What types of collateral/security are typically granted to investors in a securitisation in your jurisdiction?
In Swiss securitisation transactions, the use of comprehensive security packages is common. The most commonly used forms of security taken out are:
- an assignment for security purposes of the underlying trade or other receivables;
- pledges over bank accounts of the special purpose vehicle; and
- the assignment of certain claims under the transaction documents.
How is the interest of investors in a securitisation in the underlying security perfected in your jurisdiction?
The security is typically held by a security trustee for the benefit of the investors. The formal and procedural requirements to perfect the security depend on the form of the security and the type of asset which serves as collateral.Enforcement
How do investors enforce their security interest?
Security established in connection with Swiss securitisation structures may be enforced by either private enforcement or official enforcement proