placement, un juge pourrait
l'ordonner m6me si le Fonds de placement nest pas
lui-m~me en faillite.
Toutefois, les juges n'ordonnent pas Ia -substantive
consolidation, A Ia 16g&re et ont 6tabli qu'elle ne
saurait 8tre employ6e pour porter prdjudice & des
porteurs innocents de titres du Fonds de placement
qui en fait l'objet.
2. Organiser une "cession vdritablev des crdAnces
Le trustee d'un vendeur insolvable pourrait faire
valoir que Ia transaction ne constitue pas une "ces-
sion v6ritable. des cr6ances mais un -pr6t- de
- l'acheteur"- au "vendeur- et que le transfert des
cr6ances A - I'acheteur," constitue une sOret6 impar-
faite. Si Ie juge de Ia faillite radmet, I trustee peut
alors faire obstacle A Ia r6alisation de [a sOret6 et
comptabiliser les cr6ances A actif de 'acheteur
insolvable, comme s'il s'agissait de ses propres
cr*ances. Le vendeur devrait alors partager Is valeur
des cr~ances au prorate avec les autres cr6anciers
de I'acheteur. Cette tactique, qui a 6t6 nommde
-l'attaque du trustee-, est rendue possible par la
qualification contradictoire de Ia transaction donn6e
par les Tribunaux et par une application combin6s du
-Bankruptcy Code- et du -Uniform Commercial
Code-.
Le plus souvent, la notion de -cession v6ritable- est
utilise pour d6terminer si le transfert a effectivement
 ASET SECUR1'flZAT11N: ACOMPAIATNE STUDY BETWEEN THE UNITED STATES AND BELGIUM
deplac6 les cr~ances de - 'originateur,, au Fonds de
placement. IIexiste plusieurs facteurs pour d~termi-
ner si un transfert de creances donn6 constitue une
vente ou un pr~t assorti d'une s~ret6. L'6lude de ces
facteurs n'entre pas dans le champ de la presente
6tude mais il convient n6anmoins d'indiquer que
chacun de ces facteurs repose sur le critbre d6termi-
nant de 'existence d'un transfert des risques at b~n6-
fices economiques futurs au Fonds de placement et
de 'acceptation d'un tel transfert par le Fonds de pla-
cement.
C. Exigences 16gislatives at rdglementaires
La titrisation de cr6ances pose une myriade de ques-
tions juridiques se rattachant, entre autres, au droit
financier, 9 la faillite, au drolt fiscal ou encore au droit
bancaire. Les questions legislativas at r~glemen-
taires qui seront soulevees dependront d'un certain
nombre de facteurs, incluant le type de creances titri-
ses, le type de valorisation fourni, la nature de
I'metteur, le type at Is localisation des titres ainsi
qua Ia maniere dont ils sont offerts et le type de
comptabilisation et de traitement recherche.
Les deux paragraphes suivants se concentreront sur
deux questions : est-ce qua renregistrement en appli-
cation du ,Securities Act,, de 1933 (Ila Loi de 1933)
est requis at est-ce qua, du fait de 1'emission et du
transfert des creances a un Fonds de placement,
celui-ci deviant par inadvertance une ,sociotd d'in-
vestissement", au sans de ,l'lnvestment Company
Act"- de 1940 (Ia Loi de 1940) ?
1. L'Investment Company Act do 1940
La Loi de 1940 pr~voit que toute entitd ayant pour
activit6 principale la d6tention et le placement de
titres dolt, sous reserve de certaines exemptions, tre
enregistree auprbs de la Securities Exchange Com-
mission (SEC) an tent que societ4 d'investissement.
La plupart des crdances at flux do paiement sem-
blent entrer dana la d~finition du terme ,titre" au
sans de Ia Loi de 1940 dans la mesure ob ils consti-
tuent des "signes d'insolvabilite,,. Le respect de Ia
Loi de 1940 eat lourd at coOteux et est g~ndralement
considere comma impossible A mettre en aeuvre
totalement. Les transactions sont donc structurees
de manibre A entrer dens les diverses categories
d'exemptions legislatives ou r6glementaires b I'enre-
gistrement prevu par la Loi de 1940.
Les principales exceptions auxquelles il est fail
recours sont celles prevues par 'article 3 (c) 1
(exception concernant les soci6t~s d'investissement
- priv6es-), 'article 3 (c) 3 (exception concernant les
banques, les socidt6s d'assurance at les institutions
similaires) at I'article 3 (c) (5) (A) qui est le plus fre-
quemment utilis6. Cette derni~re exception exclut de
la d~finition des ,soci~t~s d'investissement, les
entites qui 6taient ,pralablement engag~es" dans
l'activitA d'acquisition at de placement de crdances
telles qua - les reconnaissances de dettes, les effets
from the originator to the SPV. A cluster of factors can be
identified that are relevant in most determinations of whether
a given transfer of receivables is a sale or a secured loan. A
study of these factors is beyond the scope of this research
(55). Nonetheless, each of these factors is indicative of whe-
ther the originator truly parted with the future economic risks
and benefits of the receivables purported to be sold, and
whether the SPV has taken on those risks and benefits (56).
C. Legal and Regulatory Requirements
Asset securitization presents myriad of legal issues pertai-
ning to securities (57), bankruptcy (58), tax (59), banking
(60), and other areas. The legal and regulatory issues that
arise will depend upon a variety of factors, including the type
of assets being securitized, the type of enhancement provi-
ded, the nature of the issuer, the type, place and manner of
the securities offering, and, the type of accounting and treat-
ment that is sought (61).
The two following sections will focus on two issues: whether
registration under the Securities Act of 1933 (the 1933 Act)
is required and whether, as a result of issuance and transfer
of receivables to an SPV, it inadvertently has become an
"investment company" within the meaning of the Investment
Company Act of 1940 (the 1940 Act)?
1. Investment Company Act of 1940
The 1940 Act provides that any entity principally engaged in
owing and holding "securities" must, subject to certain
exemptions, register with the Securities and Exchange Com-
mission (SEC) as an investment company (62). Most recei-
vables and payment streams appear to fall within the
definition of the term "security" (63) under the 1940 Act,
because they are "evidences of indebtedness" (64).
Compliance with the 1940 Act is costly and burdensome
(65), and generally considered as infeasible. Transactions
are therefore structured so as to fall within various statutory
and regulatory exemptions from the 1940 Act registration.
The principal exceptions relied on in asset securitization are
those in section 3 (c) (1) (exception for "private" investment
companies) (66), section 3 (c) (3) (exception for banks,
insurance companies and similar institutions) (67), and sec-
tion 3 (c) (5) (A) (68) which is the most frequently used.
This latter exception excludes from the definition of "invest-
ment company" entities that are "primarily engaged" in
acquiring and holding receivables that constitute "notes,
 ~ASSET SCRTZT1IM ACOMPARMEW STUDY s~wENT4 UNtTED STATES ANDfILGU
drafts, acceptances, open accounts receivable, and other
obligations representing part or all of the sales price of mer-
chandise, insurance and services" (69).
Many, but not all, types of receivables will fall under the sec-
tion 3 (c) (5) (A) exclusion including the most common place
types of receivables - trade accounts receivable - since
they clearly constitute the purchase price of merchandise
(70). Other types of receivables might not come clearly within
this exception. In some of those instances, it has been pos-
sible to obtain a "no-action" letter (71) from the SEC, which
will have the same effect as an exemption from investment
company registration.
2. Securities Act of 1933 and Securities Exchange Act
of 1934
Even if an SPV establishes exemption from registration
under the 1940 Act, it still will be subject to the 1933 Act
(72) and the 1934 Act (73) to the extent that it issues non-
exempt securities. The 1933 Act imposes standards of dis-
closure (74) and requires the filing of a registration state-
ment with the SEC in connectio-n with any public offering of
non-exempt securities (75). The 1934 Act imposes liability
for certain types of fraudulent statements or omissions and,
for certain publicly held issuers, imposes ongoing reporting
requirements (76). As the 1940 Act, exemptions are avai-
lable the study of which is beyond the scope of this research
(77). Yet, two recent significant changes in federal securities
regulation that will affect all securities offerings, including
asset securitizations, will retain our attention because of
their positive impact on the asset securitization market:
Rule 144 A (78) and Regulation S (79), both promulgated by
the SEC.
a) Rule 144 A
Effective April 30, 1990, Rule 144 A establishes an exemp-
tion from the registration requirements of the 1933 Act for
resales to "qualified institutional buyers" (80) of securities
that were not at the time of their issuance fungible with a
class of securities publicly traded in the United States.
Consequently, the Rule is expected to increase the liquidity
of the secondary market in the United States for eligible
securities and enhance the access of foreign issuers to
United States market (81). Furthermore, the secondary mar-
ket for such securities should become more liquid, resulting
in better pricing for the issuers (82).
de commerce, les acceptations, les soldes de
comptes bancaires, et autres obligations reprdsen-
tant tout ou partie du prix de vente de marchandises,
d'assurances ou de services,.
Un grand nombre de cr6ances, mais pas toutes,
tombent dans Ie champ de 'exclusion de 'article 3 (c)
(5) (A) y compris les cr6ances les plus courantes (les
cr6ances de soldes commerciaux) dons [a mesure ou
elles constituent clairement le prix d'achat de mar-
chandises. D'autres types de cr6ances nentrent pas
aussi clairement dans le champ de cette exception.
Dans cette hypothbse, et dans certains cas, i1 a 616
possible d'obtenir une lettre de non-opposition de la
SEC, qui aura le mgme effet qu'une exemption d'en-
registrement en tant que soci6t6 d'investissemenl.
2. Le Securities Act do 1933 et I1 Securities Exchange
Act do 1934
Mbme si un Fonds de placement bdn6ficie d'une
exemption d'enregistrement en application de la Loi
de 1940, il sera cependant soumis aux Lois de 1933
et 1934 dans la mesure ob il 6met des titres non
exempts. La Loi de 1933 impose des r6gles de
publicit6 et requiert Ia r6daction d'une note d'enregis-
trement aupres de la SEC en relation avec toute offre
publique de titres non exempt6s. La Loi de 1934 pr6-
voil des peines pour certains cas de notes ou d'dmis-
sions frauduleuses et pour certains 6metteurs faisant
publiquement appel A r'pargne. Elle impose egale-
ment des devoirs d'information permanents. Comme
dans le cadre de [a Loi do 1940, il existe des exemp-
tions dont rexamen serait en dehors de 'objet de la
pr6sente 6tude. Cependant deux modifications signi-
ficatives recentes des rglementations financi6res
f6derales doivent dire signal~es dans la mesure ou
elles affecteront toutes les offres de titres, y compris
les titrisations do cr6ance : la Rbgle 144 A et le
Rbglement S, tous deux promulgu~s par [a SEC.
a) La Regle 144 A
Entrde en vigueur le 30 avril 1990, la Rbgle 144 A
6tablit une exemption aux exigences d'enregistre-
ment de Ia Loi de 1933 au profit des reventes A des
,vendeurs institutionnels qualifies,, do titres qui
n'6taient pas, A Ia date do lour 6mission, assimilables
a une cat~gorie de tires publiquement 6chang6s aux
tats-Unis. Par cons~quent, la rbgle a pour objeclif
d'augmenter Ia liquidite du march6 secondaire ame-
ricain pour les titres concem~s et de favoriser I'acces
d'6metteurs 6trangers sur le march6 americain. En
outre, le marche secondaire de tels litres devrait, en
6tant plus liquide, procurer de meilleurs prix aux
6metteurs.
 ASSET SECURITZATION4 A COMPARATIVE STUDY ETWEEN THE UNItTED STATES ANDIBELGIUM
b) Le R~glement S
Entr6 en vigueur le 2 mai 1990, le Rbglement S
contient une disposition g~n~rale selon laquelle
I'article 5 de la Loi de 1933 n'est pas applicable aux
oflres at aux ventes de titres qui sont effectuees hors
des ttats-Unis et fournit deux ,paradis,, non limitatifs
dans lesquels les transactions remplissan I'ensemble
des conditions applicables seront consider~es comme
effectuees en dehors des :tats-Unis.
Les deux ,paradis. doivent satisfaire A deux condi-
tions generales. En premier lieu, l'offre et la vente
doivent constituer une -transaction offshore.. En
second lieu, aucun acte direct de promotion ne doit
&tre effectu6 aux :tats-Unis en relation avec la tran-
saction. Salon celle des trois categories A laquelle les
titres appartiennent, le ,paradis,, de r'metteur
pourra necessiter le respect de conditions addition-
nelles garantissant qua les litres offerts resteront off-
shore,
Lea titres c16ds dans des transactions offshore en
conformit6 avec le Rbglement S peuvent 6tre reven-
dus aux Ittats-Unis dbs lors qua la revente peut
b~n6ficier d'une exemption d'enregistrement en
application de la Loi de 1933. De tels titres peuvent
ainsi 6tre recddes A des ,vendeurs institutionnels
qualifies- en conformit6 avec la Rbgle 144 A.
Par cons6quent, Ie R~glement S, combin6 avec Ia
Regle 144 A, devrait faciliter lea offres de titres off-
shore, y compris celles qui sont effectu~es en concur-
rence avec des offres de titres similairas aux ttats-
Unis, ce qui permettrait d'accroTtre Ia liquidit6 du
march6.
D. Questions flscales
Trois types de transactions peuvent ftre distingu~s
sur le plan fiscal. Si le Fonds de placement emet des
valeurs obligataires sur les creances en donnant aux
ddtenteurs des titres un droit de remboursement
pdriodique en amortissement de lour investissement,
la transaction est un "pay-through,,. Si [a Fonds de
placement Amet des titres repr~sentant un int6r6t de
propri~t6 sur les cr6ances detenues par le Fonds do
placement, ta transaction est un -pass-through ". La
troisieme categorie, les - real estate mortgage invest-
ment conduit, (REMIC) correspond A la situation
dans laquelle le Fonds de placement ddtient des
pr~ts assortis d'une hypothbque immobilibre. Le trai-
tement fiscal variera selon qua la transaction est un
pay-through, un pass-through ou un REMIC.
Une fois que Ia cat~gorie est d6finie, it reste A d6ter-
miner
b) Regulation S
Effective May 2, 1990, Regulation S contains a general sta-
tement that section 5 of the 1933 Act (83) does not apply to
offers and sales of securities that occur outside the United
States (84) and provides two non-exclusive "safe harbors"
(85) under which transactions meeting all applicable condi-
tions will be deemed to occur outside the United States.
Both safe harbors (86) must satisfy two general conditions.
First, the offer and sale must constitute an "offshore tran-
saction" (87). Second, no "directed selling efforts" may be
made in the United States in connection with the transaction
(88). Depending upon which of three categories the securi-
ties belong to, the issuer safe harbor may require compliance
with certain additional conditions designed to ensure that the
securities offered come to rest offshore (89).
Securities sold in offshore transactions in compliance with
Regulation S may be resold in the United States, provided
the resale otherwise qualifies for an exemption from regis-
tration under the 1933 Act (90). Eligible securities sold in
offshore transactions may thus be resold to QIBs in accor-
dance with Rule 144 A.
As a result, Regulation S, together with Rule 144 A, should
facilitate offshore offerings of securities, including those
made concurrently with offerings of similar securities in the
United States, and thereby increase the market liquidity (91).
D. Tax Issues
Transaction structures can be divided, from a tax stand-
point, into three categories. If the SPV issues debt securi-
ties, backed by the receivables and giving holders of the
securities a claim for periodic payments in amortization of
their investments, the structure is referred to as "pay-
through". If the SPV issues securities that represent an
equity ownership in the receivables held in the SPV, entitling
holders of the securities to be paid out of collection on the
receivables, the structure is referred to as "pass-through"
(92). The third category referred to as a "real estate mort-
gage investment conduit" (REMIC), is characterized by the
SPV holding real estate mortgage loans. The tax treatment
will vary depending upon whether the particular structure is
a pay-through, a pass-through, or a REMIC (93).
Once this structure established, the issues are
 SCURTIZTIOK: A C~OMP~ARATIVE STUDY BEWEETHE UITED STATES AND BELGIUM
ASST
- whether the transfer of receivables from the originator to
the SPV will require the originator to recognize loss or gain
for tax purposes;
- the degree to which the SPV, as issuer of asset-backed
securities, itself will be subject to tax; and
- the tax treatment of investors in the securities issued by
the SPV.
1. Taxation of the Originator
The issue is whether the transfer itself constitutes a tax sale
of the receivables or is viewed as a loan secured by the
receivables (94). Only in the case of a tax sale does the
transfer result in a taxable event. Characterization of a
given transaction as a sale or secured loan for tax purposes
depends on whether there has been an effective shift of the
benefits and burdens of ownership of the receivables. The
inquiry depends primarily on the degree of shifting economic
risk (95).
If the transaction is structured as a pass-through, the recei-
vables are deemed sold for taxpurposes from the originator
to the investors. The investors, by virtue of receiving an
interest in all payments on the receivables and being sub-
ject to credit risk, prepayment risk and interest rate risk, are
deemed to bear the risks and possess the benefits of owner-
ship of the receivables (96). In a pay-through transaction,
even if the transfer of receivables does constitute a tax sale,
the originator still might be able to defer recognition of loss
or gain, at least to some extent (97).
In a REMIC transaction, taxation of the originator is gover-
ned by specific statutory requirements. The transfer of mort-
gages to the REMIC in exchange for interests in the REMIC
does not, by itself, result in the recognition of gain or loss
(98). A REMIC, however, issues two types of interests:
"regular" interests, which are essentially debt instruments
backed by the mortgage pool (99), and "residual" interests,
which represent an undivided equity or ownership interest in
the mortgage pool (100). As the regular or residual interests
are sold to investors, the originator will be required to reco-
gnize gain or loss.
2. Taxation of the SPV
The issue is whether the SPV itself will be subject to taxa-
tion on the incomes it earns. It is generally desirable to
- si le transfert des cr6ances de ,l'originateur, au
Fonds de placement exige qua ,l'originateur,,
d6clare fiscalament une parte ou un b6ndfice ;
- le degr6 auquel le Fonds de placement, 6metteur
de titres sur des crdances, lui-mime sera soumis &
l'imp6t ; et
- le traitement fiscal applicable A ceux qui investis-
sent dans lea titres 6mis par Ie Fonds de placement.
1. Imposition de aI'originateurv
La question est ici de determiner si le transfert lui-
m~me conslitue une vente fiscale des cr6ances ou
sil est consider6 comme un prft garanti par lea
cr6ances. Ce nest que dans le cas d'une vente fis-
cale quo le transfert constituera une op6ration impo-
sable. Le critbre permettant de consid6rer une tran-
saction donnde comme une vente ou un pr6t garanti
d6pendra de rexistence d'un transfert effectif des
benifices et des charges de Ia propri6t6 des
cr6ances. Catte recherche d6pendra essentiellement
du degre de transfert des risques 6conomiques.
Si Ia transaction constitue un pass-through, lea
cr6ances sont fiscalement consid~r~es comme
ced~es par ,l'originateur, aux investisseurs. Les
investisseurs recevant un inter6t sur tous lea paie-
ments des crdances et 6tant soumis A un risque de
cr6dit, A un risque de pr6paiemen et A un risque de
taux, sont consid6r6s comme assumant les risques
ot comme percevant lea b6ndfices de [a propri6t6 des
cr6ances. Dans le cadre dune transaction pay-
through, mtime si lo transfert des cr6ances constitue
une vente fiscale, - l'originateur- pourrat encore dif-
ferer Ia reconnaissance de pertes ou de b6n6fices,
du moins dans une certaine mesure.
Dans Ie cadre d'une transaction REMIC, l'imposition
de -'originateur,, est gouvernde par des exigences
Idgales sp6cifiques. Le transfet d'hypothbques au
REMIC en 6change d'int6rfits dans le REMIC
nentraine pas en tant que tel ls reconnaissance d'un
gain ou d'une porte. Un REMIC, cependant, 6met
deux types d'int6r6ts :les int6r6ts .,r6guliers, qui
sont essentiellement des instruments obligataires
garantis par Ie portefeuille d'hypothbques, ot les
int6rdts rdsiduels, qui reprdsentent une participa-
tion ou un intdrdt de propridt6 sur Ie porlefeuille
d'hypothbques. Comme lea int6r~ts r6guliers ou r6si-
duels sont vendus aux investisseurs, ,loriginateur,
devra declarer un gain ou une porte.
2. Impositiondu Fonds de placement
La question est ici de savoir si le Fonds de place-
ment lui-m~me pout 6tre soumis A 'imposition sur lea
revenus qu'il pergoit. II est g6n~ralement pr6ferable
 ASSE SEURITI0N: ACOMPARATIVE STUDY BEWEEN T14E UNtTE ST~A1TS AND BELGQIUMf
d'dviter la taxation du Fonds de placement dans la
mesure o6i le Fonds de placement ne dispose pas
d'une source de financement externe pour payer
'imp6t. Si le Fonds de placement 6met des titres de
type action, comme dons le cadre d'un pass-through,
limposition du Fonds de placement rdduirait les ren-
dements pour les d6tenteurs de titres. Afin d'6viter
une tell situation, le Fonds de placement est struc-
tur6 en tant que , grantor trust,, au sens des articles
671 A679 de I'lnternal Revenue Code. De ce fait,
I'change de crdances pour des certificats pass-
through n'est pas considdrd comme un dv6nement
g6n6rateur d'imp6t.
La vente de ces certificats est consid6rda comme
une vente d'un inter~t correspondant sur les creances
sous-jacentes, et le trust lui-m6me nest pas impose.
En revanche, les ddtenteurs de certificats sont
consid6res comme proprietaires de leurs parts res-
pectives des crdances du trust.
LI nternal Revenue Code autorise le -grantor trust,,
A tonctionner en tant qu'intermediaire non-imposable
dbs lors qua deux conditions sont remplies :
- le trustee n'a pas le pouvoir d'acqu6rir de nou-
veaux biens ou des biens de substitution ;
- avec certaines exceptions limitees, le trust ne dis-
pose qua d'une cat6gorie unique de certificats pass-
through.
Dans le cadre d'une transaction " pay-through, le
Fonds de placement ne peut constituer un -grantor
trust", non imposable dans Ia mesure ou i est oblige
de gerer activement des flux financiers pour garantir
qua ses obligations seront payees & leur terme fix6.
Pour minimiser ou 6viter imposition, les deux tech-
niques utiisees sont soit
- d'6tablir une structure sociale dans laquelle les
titres seront int6gr~s de facon Aconstituer des dettes
au sons de l'internal Revenue Code ; dans la mesure
ou l'int~rft paye par une soci6te emettrice d'obliga-
tions est totalement d6ductible, le Fonds de place-
ment qui 6met des obligations peut minimiser son
imposition ; soit
- de creer un trust proprietaire, sous forme de part-
nership, qui n'est soumis Aaucune taxation au niveau
de rentit6.
Le Fonds de placement nest pas soumis A 'imp6t s'il
constitue un REMIC. Le Fonds de placement peut
tre une soci6t6, un trust, un partnership ou simple-
ment un portefeuille de crdances ayant opte pour le
statut REMIC.
3. Imposition des participants
Si les titres 6mis par le Fonds de placement repr6-
sentent un int~r~t de propriet6 sur les cr6ances,
comme dans Ia structure , pass-through -, les d~ten-
teurs seront responsables, par laurs actions, des
gains et pertes des elements du Fonds de place-
ment. Si les tares sont des obligations, comme dans
la structure -pay-through,,, les d6tenteurs des fitres
seront imposes comme tout d6tenteur d'obligations.
"
avoid taxation of the SPV, because the SPV does not have
an external funding source to pay the tax. If the SPV issues
equity-type securities, as in the pass-through structure,
taxation of the SPV would reduce the return to the holders
of the securities (101). In order to avoid it, the SPV is struc-
tured as a "grantor trust" (102) under sections 671 through
679 of the Internal Revenue Code (103) so that the ex-
change of receivables for pass-through certificates be a
non-event for tax purposes.
A sale of those certificates is treated as a sale of a corres-
ponding interest in the underlying receivables, and the trust
itself is not taxed. Instead, the certificate holders are treated
as owners of their respective shares of the trust's assets.
The Internal Revenue Code permits grantor trust to function
as non-taxable conduit so long as two conditions are met
(104):
- the trustee does not have the power to purchase new
assets or substitute assets, and
- with limited exceptions, the trust has 66ly a single class
of passthrough certificates (105).
In a pay-through transaction, the SPV does not qualify as a
non-taxable grantor trust, because the SPV is obligated
actively to manage cash flows to ensure that its debt securi-
ties will be paid at their scheduled maturities (106). To mini-
mize or avoid taxation, the two techniques used are either
- to set up a corporation structure where the securities will
be structured so as to qualify as debt under the Internal
Revenue Code; since the interest paid by a corporationis-
suer of debt securities is fully tax-deductible, the SPV that
issues debt is able to minimize taxation (107); or
- to set up an owner trust, structured as a partnership,
which is not subject to any entity-level tax (108).
The SPV is not subject to taxation if it qualifies as a REMIC
(109). The SPV can be a corporation, trust, partnership or
simply a pool of assets that has elected REMIC status (110).
3. Taxation of the Investors
If the securities issued by the SPV represent an ownership
interest in the receivables, as in a pass-through structure,
the holders will account for their shares of the SPV's items
of income and loss (111). If the securities are debt securities,
as in a pay-through structure, the holders of the securities
will be taxed like any other holders of debt. Interest paid on
 ECRIIZ'mN. ACOMPARATIE UDYBEWO TH TEDSATES5 ABIUM
ASST
the securities will be treated as ordinary income (112). In a
REMIC, the holders of "regular interests" are treated as the
creditors of the REMIC and must include as ordinary
income, interest and any market discount to which they are
entitled (113). The REMIC's "residual interest" holders are
the owners of the mortgages and must therefore take into
account the taxable income or loss of the REMIC for that
portion of the year during which they hold their REMIC inter-
est (114).
V. SECURITIZATION IN BELGIUM
Most recently, asset-backed securities have been offered
for sale in the domestic markets of Japan (115), France
(116), United Kingdom (117) and other countries, denomi-
nated in the local currency of the country in which such offe-
rings were made. These securitizations were the result of
many of the same forces that brought about securitization
the United States, including: governmental initiatives to
encourage securiization by liberalizing laws that had made
securitized structures difficult to implement and, the adoption
of stricter risk-based capital requirements implementing the
Basle Accord guidelines (118).
Belgium provides a good example of a country where the
impetus for securitization was provided perhaps more by
the government than by market pressures. Largely in res-
ponse to the capital guidelines imposed by the European
Community Banking Directive 89/647 (119), Belgium adop-
ted a regulatory scheme (120), inspired from the French law
(121), which permits Belgian banks and other institutions to
securitize their assets through the indirect issuance of asset-
backed securities (122).
A. Parties Involved in a Securitization Transaction
The parties are essentially the same as those in an American
transaction: the originator, the issuer (123), the investors, a
rating agency (124), a credit enhancer, a servicer (125), a
trustee or custodian (126) and legal counsels. Securitization
transactions regulated by the Royal Decree are supervised
by the Banking and Finance Commission (the BFC), which
is Belgium's banking, capital markets and funds regulator.
Virtually every aspects of the transaction is subject to the
BFC's approval (127). Moreover, the Royal Decree requires
the whole transaction be controlled by an auditor (128) and
the appointment of a custodian (129).
Les int6r6ts pay6s sur les titres seront consid6r6s
comma des revenus ordinaires. Dans Is cadre d'une
transaction REMIC, les detenteurs d'int6r~ts . rdgu-
liers,, sont consideres comme des cr6anciers du
REMIC et doivent inclure tout int6rdt ou tout
escompte auquel ils ont droll dans leur d~claration
de revenus ordinaires. Les d6tenteurs d'intr6ts
,r6siduels, du REMIC sont consider6s comme les
propri6taires des hypotheques et doivent par conse-
quent prendre en compte les revenus imposables et
les pertes du REMIC pour la portion de I'annde pen-
dant laquelle ils d6tiennent leur int6r8t dans Ia
REMIC.
V. LA TITRISATION EN BELGIQUE
R6cemment, des titres sur cr6ances ont W offerts d,
la vente sur les marchds nationaux japonais, fran-
gais, britanniques et autres, oii ils 6taient exprim*s
en monnaie locale. A lorigine de ces titrisations, on
retrouve les m~mes facteurs ayant conduit a Is crea-
tion de Is titrisation aux 11tats-Unis, at comprenant :
des initiatives gouvernementales encourageant la
titrisation par un assouplissement des lois qui ren-
daient sa structure difficile & mettre sur pied, at
1'adoption d'exigences de capital, basdes sur Is
risque, plus strictes, metant en ouvre les directives
de I'Accord de Bile.
La Belgique fournit un bon example de pays obi
1'encouragement en faveur de [a titrisation a sans
doute plus ete I fait du gouvernement qua de Ia
pression du marche. Dans une large mesure en
r6ponse aux exigences en matibre de capital imposee
par la Directive communautaire bancaire 89/647, Ia
Belgique a adopt6 un sch6ma r6glementaire inspir6
du droit franrais, qui autorise les banques belges at
d'autres institutions A garantir leurs biens par I'6mis-
sion indirecte de titres sur creances.
A. Les parties A une transaction do titrisation
Les parties sont essentiellement les m~mes qua dans
une transaction am6ricaine : ,lroriginateur-, I'emet-
teur, les participants, une agence de notation, un
valorisateur de credit, un ,servicer,, un trustee ou
un d6positaire at des conseillers juridiques. Les tran-
sactions de titrisation reglement6es par I'Arr~td royal
sont supervis6es par la Commission Bancaire at
Financi6re (la CBF) qui est l'organisme r6gulateur
beige des op6rations bancaires, des march6s at des
fonds de capitaux. Virtuellement tous les aspects de
la transaction sont soumis i I'approbation de la BFC.
En outre, I'Arrht6 royal requiert que 'ensemble de la
transaction soit contr6ld par un auditeur at qu'un
depositaire soit nomme.
 ASSET SECURITZATION, ACOMPARATIVESTUDBEWE
Cette dernibre exigence provient de la Idgislation des
fonds d'investissement sur laquelle les reglementa-
tions de Fonds de placement sont fonddes. Le r6le
essentiel du depositaire est de conserver les biens
du Fonds de placement, mais cette activit est bien
moins capitale dans le cas d'un Fonds de placement
que dans le cas d'un fond d'investissement. Le depo-
sitaire a une responsabilit6 de contr6le ct de bonne
application, ce qui constitue sa tiche principale : il
dolt s'assurer que les creances et les autres dettes
sont correctement collectdes, il doit effectuer les
paiements et autres contreparties dus aux partici-
pants, et contr6ler sur la base des provisions ini-
tiales les flux financiers du Fonds de placement et le
portefeuille de cr~ances. S'il releve des variations
significatives par rapport aux pr6visions, il doit en
informer la CBF. A cot 6gard, ses devoirs sont iden-
tiques & ceux de la soci6td de gestion et de raudi-
teur, ces deux derniers 6tant 6galement requis de
contr6ler I'6volution des flux financiers et du porte-
feuille. Comme nous le verrons, ce nest pas le soul
exemple de lourdeur, et peut-6tre mdme d'6tranget6,
de ces r6glementations,
B. MWcanisme de la titrisation
Le mecanisme beige est semblable au m~canisme
am6ricain : des creances homoganes sont rassem-
bles ct transf6rees &un Fonds de placement qui, a
son tour, 6met des titres afin de lever des liquidit6s.
Cependant, la loi beige diffire de la pratique ameri-
caine lk deux egards : 1) le choix de la forme du
Fonds de placement, qui sera soit une sociit
d'investissement en crdances (ou SIC), soit un fonds
de placement en criances (ou FCP) et, 2) les forma-
lites de transfert des creances de ,l'originateur-, au
Fonds de placement.
1. Choix do la forme du Fonds do placement
a) Socidtd d'lnvestissement en Creances (SIC)
Comme aux Ittats-Unis, un Fonds de placement peut
6tre constitue en socit. La SIC est une entit6 juri-
dique ayant la personnalit6 morale qui prend la forme
soil d'une soci6t anonyme, soil, plus rarement, la
forme d'une societe en commandite par actions. La
SIC est ding~e par son propre conseil d'administra-
tion et peut dmettre des actions at des obligations.
Soumises 6 une exigence de capital minimal d'au
moins BEF 1.25 million, les actions peuvent dire
remboursables. La SIC peut 6mettre plusieurs sortes
de titres, de rang subordonn6 ou non aux autres. Au
moins une d'entre elles dolt 6tre placce par la voie
d'une offre publique en Belgique. Le nouveau regime
THE UNIlTED ST'ATES AND BELGIUM
This last requirement derives from the investment funds
legislation on which the regulations for SPVs are based.
The primary role of a custodian is to keep custody of the
assets of the SPV (130), but this activity is far less signifi-
cant in the case of an SPV than in the case of a fund inves-
ting in securities. The custodian has a monitoring and
compliance responsibility which is its main task (131): it
must ensure that receivables and other debts are duly col-
lected, make the payments owing to the investors and other
counterparties, and monitor against the initial projections,
the cash flow of the SPV and the portfolio of the receivables.
If it becomes aware of significant variations from the projec-
tions, it must report to the BFC (132). In this latter respect,
its duties duplicate those of the management company (133)
and the auditor, both of whom are also required to monitor
the evolution of the cash flow and the portfolio (134). As we
will see hereafter, this is not the only example of the heavi-
ness and sometimes of the strangeness of these regulations.
B. Mechanism of Securitization
The Belgian mechanism is Similar to the American: homo-
geneous assets are pooled together and transferred to an
SPV which, on its turn, issues securities to raise cash (135).
Yet, Belgian law differs from the American practice on two
levels: 1) the choice of the SPV's form which will be either a
"receivables investment company" (soci6t6 d'investissement
en crdances or SIC) or a "receivables investment fund"
(fonds de placement en creances or FPC); and 2) the trans-
fer's formalities of the receivables from the originator to the
SPV.
1. Choice of the SPV's Form
a) Soci6td d'lnvestissement en Cr6ances (SIC)
As in the United States, an SPV can take the legal form of a
company. The SIC is an incorporated legal entity which takes
either the form of a joint-stock company (socitd anonyme)
or, in some rarer cases, the form of a partnership limited by
shares (soci6t6 en commandite par actions) (136). The SIC
is managed by its own board of directors and may issue
shares and bonds. Subject to a minimum core capital of at
least BEF 1.25 million (137), the shares may be redee-
mable. The SIC may issue more than one series of securi-
ties, ranking as senior or junior to each other. At least one
of these must be placed by way of public offering in Belgium
 ASSET EUR&1ATON:A COMPARATIVE STUDY BETWEEN THE UNTED STATES AND BELGIM
(138). The new legal regime does not deal with transactions
subscribed to by institutional investors on a private place-
ment basis. This is surprising considering the increasing
importance of new payment streams created by private pla-
cement transactions in the United States. The regulations
should be amended in this respect.
Another unexpected element is that the Law of December
4, 1990 and the Royal Decree of November 29, 1993
contradict each other with regard to the types of securities
that may be placed publicly. The Law provides that the
shares in an SPV which have been offered publicly must be
listed on the stock exchange (139), and therefore implies
the possibility of a public placement of shares. It also says
that an SPV "may" - and thus need not - issue bonds as
well. The Royal Decree, by contrast, provides that no secu-
rities of any type other than senior bonds may be placed
publicly and consequently prohibits the public offering of
shares (140). In principle, such a contradiction between a
Law and a Royal Decree must be resolved by giving prece-
dence to the law, which ranks higher in the hierarchy of
rules, and by disregarding the Royal Decree. It remains to
be seen if the BFC, which was closely involved in the draf-
ting process of the Royal Decree, will be prepared to autho-
rize schemes which include a public offering of shares or
junior bonds.
b) Fonds de placement en crdances (FPC)
In the United States, an SPV can take the form of a trust,
which presents numerous tax advantages. Such legal form,
which is an institution specific to Common law systems is
unknown in Civil law systems. It is thus impossible, under
Belgian law, to set up a trust that serves as SPV. One may
consider the setting up of a trust abroad. Belgian law does
not prevent the securitization of Belgian assets through off-
shore SPVs to the extent that such setting-up of a trust does
not violate the fundamental provisions of its domestic legal
order. Transactions seeking funding sources outside the
domestic market may indeed prefer to opt out of the highly
regulated regime under the Royal Decree.
However, under Belgian law, an SPV can also take the form
of a FPC (141) which investors used to United States tran-
sactions based on trusts may feel more familiar with.
The FPC is an ambiguous structure with regard to its legal
form. Article 111 of the Law of December 4, 1990 provides
(142):
l6gal ne traite pas des transactions souscrites par les
investisseurs institutionnels sur la base d'un place-
ment priv6. Ceci est surprenant lorsque I'on consid6re
I'importance grandissante de nouveaux flux de paie-
ment cr6ds aux Ittats-Unis. Sur ce point, les ragle-
mentations devraient 6tre modifides.
Un autre 6lment inattendu est qua Ia Loi du 4
d6cembre 1990 et I'Arrbt6 royal du 29 novembre
1993 sont en contradiction en ce qui concerne les
types de titres pouvant 6tre 6mis publiquement. La
Loi etablit que les actions d'un Fonds de placement
qui ont 6t offertes publiquement doivent Atre enre-
gistrdes & la Bourse, ce qui rend implicitement pos-
sible un placement public des actions. La Loi pr6voit
6galement qu'un Fonds de placement , peut, - i n'y
est donc pas oblig6 - 6metire egalement des obliga-
tions. Au contraire, I'Arr6te royal tablit qu'aucun
litre d'aucune sorte, autre quo des obligations non
subordonn~es, puisse Atre 6mis publiquement et,
par consequent, prohibe l'offre publique dactions. En
principe une telle contradiction entre une Loi at un
Arr~t6 royal doit 6tre resolue par le principe de supe-
riorit6 de la Ioi qui est plus 6lev6e dans la hi6rarchie
des normes, et doil conduire A ignorer I'ArrM6 royal.
II reste cependant A d6terminer si le CBF, qui a 6t6
6troitement associd A la redaction de I'Arrdte royal,
sera prt A autoriser des schdmas qui incluent une
offre publique d'actions ou dobligations subordon-
noes.
b) Fonds de placement en cr6ances (FPC)
Aux tats-Unis, un Fonds de placement pout prendre
Ia forme d'un trust, ce qui pr6sente de nombreux
avantages fiscaux. Cette forme juridique, qui est une
institution sp~cifique des systemes de common law,
est inconnue des systhmes de Droit civil. II eat donc
impossible en droit beige, de creer un trust ayant le
r6te de Fonds de placement. La cr6ation d'un trust &
I'tranger est envisageable. Le droit beige ninterdit
pas Ia titrisation de cr6ances beiges par l'interm6-
diaire de Fonds de placement off-shore, sous reserve
qua la cr6ation de ce trust nintervienne pas en viola-
tion de dispositions fondamentales de son ordre juri-
dique interne. Las transactions utilisant une source
des fonds situ6s en dehors du march6 national peu-
vent effectivement pr~f6rer se situer en dehors du
champ d'application hautement rdglement6 de I'Arr&t6
royal.
Cependant, en droit beige, un Fonds de placement
peut 6galement prendre Ia forme d'un FPC que les
investisseurs habitu6s aux transactions am6ricaines
trouveront probablement plus familiar.
S'agissant de sa forme juridique, le FPC est une
structure ambigu6. L'article 111 de Ia Loi du 4
d6cembre 1990 prescrit qua:
 SCU~UATO-A COMPARATIVE SUDY BETWEEN THE UNITED S1"ATRSAWIUM
ASST
- Par Fonds de placement, if taut entendre le
patrimoine indivis g6re par une societ6 de ges-
tion pour le compte des participants, dont les
droits sont repr6sentds par des parts nomina-
tives ou au porteur,,.
La r~fdrence A rexistence d'un patrimoine joint, c'est-
&-dire Ia qualification de copropri~te, et Ia r~fdrence
A Ia qualification contractuelle de ce fonds sont toutes
deux inappropriles et artificielles. Les actionnaires
n'exerceni pas un droit de copropridtd sur le fonds. II
est plus vraisemblable qu'ils d6tiennent un droil indi-
rect sur les biens du fonds et qu'ils peuvent l'exercer
contre les personnes responsables de Is direction et
du dep6t du fonds (Ia societe de gestion at le depo-
sitaire). La qualification contractuelle nest pas bonne
non plus en raison de 'absence de contrat entre les
actionnaires etlasocidte de gestion ou le d6positaire
ou entre les actionnaires.
L'op~ration peut Mtre qualifiee de fiducie pour deux
raisons : Is fiducie est une institution de droit conti-
nental tr6s proche du trust, et le FPC ainspire du
trust. La question n'a pas seulement un int6r&l theo-
rique, en raison de son influence sur Ia question de
l'insaisissabilite de ses biens. Soit le FPC est qualifie
de copropriet6 avec le risque que les cr6anciers des
actionnaires effectuent des saisies sur Is FPC, soit
Ie FPC est qualifi6 de fiducie avec le risque de voir
les creanciers de Ia socidte de gestion agir de Ia
m6me manire, & moins que l'individualisation du
fonds soft clairement affirmde. Les nouvelles r~gle-
mentations nont pas pris cette question en conside-
ration mals Is devraient afin d'viter de tels problemes
pratiques dans le futur.
c) La socigt de gestion
Quelle qua soit Ia forms adopt~e par Is Fonds de
placement (SIC ou FPC), celui-ci dolt Mtre dirig6 par
une socit6 de gestion, dOment autoris~e par [a CBF.
Cette soci6t6 dolt avoir un capital d'au moins BEF
5 millions et poss der des fonds au moins 6gaux au
montant inf6rieur entre :
- une annee de frais de fonctionnement, y compris
les frais d'agences de notation et, Is cas 6chant, de
I'agent de -servicing-, et
- un pourcentage de Iavaleur du portefeuille calculd
sur une dchelle decroissante de 0,50 % pour Ia
tranche inferieure jusqu'&BEF 1 milliard, 0,25 % pour
Ia tranche inlermediaire de BEF 1 A 10 milliards, et
0,10 % pour la tranche superieure au-delA de BEF
10 milliards.
La socit6 de gestion assume Ia direction adminis-
trative et comptable du Fonds de placement et dot,
"By investment fund, it has to be understood a joint
patrimony managed by a management company on
behalf of the investors, which rights are represented by
registered or bearer shares".
Both the reference to the existence of a joint patrimony, and
thus the qualification of co-ownership, and the reference to
the contractual qualification of this fund are inappropriate
and artificial. The stockholders do not exercise a co-owner-
ship right on the fund. They are more likely to be holders of
an indirect right against the assets of the fund and to exer-
cise it against the persons liable of the management and
the custody of the fund (the management company and the
custodian) (143). The contractual qualification is not good
either because of the absence of contract between the
stockholders and the management company or the custo-
dian or among the stockholders (144).
The operation may qualify as a "fiducie" (145) for two rea-
sons: the "fiducie" is an institution that, in continental law, is
very close from the trust, and the FPC is inspired by the
trust (146). The question is not only theoretical because of
its influence on the issue of the immunity from attachment
of its assets. Either the FPC is qualified as a co-ownership
with the risk of the stockholder's creditors levying on the
FPC which the stockholders are co-owners of. Or the FPC is
qualified as a "fiducie" with the risk of seeing the manage-
ment company's creditors act the same way, except if the
individualisation of the fund is plainly affirmed. The new
regulations did not take this issue into account but should
do so in order to avoid such important practical problems in
the future.
c) The Management Company
Whatever is the form taken by the SPV (SIC or FPC), it has
to be managed by a management company (soci6t6 de
gestion) duly authorised by the BFC (147). It must have a
capital of at least BEF 5 million, and own funds at least
equal to the smaller of:
- one year of operating expenses, including the fees of the
rating agency and the servicing agent if any and
- a percentage of the value of the portfolio, calculated on a
sliding scale at 0,50 % of the first tranche up to BEF 1 bil-
lion, 0,25 % of the tranche from BEF 1 to 10 billion, and
0,10 % of the tranche above BEF 10 billion (148).
The management company provides the administrative and
accounting management of the SPV and must, during the
 ASSEMT CRZAIOE A COMPARAIVE STUDY BETWEEN THE UNITED STATES AND BELGIUM
life of the transaction, publish annual and quarterly reports
about it (149). It may manage more than one SPV but can-
not have any other activities (150). It may in principle not be
affiliated with the originator except if it can evidence that it is
sufficiently independent from the originator (151), that is
adequately staffed and organized in order to perform its
duties independently and in the best interests of the inves-
tors (152). The remaining question is how to prove it. Neither
the Law nor the Royal Decree provide an answer.
Another issue is the overlap between the respective roles of
the management company and the board of directors of an
SIC, both supplied with a decision power on the manage-
ment of the SPV. To avoid such conflict of interests, a pri-
mary solution could consist in drafting the SIC's articles of
incorporation to delegate some of its power to the manage-
ment company. A second solution could be to appoint the
management company as a member of the board of direc-
tors of the SIC and to give it the role of managing director. A
third and more radical solution could be to limit the creation
of a management company where the SPV takes the form
of a FPC which, by definition, does not have a board and
which would be managed exclusively by the management
company.
2. The Transfer's Formalities of the Receivables
As in the American mechanism, the receivables have to be
transferred from the originator to the SPV. The issue in
Belgian law is not whether this transfer constitutes a "true
sale" of the receivables but whether this transfer complies
with the formalities set forth in article 1690 of the Civil Code
to be valid against third parties, including the account debtor.
a) Article 1690 of the Civil Code
As originally drafted, article 1690 provided that a transfer of
receivables could be valid against third parties only by one
of two methods: notification of such transfer to the account
debtor made by bailiff or, explicit acceptance of such transfer
by the account debtor in a notarial deed. Both procedures
were costly and cumbersome and have been among the
principal roadblocks to the development of the Belgian secu-
ritization market. This is no longer the case since the new
Law of July 6, 1994 modified article 1690 (153).
As redrafted, article 1690 no longer requires either notifica-
tion by bailiff or execution of a notarial deed. Instead, the
Law divides third parties into two categories and specifies
pour la dur6e de la transaction, publier des rapports
annuels et trimestriels i propos de cette direction.
Elle peul diriger plus d'un Fonds de placement mais
ne peut avoir aucune autre activitd. Elle ne peut en
principe Atre affili6e it ,l'originateur,,, sauf si ella
peut apporter la preuve qu'elle en est suffisamment
independante, qu'elle poss de une organisation et
un personnel addquat lui permetlant d'ex6cuter seas
obligations independamment et au mieux des int~r~ts
des participants. Reste [a question de savoir com-
ment cette preuve doil 8tre apport6e. Ni la Loi ni
I'Arr&t royal napportent de r6ponse.
Une autre question rsulle du compromis entre les
r6les respectifs de la societ6 de gestion et du conseil
d'administration d'une SIC, tous lea deux ayant un
pouvoir de ddcision sur la direction du Fonds de pla-
cement. Pour 6viter les conflits d'int6r6ts, une pre-
miere solution pourrait consister A rddiger les statuts
de la SIC de maniere A del6guer certains de ses pou-
voirs A la soci~t6 de gestion. Une deuxihme solution
pourrait 6tre de dsigner la socidtd de gestion comme
membre du Conseil d'administration de la SIC at de
lui confier le role de President directeur g6n6ral. Une
troisieme solution, plus radicale, serait de limiter la
creation d'une soci6te de gestion au cas ob le Fonds
de placement prend la forme d'un FPC qui, par d6fi-
nition, n'a pas de conseil, et qui serait dirig6 exclusi-
vement par Ia socit6 de gestion.
2. Los formalitds do transfert des crdances
Comma dans le syst6me am6ricain, les cr6ances
doivent tre transf6rdas de -l'originateur,, au Fonds
de placement. La question essentielle en droit beige
n'est pas de savoir si ce transfart constitue une
-cession v6ritable,- de cr6ances mais de d6terminer
si le transfert est conforme A 'article 1690 du Code
civil pour qu'il puisse dtre opposable aux tiers, y
compris au d6biteur.
a) Article 1690 du Code civil
Dans sa version d'origine, I'article 1690 6tablissait
qu'un transfert de cr6ances ne pouvait tre opposable
aux tiers qua de deux manikres : par une signification
par huissier du transfert au d6biteur ou, par I'accep-
tation explicite de ce transfert par le ddbiteur par acte
authentique. Ces deux procedures, lourdes at coO-
teuses, ont constitu6 I'un des principaux obstacles au
d6veloppement du march6 beige de la titrisation. Ce
nest plus le cas depuis que la Loi du 6 juillet 1994 a
modifi6 I'article 1690.
Ainsi modifi6, 'article 1690 ne requiert plus la signifi-
cation par huissier ou 1'tablissement d'un acte
authentique. D6sormais la Loi distingue deux cat6-
 AS==RMZA1ON.A COPARATE TU~DBEWE TIHm JfftTpSTATESAND OUW41UR
gories de tiers pour lesquels elle d6finit les crit6res
d'opposabilite : pour les tiers autres que le d6biteur,
le transfert de cr6ances serait parfait par la signature
de I'accord da transfert concern ; par le d6biteur, le
transfert serait parfait A compter du moment soit de
la r6ception par Is d6biteur de la notification, soit de
Ia reconnaissance du transfert par Is d6biteur, sui-
vant 1'6v6nement qui se produit le plus t6t.
Aussi longtemps qua le transfer n'a pas 6t6 notifi6
au d6biteur, ou que celui-ci ne ra pas reconnu, le
dibiteur de bonne foi peut valablement payer le
cidant. De la m6me manire, tout acte juridique
effectue par le dibiteur vis-a-vis du cidant lier
I'acquereur. Apres notification ou reconnaissance, le
d6biteur no peut invoquer a lencontre de racquereur
une circonstance qui aurait donnd lieu &extinction &
I'encontre du cidant. En outre, si un cidant a trans-
fer6 la mime cr6ance A plus d'un acqudreur, [a pre-
firence sera donn6e A I'acquireur de bonne foi qui
a notifi6 [e premier le d6biteur du transfert ou obtenu
le premier du dibiteur la reconnaissance du trans-
fert.
b) Modifications cons6quentes
L'article 119 ter de Ia Loi du 4 dicembre 1990 a 6t6
modifi6 afin de prdciser qu'un transfert de cr6ances
A ou par un Fonds de placement nest soumis ni A
'article 1328 du Code civil, ni d I'article 26 de la Loi
du 12 juin 1991 sur les prts A la consommation. Ces
modifications limities au droit regissant les Fonds
de placement sont importantes dans a mesure ob le
premier article aurait requis I'enregistrement de
I'accord de transfert pour rendre sa date certaine (si
le cedant nest pas une personne exergant une acti-
vite commercials telle que definie par le Code com-
mercial) at le deuxieme article aurait requis une
notification par letire recommand6e du transfert d'un
prit A la consommation au dibiteur.
L'arlicle 52 de la Loi du 4 ao~t 1992 sur les pr6ts
hypothicaires a dgalement t6 modifi afin de pr6-
voir qua lorsqu'une crdance, garantie par une hypo-
theque, east transfirie A ou par un Fonds de place-
ment, i nest pas nicessaire qua ce transferl soit
effectui par acta notari6 ou que racte notari6 enre-
gistr6 soit 6marg6. Au contraire les articles 1690 et
1691 du Code civil seront d'application exclusive.
L'article 52 n'empiche plus un acquireur de mettre
en ceuvre rhypotheque sous-jacente. II est suppose
que racquireur a un tel droit de r6alisation de I'hypo-
thique. Cepandant, A la requite d'un tiers, le cedant
dol fournir les informations concernant lidentitI do
I'acqu6reur.
the criteria for perfection with respect to each category: for
all third parties other than the account debtor, the transfer of
receivables will be perfected merely by execution of the
relevant agreement to transfer; for the account debtor, the
transfer will be perfected from the earlier of the account
debtor's receipt of notification of the transfer (154) or his
acknowledgement of it.
As long as the transfer has not been notified to the account
debtor, or acknowledged by him, the bona fide account deb-
tor can validly pay the assignor. Similarly, any legal act
effected by such account debtor vis-,-vis the assignor will
be binding upon the assignee. After the notification or ack-
nowledgement, the account debtor cannot invoke against
the assignee any circumstance which would have given rise
to set-off against the assignor. Moreover, if an assignor has
transferred the same receivable to more than one assignee,
preference will be given to the bona fide assignee who first
notified the account debtor of the transfer or obtained the
account debtor's acknowledgement of the transfer.
b) Related Amendments
Article 119 ter of the Law of December 4, 1990 has been
amended to provide that an assignment of receivables to or
by an SPV will be subject neither to article 1328 of the Civil
Code nor to article 26 of the Law of June 12, 1991 on the
consumer loans. These amendments limited to the SPV's
Law do make sense to the extent that otherwise the former
article would have required, for purpose of fixing its date,
registration of the agreement to transfer (if the assignor is
not a person that engages in commercial activities as defined
in the Commercial Code), and the latter article would have
required notice of the transfer of a consumer loan by regis-
tered mail to the account debtor.
Article 52 of the Law of August 4, 1992 on mortgage loans
has also been amended to provide that when a receivable
secured by a mortgage is transferred to or by an SPV, it will
no longer be necessary either to effect such transfer by
means of notarial deed, or to indicate such transfer by
making a marginal notation on the registration of the origi-
nal notarial deed. Instead, articles 1690 and 1691 (155) of
the Civil Code will apply exclusively, article 52 no longer
prevents an assignee from foreclosing on the underlying
mortgage. It is assumed that the assignee has such right to
foreclose. However, at the request of a third party, the assi-
gnor must provide information with respect to the identity of
the assignee.
 ASSET SEC URITMATION; A COMPARATIVE STUDY BETWEEN THE UNtTEV STATES AND BELCUU11101
If, in theory, the removal of these impediments to the trans-
fer of receivables is an important legal step for further deve-
lopment of the Belgian asset-backed and mortgage-backed
securities market, in practice, and like in many countries
where securitization is better developed, most securitization
transactions can be expected to proceed without any form
of notice to the various account debtors. Originators are
often reluctant to notify their debtors that "they" have been
sold to a third party, for perfectly sound commercial reasons
(156). No notice is therefore given to them, the originator
continues to collect the receivables as servicer for the
account of the SPV, and the commercial relations between
the originator and its debtors remain unaffected (157).
It is only if, during the life of the transaction, the credit-
worthiness of the originator deteriorates to such a point that
it can no longer safely be trusted to act as servicer that a
third party will be appointed as substitute servicer and that
the debtors will at that time be notified of the assignment
and of their obligation to make all future payments to the
substitute servicer.
C. Other Regulatory Aspects
We saw that, in the United States, the 1933 Act, the 1934
Act and the 1940 Act require an SPV, under specific circum-
stances, either to file a registration statement with and pro-
vide ongoing reports to the SEC, or to register with the SEC
as an investment company. We also noticed that those Acts
provided several possibilities of exemptions that allow an
SPV to avoid these costly and time-consuming formalities.
Moreover, the new Rule 144 A and Regulation S, by offering
new possibilities of exemptions, can be interpreted as regu-
lations reducing still more the weight of these formalities
(158).
In Belgium, the new regulations adopted the opposite pro-
cess and vested the BFC with extensive powers to control
every aspect of a securitization transaction. The first requi-
rement is, prior the beginning of any transaction, the regis-
tration of the SPV with the BFC (159). Its approval is then
required with regard to 1) the identity and suitability of the
various parties involved, that is the management company
and the members of its board of directors, the custodian and
the auditor, 2) the cash flow forecast, the rating agency's
reports, the various draft agreements between the SPV, the
custodian, the rating agency and the collector, the mandatory
Si, en th~orie, Ia lev6e de ces obstacles au transfert
de cr6ances a dtd une dtape juridique importante
pour le d6veloppement futur du march6 beige des
titres sur actifs et hypoth&ques, en pratique, at
comma dons de nombreux pays ob Ia titrisation s'est
mieux d6velopp6a, Ia plupart des transactions de
titrisation seront probablement effectu6es sans
aucune forme de notification aux divers d6biteurs.
Les originateurs, sont souvent peu dispos6s A
notifier leurs ddbiteurs qu'ils ont 6t6 transf6r6s A un
tiers pour des raisons commerciales. Aucune infor-
mation ne leur 6tant donc donn6e, ,l'originaleur,
continue A collecter les cr6ances en tant qua servi-
car- pour le compte du Fonds de placement, at lea
relations commerciales entre ,l'originateur, at ses
d6biteurs ne sont pas affect6es.
Ce n'est qua si, pendant la dur6e de Ia transaction, le
cr6dit de "loriginateur, se d6t6riore &tel point qu'il
ne puisse plus lui tre fait confiance pour agir en tant
qua -servicer,,, qu'un tiers sera nomme en tant qua
substitut at qua les debiteurs seront notifies de
'existence de Ia cession at de leur obligation d'effec-
tuer tous les paiements futurs au substitut du ,,servi-
cer ".
C. Autres aspects r6glementaires
Nous avons vu qu'aux ttats-Unis, les Lois de 1933,
1934 at 1940 requibrent dens des circonstances par-
ticuli~res qua le Fonds de placement, soil d6pose
une note d'enregistrement at fournisse des rapports
A la SEC de fagon continue, sot proc6de A un enre-
gistrement auprbs de la SEC en tant qua soci6t6
d'investissement. Nous avons 6galement relev6 qua
ces Lois fournissaient plusieurs possibilit~s d'exemp-
tion autorisant un Fonds de placement A 6viter ces
formalil6s lourdes et coOteuses. En outre, Is nouvelle
R~gle 144 A at le nouveau Rbglement S, en offrant
de nouvelles possibilites d'exemption, peuvent 6tre
considdrds comma des rdglementations rdduisant
encore le poids de ces formalitds.
En Belgique, lea nouvelles r6glementations ont
adopt6 I proc~d6 inverse at ont conf6r6 A Ia CBF
des pouvoirs 6tendus afin de contr~ler tous lea
aspects d'une transaction de titrisation. La premiere
exigence est, avant le d6but de toute transaction,
renregistremrent du Fonds de placement A la CBF.
Son approbation est aors requise en ce qui conceme
1) lidentite des parties concern6es et Ia pertinence
de ce choix, & savoir Ia soci6tA de gestion at les
membres de son conseil d'administration, Ie d6posi-
taire at rauditeur, 2) leas prdvisions de flux de liquidi-
t6s, les rapports de ragence de notation, lea divers
 ASSET SECURITIZATION: A COMPARATIVE STUDY BETWEEN THE UNIT ED STATES AND BELGIUM
projets d'accords entre le Fonds de placement, ]a
depositaire, l'agence de notation at le collecteur, le
prospectus obligatoire devant btre publid par le
Fonds de placement pour toute transaction de publi-
cation et les documents promotionnels concern6s, la
valorisation de crdil offerte et, 3) toute offre publique
en Belgique de titres 6mis par un Fonds de place-
ment 6tranger.
Ces procedures d'approbation sont non seulement
longues mais aussi on6reuses. Des frais annuals
doivent en effet tre verses a la CBF. Is sont calcules
sur une base de 0,75 points du total des actifs dte-
nus par le Fonds de placement & ]a fin de 'annde,
plus une base da 7,5 points du montant brut des pla-
cements an titres effectu6s sur le marche primaire
beige pendant l'ann6e. Ceci repr~sente un coOt pro-
hibitif pour des Fonds de placement se finanqant au
moyen de titres commerciaux a court terme pour les-
quels I'arrivde de chaque dchdance donnerait A nou-
veau lieu aux pr6lvements de 7,5 points.
Les caracteristiques d'un Fonds de placement beige
correspondent plut6t bien , la pluparl des principes
sous-jacents A la titrisation : la structure permet de
se mettre i I'abri du risque d'insolvabilit6, elle
encourage la relocalisation du risque A travers des
m6thodes de valorisation du credit, at ells permet a
,,l'originateur,, de retirer des actifs de son bilan,
r~duisant d'autant les exigences de capital qui
s'imposent A lui. Mais si ce cadre r6glementaire
repr~sente une incitation significative pour [a titrisa-
tion beige, comment la rdconcilier avec le r6le de la
CBF ? Cas proc6dures d'approbation lourdes et co0-
teuses ne constitueront-elles pas un inconvdnient
majeur pour le developpement du march6 de la titri-
sation ? Comment expliquer ta contradiction entre un
all6gement des formalitds de transfert des cr6ances,
qui accrolt la circulation d'actifs at facilite la crdation
d'un marche beige de la titrisation, at un ralentisse.
ment de son developpement par l'imposition de
telles proc~dures d'approbation at de contr61e? Est-
ce qu'il na s'agirait pas plus d'une incitation & la
cr6ation de structures offshore qua d'une incitation &
la creation de structures nationales ?
D. Questions fiscales
Nous avons vu qu'aux tats-Unis les structures de
transaction 6taient divisees en trois categories (pay-
through, pass-through at REMIC), chacune d'elles
6tant soumise h un traitement fiscal diff6rent. D'un
point do vue fiscal, cette distinction n'est pas effec-
tu6e an droit beige. Une fois qua la transaction de
titrisation est structur~e, les questions se limitent &
I'imposition de ,l'originateur-, du Fonds de place-
ment at des participants. Une autre question an droit
beige est de savoir si la TVA est applicable aux frais
pay6s par le Fonds de placement.
prospectus to be issued by the SPV for any securitization
transaction and the related promotional documents, the cre-
dit enhancement offered (160), and 3) the placement by way
of public offering in Belgium of securities issued by foreign
SPV (161).
Not only are these approval procedures time-consuming, but
also are they onerous. Annual fees are indeed payable to
the BFC. They are calculated at the rate of 0,75 (162) basis
points of the total assets held by the SPV at year-end, plus
7,5 basis points of the gross amount of primary market pla-
cements of securities made in Belgium during the year. This
is prohibitively expensive for SPVs funding themselves with
short term paper, of which each roll-over issue would give
rise to a renewal of the 7,5bp charge.
The characteristics of a Belgian SPV are responsible to
many of the basic principles underlying securitization: the
structure provides for the segregation of insolvency risk; it
encourages risk reallocation through credit enhancement
devices; and it permits the originator to remove assets from
its balance sheet, thereby reducing the originator's capital
requirements. But if this regulatory scheme represents a
significant impetus for Belgian securitization, how can we
reconcile it with the role devoted to the BFC? Will these
cumbersome and costly approval procedures not be a major
drawback to the development of the securitization market?
How can the contradiction between the fact of alleviating
the receivables transfer formalities which increases the cir-
culation of assets and facilitate the creation of a Belgian
securitization market, and the fact of slowing its develop-
ment by imposing such control and approval procedures be
explained? Is this not an incentive to create offshore struc-
tures rather than domestic structures?
D. Tax Issues
We saw that in the United States, transaction structures
were divided into three categories pay-through, pass-through
and REMIC - each of them being subject to a different tax
treatment. From a tax standpoint, this distinction is not made
in Belgian law. Once a securitization transaction is structu-
red, the issues are the same as in the United States, that is
the taxation of the originator, the SPV and the investors.
Another issue under Belgian law is whether the value-added
tax is chargeable on fees paid out by an SPV.
 COPARAIVESTUD BEWEEN THE UItTED STATS AND BELIU*M
ASSE SEURITZATON:
1. Taxation of the Originator
The sale of a portfolio of receivables may result for the ori-
ginator in an acceleration of its taxable profits. If the portfolio
is sold to the SPV at a price which exceeds its book value
(163), there will be an early recognition of profits and this
will be taxable. If, by contrast, the portfolio is sold at a dis-
count to its book value (164), the issue of whether the dis-
count is a tax deductible loss is quite delicate and depends
on the particular characteristics of the transaction.
2. Taxation of the SPV and the Investors
The issues are whether the SPV is subject to the corporate
income tax, and whether the SPV's interest coupons paid
out to the investors are subject to the withholding tax.
a) Corporate Income Tax
SICs and FPCs benefit from the same tax regime as invest-
ment funds and are not subject to the 0,6 % annual tax on
net assets. Moreover, they are exempt from any income tax
on their profits (165). SICS are, in theory, subject to corpo-
rate income tax at the ordinary rate of 40,17 % but their
taxable profit is calculated in such a way that it is almost
invariably nil. The goal of the law is clear: Belgian legislation
does not require that these legal entities be used as securi-
tization vehicles, but they were created as tax neutral
vehicles to appeal to parties considering these structures
and the clear advantages they offer (166). This tax neutral
treatment also exists with regard to withholding tax.
b) Withholding Tax
FPCs are meant to be transparent for the application of
withholding tax: interest payments made by the debtors to
the SPV are subject to withholding at the rate of 13.39 %
(167), but interest paid out is exempted from tax. This makes
FPC very attractive structures for the securitization of
assets, such as trade receivables, which do not carry inter-
est. There is no withholding tax on the incoming flows of
cash nor on the outgoing payments to investors. When with-
holding tax is due on interest collected by the SPV, in theory,
each and every one of the debtors should withhold tax from
the payments it makes to the FPC, file a return and pay the
tax to the authority. The tax authorities should not enforce
the rules in this respect as long as the servicer of the tran-
saction arranges for paying the tax on the aggregate amount
received.
1. Imposition de I'orlginateur#
La vente d'un portefeuille de cr6ances pout entrainer
pour ,l'originateur- une augmentation de sea b~n6-
ices imposables. Si le portefeuille est vendu au
Fonds de placement A un prix sup6rieur &sa valeur
comptable, i1y aura une d6claration de b~nfices et
ceux-ci seront imposables. Si, au contraire, le porte-
feuille est vandu pour une valeur inf~rieure, Ia ques-
tion de savoir si la difference constitue une perte
d~ductible est relativement d6licate et depend des
caracteristiques particulibres de la transaction.
2. Imposition du Fonds do placement
ot des participants
IIfaut determiner si le Fonds de placement est sou-
mis A I'impt sur lea socidt6s, at si les coupons
d'int~r6ts du Fonds de placement pays aux partici-
pants sont soumis au prelevement libratoire.
a) Imp6ts sur les socidt~s
Les SIC et lea FPC bdnficient du m~me r6gime fis-
cal en tant qua Fonds de placement et no sont pas
soumis A l'imp6t annual de 0,6 % sur lea actifs nets.
En outre, ils sont exempt~s de tout imp6t sur lea
soci~tds at sur leurs b~n6fices. Les SIC sont, en
thdorie, soumises A l'imp6t sur lea soci6t6s au taux
normal da 40,17 % mais leur profit imposable est
calculA d'une telle maniere qu'it est presque toujours
nul. L'objectif du legislateur est clair : la legislation
beige nimpose pas qu'il soit recouru A ces antit~s
juridiques en tant qua v~hicules de la titrisation, mais
ils ont 6t6 cr66s en tant qua v6hicules fiscalement
neutres pour inciter lea parties A considerer ces
structures at lea avantages qu'elles offrent. Ce traite-
ment fiscal neutre s'applique 6galement en ce qui
concerne le pr~compte mobilier.
b) Le pr61 vement lib6ratoire
Les FPC sont censes tre transparents pour I'appli-
cation du prdlbvement lib6ratoire : le paiement
d'int6r~ts effectu6 par les d~biteurs au Fonds de pla-
cement sont soumis A une retenue A la source au
taux de 13,39 %, mais lea inter~ts revers6s sont
exempt6s. Ceci rend lea FPC trbs attirants pour la
titrisation d'actifs, comme lea effets commerciaux,
qui ne portent pas intdrit. II n'y a pas de prel~ve-
ment sur lea flux entrant ni sur les paiements sortant
aux participants. Lorsqu'une retenue A la source est
due sur lea int6rbts collectds par le Fonds de place-
ment, an th6orie, chacun des d6biteurs devrait rete-
nir le prel~vement sur les paiements qu'il effectue au
FPC, remplir un formulaire et regler le prdlbvement A
I'Administration fiscale. Catte derniere ne devrait
cependant pas metire en oauwe lea dispositions dans
ce cas, aussi longtemps qua le servicer, de la
transaction accepte de payer Ia pricompte sur le
montant total reu.
 ASST
ECRIZIOL: A COMPARATVE STDBEWN
n.5THENT~EDSATES AN
Les SIC sont plus complexes. Les paiemenis d'int6-
r6ts verses au Fonds de placement sont exemptes
de prdcompte mobilier. Les revenus d',, actions , ver-
sds sont soumis A la retenue h Ia source au taux de
13,39 % mais if existe une exemption en faveur des
participants non rsidents. Les revenus d'obligations
6mises par une SIC sont soumis A retenue au taux
de 13,39 % mais il existe une exemption en faveur
des institutions financibres nationales at, dans la
mesure oO les obligations sont enregistrdes et dete-
nues par les m~mes participants entre deux dates
de coupon, des participants non r~sidents,
3. La Taxe sur la Valeur Aoutde (TVA)
Pendant son existence un Fonds de placement
r~glera differentes sortes de frais. Toute TVA appli-
cable &ces frais sera nette puisque le Fonds de pla-
cement ne peut r6cupdrer Ia TVA payee. Le taux
applicable est actuellement de 20,5 %.
Le prix de transfert des cr~ances vendues par -I'on-
ginateur,, au Fonds de placement nest pas soumis
h la TVA Lea derniers frais r~gl~s A ,l'originateur,,
dans le but d'extraire les profits accumul~s dana le
Fonds de placement, s'ils sont suffisamment docu-
ment~s en tant que frais d~f~r~s faisant parlie int6-
grante de prix de transfert, peuvent egalement
6chapperA la TVA.
Les frais soumis A Ia TVA sont lea frais de gestion at
de ,servicing-, lea frais de collecte rdglds au "ser-
vicer -, at lea frais de dep6t.
V. DtVELOPPEMENTS FUTURS ET CONCLUSION
La titrisation est en train de devenir un ph~nomene
de plus en plus global. Les raisons principales sont :
- son d6veloppement en Europe de I'Ouest at de
'Est et les mutations dana roffre at la demande de
capitaux qui en rsulteront,
- I'adoption des directives d'6quilibre du capital de
I'Accord de Bhle, at
- I'assouplissement des restrictions juridiques en
dehors des Itats-Unis qui avaient au d~part rendu Is
titrisation d'actifs difficile, voire m~me impossible a
utiliser comma methode de financement.
La prochaine phase d'innovation aux Ittats-Unis
devra rdpondre aux mutations de l'environnement
6conomique et juridique qui crdent un besoin pour
les banques, les compagnies d'assurances at les
autres institutions financi~res d'etre mieux capitali-
ELGIUM
SICs are more complex. Interest payments coming into the
SPV are exempted from withholding tax. Income paid out
on "shares" in a SIC is subject to withholding tax at the rate
of 13,39 % (168), but there is an exemption in favour of non
resident investors (169). Income paid on bonds issued by a
SIC is subject to a 13,39 % withholding tax, but there is an
exemption in favour of domestic financial institutions and,
subject to the bonds being kept in registered form and being
held continuously by the same investor between two cou-
pon dates, non-resident investors (170).
3. Value-Added Tax (VAT)
During its existence, an SPV will pay various types of fees.
Any VAT chargeable on these fees will be at net cost, as the
SPV is not entitled to recover input VAT. The applicable rate
is currently 20,5 %.
The transfer price of the receivables sold by the originator
to the SPV is not subject to VAT (171). The final fee paid
out to the originator in order to extract profits accumulated
in the SPV, if adequately documented as being a deferred
and contingent part of the transfer price, can escape the VAT
as well (172).
The fees subject to the VAT are the management and servi-
cing fees (173), the collection fees paid to the servicer (174),
and the custody fees (175).
V. FUTURE DEVELOPMENTS AND CONCLUSION
Securitization is becoming an increasingly global phenome-
non. The main reasons are:
- its development in Western and Eastern Europe and the
shifts in international supply and demand of capital that will
result,
- the adoption of the Basle Accord capital adequacy guide-
lines, and
- the relaxation of legal restrictions outside the United
States that had previously made asset securitization difficult
or even impossible to use as a financing method.
The next phase of innovation in the United States will be in
response to changes in the economic and legal climates that
create a need for banks, insurance companies and other
financial institutions to become better capitalized, and for
 AS$ETSECURMZATHM: A COMPARATWE STUOY SEMEN THE uNiTIED'STATESOM SELCAIM

the end users of capital to raise funds more efficiently by
using securitized structures to access the capital markets
directly.
Although Belgium recently created the legal framework to
make securitization possible, its development could be hin-
dered by a number of financial and technical constraints
inherent in the marketplace (176) and most particularly:
- the high level of savings of the Belgian population (and
the success of the financial institutions in collecting these)
which has, to date, given the banks a continuous flow of
relatively cheap retail funding (177);
- the incapacity of computer systems of most financial ins-
titutions to provide the level of data and information gene-
rally required in a securitization transaction;
- the lack of reliable information about the performance of
potentially securitizable assets; and
- the lack of standardization of the underlying assets (no
standard lending guidelines, no standard application forms
or documentation...).
The overall approach to securitization of the government and
the BFC is yet constructive and forward-looking, although
the BFC's power of controlling all aspects of such transac-
tions is too heavy. Accordingly, with a ready supply of assets
suitable for securitization and an increasing realization by
corporates, banks and other financial institutions of the
advantages of securitization, there is confidence that the
securitization market of Belgian originated assets will be
s~es at pour leasutilisateurs des capitaux de lever
des londs de maniere plus efficace en utilisant des
structures titrisdes pour acc6der directement aux
march6s de capitaux.
Bien qua Is Belgique ait r6cemment cr46 un cadre
juridique rendant Is titrisation possible, son develop-
pement pourrait dire frein6 par un certain nombre de
contraintes financi~res et techniques inh6rentes au
marche et plus particuli6rement :
- le niveau 6leve d'6pargne de Is population beige
(at le succbs des institutions financibres pour Is col-
lecter) qui a, & ce jour, fourni aux banques un flux
continu de fonds relativement bon march6,
- 'incapacit6 des syst6mes informatiques de Ia plu-
part des institutions financi~res Afournir le niveau de
donn~es et dinformation generalement requis dans
une transaction de titrisation ;
- I manque d'information fiable 6 propos de Is rda-
lisation d'actifs potentiellement titrisables, et
- le manque de standardisation des actifs sous-
jacents (absence de directives standard de prft, de
formulaires ou de documentation standard...).
L'approche globale du gouvernement et de Is CBF
pour Ia titrisation est cependant constructive at pro-
gressiste bien que le pouvoir de la CBF de contr6ler
tous les aspects de ce type de transaction sot trop
developp6. Par cons6quent, avec une fourniture
rapide d'actifs susceptibles d'6tre titris~s, et avec
une meilleure r~alisation par les soci6t6s, banques
at autres institutions financieres des avantages offerts
par Is titrisation, on pout raisonnablement esp6rer
qu'un march6 de Is titrisation de valeurs d'origine
beige voit le jour, peut-Atre pas dans un futur imm6-
diat, mais A tout le moins dans Is moyen terme.

established, perhaps not in the immediate future but in the

medium term.

Endnotes

1. Joseph C. Shenker & Anthony J. Colletta, Asset Securitization: Evolution, Current Issues and New Frontiers, 69 Tex. L. Rev. 1369,
1373 (1991) (stating that no legal meaning or uniform definition has emerged forsecuritization). Peter L. Mancini, Bankruptcy and the UCC as
Applied to Securitization: Characterizing a Mortgage Loan Transfer as a Sale or a Secured Loan, 73 B. U. L. Rev. 873 (1993).
2. Shenker & Coletta, supra note 1, id. See also 1 Tamar Frankel, Securitization: Structured Financing, Financial Asset Pools, and Asset-
Backed Securities § 1.1, at 3 (1991) (stating that securitization "stands for the massive movement since the 1970s to transform illiquid debt into
securities").
3. Shenker & Collette, supra note 2, at 1374-75.
4. Laura Jereski, Alice in Mortgageland, Forbes, Mar. 1, 1993, at 46 -stating that the mortgagebacked securities market 'has grown from
nothing to three-quarters of a trillion dollars outstanding in less than ten years").
 ASSETEUc ITIZATION: A COMPARATIVE STUDY BETWEE THE UNITED STATES AND BELGIUM

5. The other basic form of securitization is the securitization by loan participation involving large loans. Typically, a lead bank negotiates
a large loan with a borrower and then sells interest in the loan to other entities. See 1 Frankel, supra note 2, § 1.2, at 6. See also Robert B.
Titus, Asset Securitization: Marvel of the Marketplace but Should We be Uneasy?, 73 B.U.L. Rev. 273 n. 13 (1993).
6. Jean-Francois Romain, Examen du r6gime de la titrisation des crdances en droit civil beige, 10 R.D.C.B. 837 (1992).
7. See J, Downs & J. Goodman, Barron's Finance and Investment Handbook (1986).
8. Id.; Michael T. Kawachi, The New Law of Asset Securitization in Japan, 17 U.Puget Sound L. Rev. 587 (1994).
9. Structured finance can change the security holder's dependence on the company for payment, by separating the source of payment
from the company itself. In a typical structured financing, a company that seeks to raise cash may sell certain of its assets to a "special pur-
pose vehicle" that is organized in such a way that the likelihood of its bankruptcy is remote. The result is that the assets are no longer owned
by the selling company, but by the bankruptcy-remote vehicle. See infra notes 36-46 and accompanying text.
10. The SPV, and not the selling company, will issue securities to raise cash. Those securities are intended to be payable from collections
on the receivables purchased by the SPV. A potential buyer of the securities therefore looks to the cash flow from the purchased receivables,
and not necessarily to the credit of the selling company, for repayment. Steven L. Schwarcz, structured finance: a guide to the principles of
asset securitization 1 (2d ed. 1993).
11. Id. at 4. See generally, J. Rosenthal & J. Ocampo, Securitization of credit: inside the new technology of finance 79-185 (1988).
12. Id.
13. See F. Bradford, Banking 338-39 (1932). See generally E. Roussakis, Managing Commercial Bank Funds 24, 68 (1977). Shenker &
Colletta, supra note 3, at 1389.
14. See, e.g., S. REP. N1 761, 91st Cong. 2nd Sess. 38, reprinted in 1970 U.S. Code Cong & Admin. News 3488, 3522 (noting that as
Treasury rates were rising during 1969, thrift deposits declined by nearly $ I billion and commercial bank deposits declined by $ 9 billion);
Sullivan, Collins & Smilow, Mortgage Pass Through Securities, in The Handbook of Mortgage-Baked Securities 13-15 (F. Fabozi ed. 1985)
(high non bank interest rates in 1970s caused disintermediation as existing depositors withdrew funds in order to take advantage of higher
returns available from alternative investments).
15. Commercial paper largely supplanted short-term credit for many corporate borrowers of high credit quality, resulting in the disinterme-
diation of banks' asset base and banks' traditional franchise as providers of commercial and industrial loans. In the same time, banks faced
increasing competition from large foreign banks, especially for the commercial and industrial loan market. See Structure and Regulation of
Financial Firms and Holding Companies: Hearings Before The House Comm. on Commerce and MonetaryAfairs, 99th Cong. 2d Seass., pt. I at
121, 197 (1986); Dept. of Treasury, modernizing the financial system: recommendations for a safer, more competitive banks, at Ch. XVII
(1991). See generally Judd, Competition between the Commercial Paper Market and Commercial Banks, Econ. Rev., Winter 1979, at 39;
Federal Reserve Bank of New York, Competition from Foreign Banks, in recent trends in commercial banks profitability: a staff study 179-91
(1987).
16. For an overview of the literature examining the impact on bank profitability of banking laws and regulations, economic and business
factors, and other factors relative to the industry's structure, see generally, Recent Trends in Commercial Banks Profitability, supra note 15,
at 45-71.
17. Shenker & Collate, supra note 13, at 1390.
19. See infra note 92-114 and accompanying text-
19. See infra note 62-91 and accompanying text.
20. Many commentators have noted that volatile interest rates were an important factor in the development of secuntization. See e.g.,
Campbell, Innovations in Financial Intermediation, Bus. Horizons, Nov. Dec. 1989, at 70; Van Home, Of Financial Innovations and Excesses,
40 J. FIN. 621, 622-25 (1985).
21. Shenker & Colletta, supra note 17, at 1394.
22. This is the primary risk addressed by rating agencies in assigning a rating to a security. Id.: see e.g. Standard & Poor's Corp., S & P's
Structured finance criteria 13 (1988) ratings reflect an assessment of the probability of timely repayment of principal and interest).
23. C. Pavel, Securitization 16-17 (1989).
24. Certain securities, as CMOs, have been structured to reduce prepayment risk. In essence, a CMO redistributes the timing and amount
of interest and principal cash flows across different classes (or "trenches") of securities. In the simplest form of CMO, each tranche must be
paid in full before any principal payments from the mortgage loans can be paid to the holders of the next tranche. The result is a range of
expected maturities and a reallocation of the prepayment risk more suited to the risk preferences or needs of the purchases of the different
classes of securities. See id at 69-72; Smith & Taggart, Bond Market Innovations and Financial Intermediation, Bus. Horizons, Nov./Dec. 1989,
at 29.
25. Rosenthal & Ocampo, supra note 11, at 6.
26. Committe on Banking regulations and supervisory practices, Final international risk-based capital standards adopted by the basle
committee on banking regulations (1988), reprinted in 51 BNA's Banking Rep. 143 (1988). For discussions of the Basle Accord, see Note, The
Basle Accord: an Opportunity for Expanding Bank Holding Company Securities Activities?, Geo. Wash. J. Intl L. & Econ. 531 (1989).
27. The Group of Ten comprises the following countries: Belgium, Canada, France, the Federal Republic of Germany, Italy, Japan, the
Netherlands, Sweden, Switzerland, the United Kingdom, and the United States.
28. In the United States, the risk-based capital guidelines are codified at (1) 12 CF.R. pt. 208 (1992) (stale member banks); (2) 12 C.F.R
pt. 225 ap. A (1992) (bank holding companies); (3) 12 C F.R pt. 3 app. A (1992) (national banks); (4) 12 CFR. pt. 325 (1992) (state non-mem-
ber banks). In Europe, see Council Directive 89/647, art. 10, 1989 O.J. (L. 386) 1, 14.
29. See, e.g., 12 C.F.R. § 3.6 (1991) (minimum capital ratio for national banks was 6 % of average total assets).
 ASSET SECU R ZATI.. A COMPARATIVE STUDY BETWEEN THE UNITED STATES AND BELGIUM

30. See C. Pavel, supra note 24, at 221-22 (listing 20 large banks that will have to raise capital by selling or securitizing assets to meet the
new risk-based guidelines.
31. Shenker &Colleta, supra note 21, at 1376.
32. The term "sponsor" is usually used to refer to the economic owner of the assets who desires to securitize it, the entity that created the
assets, the "originator", may be a distinct entity.
33. See S & P's Structured finance criteria, supra note 22, at 88-89; see also Crosby, The Securitization of Commercial Mortgages, in The
Secondary Mortgage Market 143, 152 (Lederman ad. 1987) (describing pooling as "necessary to create a large enough dollar volume to create
liquidity secondary 'aftermarkets'").
34. Rosenthal & Ocampo, supra note 25, at 47.
35. Schwarcz, supra note 11, at 16.
36. Sometimes, for instance, the SPy is a limited-purpose subsidialy of the originator.
37. Bankruptcy Code § 301.
38. See Price v. Gurney, 324 U.S. 100, 107 (1947).
39. It appears to be against public policy to remove entirely a company's power to place itself in voluntary bankruptcy. See Fallick v. Kehr,
369 F. 2d 899, 904-05 (2d CIr. 1966) (federal bankruptcy law reflects a strong legislative intent that debtors be allowed to get a fresh start); In
re Tru Block Concrete Prod., Inc., 27 B.R. 486, 492 (Bankr. S.D. Cal. 1983) (prepetition agreement to avoid bankruptcy proceedings is void as
against public policy); In re Ardana Mortgage Bankers, Inc., 12 B.R. 989, 1009 (N.D. Ga. 1980) (even a bargained-for and knowledgeable wai-
ver of right to seek protection of bankruptcy law is void); In re Weitzen, 3F. supp. 69899 (S.D.N. Y. 1933) (agreement to waive benefits of ban-
kruptcy is unenforceable).
40. Schwarcz, supra note 35, at 17 (stating that an independent director might be defined as a person who is not director (other than
being director of the SPV), of ficer, employee or holder of 5 per cent or more of the voting securities of the originator or any of the originator's
affiliates).
41. Id. at 21.
42. See infra notes 52-56 and accompanying text.
43. Although "business trusts" may be the subject of bankruptcy cases. Section 109 of the Bankruptcy Code provides that only a person
may be eligible for relief under the Bankluptcy Code. Section 101(41) of the Bankruptcy Code defines a "person" to include a "corporation",
and section 101 (9)(A)(v) of the Bankruptcy Code defines a corporation to include a "business trust".
44. Rosenthal &Ocampo, supra note 34, at 47-48.
45. These criteria are that the SPV is either generally not paying its debts as they become due, or that a custodian has been appointed or
has taken possession; see Bankruptcy Code 303 (h). Section 303 (b)of the Bankruptcy Code also has requirements for the number of credi-
tors and the types of claims necessaly for filing an involuntary petition.
46. The number of trade creditors can be effectively limited by limiting the business in which the SPV can engage (e.g. in the SPV's char-
ter or other organizational documents).
47. Courts take into consideration both the nature of the relationship between the entities to be consolidated and the effect of consolida-
tion on the creditors of each entity. However, the determination that two entities should be substantively consolidated must be made on a case-
by-case basis.
48. See Dorris, Bankruptcy Considerations, in Structured Mortgage and Receivable Financing 1990, 301, 308-23 (PLI Real Estate Law
and Practice Course Handbook N1 335).
49. See e.g., Sampsell v. Imperial Paper & Color Corp., 313 U.S. 215 (1941) (Consolidating the assets of corporation with those of its sha-
reholders); (William M. Collier, Collier on Bankruptcy § 1100.06[3], at 1100-44 to 46 (151h ed. 1989).
50. The courts have identified the following among the factors to be considered to order consolidation: (1) the degree of difficulty in segre-
gating and ascertaining individual liabilities and assets; (2) the presence or absence of consolidated financial statements; (3) the commingling
of assets and business functions; (4)the unity of ownership and interests behveen the corporate entities; (5)the guaranteeing by the parent of
loans of the subsidiary; and (6) the transfer of assets without formal observance of corporate formalities.
See, e.g., In re Vecco Constr. Indus., 4 B.R. 407, 410 (Bankr. E.D. Va. 1980); Chemical Bank N.Y. Trust Co. v. Kheel (In re Seatrade
Corp.), 369 F. 2d 845, 847 (2d Cir. 1966).
51. See, e.g., In re Augie/Restivo Baking Co., 860 F. 2d 515 (2d Cir. 1988) (denying consolidation where one creditor would suffer
unfairly); In re Bros., 18 B.R 230, 239 (Bankr. D. Mass. 1982) (Court's power arises out of equity and should be used sparingly).
52. Schwarcz, supra note 41, at 28-36.
53. See W. Homer Drake, Jr. & Kyle R Weems, Mortgage Loan Participations: The Trustee's Attack, 52 AM. BANICR L.J. 23, 25-26
(1978) (discussing the trustee's attack in the context of loan participations).
54. Mancini, supra note 1, at 875.
55. The most significant factors are (1)the degree of recourse the transferee of the receivables has against the transferor; (2) the pre-
sence or absence of the originator's right to redeem or repurchase transferred receivables; (3) the pricing mechanism (whether the SPV pur-
chased receivables on a discounted basis or not); (4) the transferee's authority to control the collection of the accounts; (5) perfection of the
transfer under section 9-102 of the UCC; (6)whether the transfer of the assets to the SPV may be subject to avoidance as a fraudulent transfer
or preferential transfer; and (7) the commingling of the collections from the purchased receivables, not paid directly to the SPV but to the origi-
nator, in accounts with the originator's general funds. See generally, Mancini, supra note 54, at 876-88; Schwarcz, supra note 52, at 31-44.
56. See Major's Furniture Mart, Inc. v. Castle Credit Corp., 499 F. Supp. 538, 543 (E.D. Pa. 1978), aft, d, 602 F. 2d 538, 545 (3d Cir.
1979) (holding that if a buyer fails to retain any of the "risks or obligations of ownership", a court is likely to consider the transaction as a secu-
red loan).
 57. Some of the more common issues under the federal securities laws are: (1)whether the instruments offered for sale are exempt from
the registration requirements of the Securities Act of 1933, 15 U.S.C; §§ 77a of seq. (1991), either as exempt security under § 3 or as exempt
transaction under § 4, id 77c, 77d; (2) whether the registration, periodic reporting and margin requirements of the Securities Exchange Act of
1934, 15 U.S.C. §§ 78a et seq. (1991) are applicable, see infra notes 72-77 and accompanying text; and (3) whether the issuer of the securi-
ties will be required to register as an investment company under the Investment Company Act of 1940, 15 U.S.C. §§ 80a et seq. (1991).
58. See infra notes 62-71 and accompanying text.
59. See infra notes 92-114 and accompanying text. See generally Humphreys, Tax Treatment of Structured Finance Transaction, in
Structured Mortgage and Receivable Financing 1990, supra note 48, at 157 - Peaslee, Federal Income Tax Treatment of Mortgage-Backed
Securities, in Tee Handbook of Mortgage-Backed Securites, supra note 14, at 569.
60. See C. Pavel, supra note 30, at 195-209; Rosenberg & Kravitl, Legal Issues in Securitization, 1 J. Applied Corp. Fin., Fall 1988, at 61;
Tortoriello, Glass-Steagel Act: Current Issues Affecting Bank Underwriting, Dealing and Brokerage Activities, in Ninth Annual Institute
Securities Activities of Banks 174, 475-511 (P-H 1989).
61. See Sherlker &Colletta, supra note 31. at 1407.
62. IS U.S.C. §§ 80a-6,-7 (1991). The 1940 Act defines "investment companies" as any entity engaged primarily in investing, reinvesting
or trading in securities, or any entity engaged in investing, reinvesting, owning, holding or trading in securities and owning or proposing to
acquire investment securities with a value exceeding forly percent of the value of the entity's assets, excluding government securities and cash,
id. § 80a-3.
63. Id. Under section 3(a), the term "investment securities" is defined to include all securities except government securities, securities
issued by employees' securities companies, and securities issued by majorityheld-subsidiaries (provided the owner is not itself an investment
company).
64. Schwarcz, supra note 55, at 55.
65. See, e.g., the general requirements on registered investment companies, id. §§ 10, 12(d)(e), 13, 15(d), 16, 18, 22, 24(b), 29, 30 and 31.
66. 15 U.S.C. § 80 a-3 (1991).
67. Id.
68. Id.
69. Id.
70. Id.§ 80 a-3(c)(5)(A) (sales price of merchandise).
71. A "no-action" letler is a nonbinding response by the SEC staff to a private inquiry indicating that the staff of the SEC will not recom-
mend to the SEC that any enforcement action be taken if a proposed transaction is carried out in a specific manner. See Schwarcz, supra note
64, at 56 n. 135.
72. Securities Act of 1933 15 U.S.C. §§ 77a etseq.(1991).
73. Securities Exchange Act of 1934 15 U.S.C. §§ 78a at seq. (1991).
74. 15 U.S.C. §§ 77a-7-7,-10 (1991) 75 Id§ 5 (c)
75. Id. § 5 (c).
76. 15 U.S.C. § 78a-10(b) (1991).
77. See section 3(a)(2) of the 1933 Act which exempts from registration securities fillly supported by a bank letter of credit; section 4(2) of
the 1933 Act which exempts from registration "transactions by an issuer not involving public offering"; and regulation D promulgated by the
SEC (17 C.F.R. §§ 230.501-506 (1992)) providing a "safe harbor" if a private placement is to a large number of investors, and particularly if
non institutional investors are involved.
78. 17 C.F.R. § 230.144A (1991).
79. 17 C.F.R. § 230.901-904 (1991).
80. 80 17 C.F.R § 230.144 (a) (1). In general, a "qualified institutional buyer" (QIB) isan institution that owns and invests on a discretio-
nary basis at least $ 100 million (or, in the case of a securities dealer registered under § 15 of the 1934 Act, $ 10 million) in securities (exclu-
ding certain specified securities) of issuers that are not affiliated with the QIB. If the institution is a bank, it must also have a net worth of at
least $ 25 million to qualify.
81. Shenker &Coletta, supra note 61, at 1408.
82. Id.at 1409
83. 15 U.S.C. § 77e (1991).
84. 17 C.F.R § 230.901 (1991)
85. Offshores Offers and Sales, Securities Act Release N*6863, 55 Fed. Reg. 18306 (1990) [hereinafter Regulations S Release].
86. Id. at 18307. The First safe harbor applies to offers and sales of securities by issuers, distributors, their respective affiliates and per-
sons acting on their behalf (the "issuer safe harbor"). the second applies to resale by persons other than the issuer, a distributor, their affiliates
and parsons acting on their behalf (the "resale safe harbor").
87. 17 C.F.R. §§ 230.903(a), 230.904(a) (1991). Offshore transaction is defined in Rule 902(i) of Regulation S_See C.F.R. § 230.902 (&
6 (1991).
88. 17 C.F.R §§ 230.903(b), 230.904 (b) (1991). Rule 902(b) defines "directed selling efforts". See id. at 230.902(b).
89. 17 C.F.R. § 230.903(c) (1991). See Regulation S Release, supra note 85, at 18313-19.
 ASETSEUITAT1IN U W'CM
AV SUY TAT
EWENTEUE ES ND ELUM

90. Id. at 18320.

91. See Standard and Poor's Credit Review, June 11, 1990, at 13.
92. In a typical "pass-through" structure, the receivables are deposited into a trust. The receivables are then effectively sold to investors
by issuance of pass-through certificates in the trust, each of which represents the rights to a prorate portion of the unpaid principal balance of
the receivables and of monthly interest payments on that principal balance.
93. See generally, Humphreys supra note 59, at 157; Peaslee, supra note 59, at 569; Rosenthal & Ocampo, supra note 44, at 49;
Schwarcz, supra note 71 at 45.
94. See supra notes 52-56 and accompanying text which discuss whether a given transfer of receivables constitutes a 'true sale" or a
loan for bankruptcy purposes. The factors relevant to a determination of a tax sale are similar, but not identical, to those relevant to determina-
tion of a bankruptcy sales.
95. Schwarcz, supra note 93, at 46.
96. See e.g., United Surgical Steel Co. v. Commissioner, 54 T.C. 1215 (1970), acq. 1971-2C.B-3; Town & Country Food Co. v.
Commissioner, 51 T.C. 1049 (1969), acq. 1969-2C.B.XXV. In addition, numerous internal memoranda and private letter rulings have been
issued by the IRS that stand for the proposition that a transfer of receivables will be treated as a sale provided that the transferor has relinqui-
shed substantial incidents of ownership. See, e.g., Gen. Couns. Mem. 39,584 (Dec. 3, 1986).
97. The originator, for example, could sell or contribute its receivables to the capital of a wholly owned, bankruptcy-remote subsidiary
(SPV 1). SPV 1 then could transfer the receivables to a second bankruptcyremote entity (SPV 2), not owned by the originator, in a transaction
structured as an accounting sale but a tax loan. SPV 2 will be the issuer of securities to investors. Because SPVI iswholly owned by the origi-
nator, it and the originator can file consolidated returns for federal income tax purposes; and the transfer of receivables to SPVI is treated as a
deferred intercompany transaction, gain or loss with respect to which will not be currently recognized.
98. I-R.C. § 860F(b) (I)(A) (West 1993).
99. I.R.C. § 806(a)(1) (West 1993).
100. 1.RC. § 806 (a) (2) (West 1993). Only one class of residual interests may be issued, and the interests are subject to certain restric-
tions on transfer. See I.R.C. 806D(a)(2), (a)(6) (West 1993).
101. Schwarcz, supra note 97, at 49.
102. See Rosenthal & Ocampo, supra note 93, at 49. A grantor trust is legally created by a contract between a depositor and an indepen-
dent trustee. This contract is known as a Trust Agreement or a Pooling and Servicing Agreement. Typically, this contract will provide for: (1)the
appointment of the trustee, (2)the pooling and deposit of certain assets by the originator into the trust, (3) the issuance by the trust back to the
originator/depositor of certificates of the beneficial interest into the trust,
(4) the appointment of the originator as the servicer of the assets, (5)
the designation of the trustee as the representative of the certificate holders, and (6)the trustee's remedies in the event of default.
103. I RC. §§ 671-679 (West 1993).
104. Treas. Reg. §§ 301.7701-4(a), -4(c).
105. Id. The prohibition against multiple classes is imposed under the IRS' so called "Sears" regulations which were proposed in 1984
and finalized in 1986. Those regulations include an exception that allows multiple classes of ownership in two situations: (1)where the only dif-
ference between the classes is that one is subordinated to another in the events of defaults in trust assets; and (2)where each class repre-
sents "stripped" interests in the underlying receivables.
106. Schwarcz, supra note 101, at 50.
107. Rosenthal &Ocampo, supra note 102, at 54-55.
108. See Trees. Reg, §§ 1.1502-13, -14. In order to qualify as a partnership rather than an association taxable as a corporation, the entity
must possess less than a majority of the following four corporate characteristics; (1)continuity of life; (2) centralization of management; (3) limi-
ted liability; and (4) free transferability of interests. See Tress. Reg. § 301.7701-2.
109. See I.R.C. §§ 860G(c), (d)(West 1993).
110. To qualify as a REMIC, the SPV must keep its books on the calendar year, use the accrual method of accounting and fillfil certain
other requirements relating to the types of assets it holds. See I.R.C. § 860D(a) (West 1993).
111. I.RC. § 1271(a) (West 1993).
112. Schwarcz, supra note 106, at 52.
113. I.R.C. § 860B (West 1993).
114. I.RC. § 860C (West 1993).
115. See generally Kawachi, supra note 8, 587-609.
116. See generally J. Terray, La Titrisation des credits (Gide Loyrette Nouel 1990).
117. See generally M. Raines, Off-balance sheet treatment for Securitization in the United Kingdom, J.I.B.L. 230 (1992).
118. See supra notes 26-30 and accompanying text.
119. Council Directive 891647, supra note 28.
120. Law of August 5, 1992 amending, with regard to the "organismes de placement en cr6ances", the law of December 4,1990 on finan-
cial transactions and the financial markets, M.B. (September 9, 1992) (hereinafter the Law of December 4, 1990). Royal Decree of November
29,1993 "relatif aux organismes de placement en cr~ances" M.B. (November 29, 1993) (hereinafter the Royal Decree). the "organisme de pla-
cement en cr6ances" will hereinafter be referred as the SPV
 ASSET SECURIZATIONQ A COMPARATIVE STUDY BETWEEN THE UNITEDTATES AND BELGIUM

121. Law No 88-1201 of December 23, 1988.

122. In addition to fix the capital ratio to 8 %, article 6 of the directive 89/647 provides for, to calculate this ration, the weighting of the
assets and of the off-balance sheet items in function of their degree of credit's risk. The items presenting a high risk (e.g., assets constituting
claims upon non-banking sectors) are weighted up to 100 %; items presenting an average risk (e g., mortgage loans) are weighted up to 50 %;
those presenting a low risk up to 20 %. If we take into account both the capital ratio and the weighting rate, we can better understand why a
securitization transaction can be interesting for a credit institution; - let's take a bank whose assets include BEF 10 billion of mortgage loans
receivables and BEF 10 billion of consumer loans receivables;
- the transfer by this bank of 2 x 5 billion of these receivables, pooled in two masses of securitized receivables, will imply for the bank an
assets' saving equal to:
- BEF 5 billion x 8 % x 50 %, that is BEF 200 million with regard to the mortgage loans; - BEF 5 billion x 8 % x 100 %,that is BEF 400 mil-
lion for the consumer loans.
See Romain, supra note 6, at 840 n. 11.
123. Law of December 4, 1990 art. 108 3° .
124. Royal Decree art. 4 § 2 11 *. The usual practice of seeking a rating for securitization is made mandatory by the Royal Decree, sub-
ject to the power of the Banking and Finance Commission to grant dispensations in specific cases. A detailed report from the rating agency is
to be submitted to the Banking and Finance Commission as part of the application for the approval of the transaction.
125. Id. Law of December 4, 1990 art. 119 ter.
126. Id. Law of December 4, 1990 art. 120 § 3. The term "custodian" will be used hereinafter in order to avoid any confusion with the
"trustee" of a grantor trust as described p. 16.
127. See infra notes 160-164 and accompanying text.
128. Royal Decree art. 32-33.
129. Id. art. 16 According to this article, il must be a credit institution with its registered office or a branch in Belgium.
130. Id. art. 27.
131. Id. art. 28-31.
132. Id. art.
30.
133. See infra notes 148-153 and accompanying text.
134. Id. art. 32-33.
135. See generally Car Diercks, Off-balance sheetfinancing and securitisatie, Rev. Banque 39 (1988); Marc Marechal, De securitisatie op
de Amerikaanse kapitaamarkten, Rev. Banque 219 (1989), Henri-Paul Lemaitre & Fransois Glansdorf, La titrisationdos cr~ances bancaires au
regard du droit beige, Rev. Banque 561 (1990); Jean Dufrane, La titrisationen Belgique: quelques donnees de base dune reforme en profon-
deur, 19 D.A.O/R. 69 (1991); Romain, supra note 122 at 837; Jean-Francois Romain, Le regime de /a titrisation des crdances en droit beige
(Loi du 5 ao~t 1992): synthbse at aspects pratiques en mati~re de cr6dit i la consommation et de credit hypothcaire, 27 D.A.O.R 43 (1993).
136. Law of December 4, 1990 art. 119 quinquies.
137. Id. art. 119sexies§3.
138. Id. art. 119 bis 20.
139. Id. art. 125.
140. Royal Decree art. 37.
141. Law of December 4, 1990 art. 108 3".
142. Law of December 4, 1990 art. 111: "Par fonds de placement, il faut entendre le patrimoine indivis gere par une societe de gestion
pour le compte des participants, dont les droits sont representes par des parts nominatives ou au porteur".
143. Romain, Examen du regime dela titrisation des crdances en droit civil beige, supra note 135, at 846.
144. J. Van Ryn &J Heenen, 3 Principes de droit commercial 142 (2d ed. 1980)
145. Romain, supra note 143, at 848.
146. About the "fiducie" in Belgian Law, see generally Paul-Alain Foriers, La fiducie en droit beige, in Les op4rations financieres 264
(Feduci ad. 1985).
147. Law of December 2, 1990 ART. 119 ter; Royal Decree art. 4 § 1.
148. Royal Decree art. 3 § 13*.
149. Id. art. 5-8.
150. /d. art. 3§ 110.
151. Id.art. 3 § 19 °
152. Id.3 § 2.
153. Law of July 6, 1994 on the assignment of receivables, M.B. (July 25, 1994).
154. Whilst the tenn "notification" could in principle mean any means of notifying a person, the general view is that the notification should
be made in writing, including fax or telex, and should be personal, excluding therefore any notice in the press or the Belgian State Gazette.
 ASSET ECURlTIATION. A COMPARATIV E STUDY BETWEEN THE UNITDTATES AN BLGIUM

155. Article 1691 of the Civil Code provides that (1) an account debtor who, in good faith, and prior to the notification of the transfer of a
receivable, makes a payment on the receivable to the assignor, will be discharged, and (2) prior to notification or recognition of a transfer, an
account debtor in good faith may use against the assignee all defences it has against the assignor. Article 1691 has been amended, however,
to recognize the new means of notifying the account debtor as set forth in the amended article 1690.
156. Debtors of the originator do not get any benefit from a securitization transaction. In some cases, they may feel "betrayed", learning
that their debts were assigned to an unknown SPV, especially if the contract giving rise to the receivables is an intuitu personae contract.
157. Article 119 ter al. 2 of the law of December 4, 1990 provides that the management company may appoint the originator or a third
parly to collect the receivables but only pursuant to standards established by a collection agreement. In the United States, see Schwarcz, supra
note 112, at 33-34 (stating that to have true purchase, the transferee should have the authority to control the collection of the accounts... In
practice, the originator often is appointed as the collection agent initially. That is not necessarily inconsistent with characterization as a sale if
(1)the originator, as collection agent, will be acting as an agent for the SPV pursuant to established standards, much like any other agents; (2)
the originator will receive a collection agent fee that represents an arm's length fee for those services; and (3)the SPV has the right at any time
to appoint itself or another person as collection agent in place of the originator).
158. See supra notes 78-91 and accompanying text.
159. Law of December 4, 1990 art. 120.
160. Royal Decree art. 2, 3, 4, 5, 6, 7, 14, 15, 17, 39, 40.
161. Id. art. 57. The approval requires in particular that the scheme be subject in its home country to a similar supervision as carried out in
Belgium by the BFC.
162. Basis is a term used in accounting, especially in tax-accounting, to describe the value assigned to an asset for the purpose of deter-
mining gain (or loss) on the sale or transfer or in determining value in the hands of a donee. Black's Law Dictionary 151 (6th ed. 1990).
163. This may occur if the yield of the portfolio is higher than current market rates.
164. For instance, with a view to the overcollateralization of the SPV.
165. Code des Impots sur lesRevenus art. 90 6" (1992) (hereinafter referred as C.I.R.).
166. See Cools, Peeters & Trott, Securitisation in Belgium: the way forward, in International Securitisation report at 40 (IFR Publishing ed.
1994).
167. Law of December 4, 1990 art. 146 § 2.
168. C.IR. art. 269 § 3" (1992).
169. C.I.R. art. 106§7, 117 §6 (A.R. 1992).
170. C.I.R. art. 107 § 28'-9' , 113 § 22* (1992).
171. Code de laT.V.A. art. 44 § 370 .
172. Id.
173. However, an exemption is available for the fees paid by a SIC or an FPC to its management company provided in the case of a SIC
that the management company is also appointed as director of itand is remunerated by way of director's fees. Id.
44 § 3 110.
174. When the service isa bank which has opted to submit its payment and collection services to VAT. In all the other cases, these fees
are exempted from VAT but this exemption does not extend to "recouvrement de creances", that is the actions taken with a view to collection
of receivables in default. Id. art. 44 § 3 7°.
175. Id.
176. Cools, Peeters & Trott, supra note 166, at 42.
177. This does not mean, however, that they do not have a ready supply of potentially securitizable assets.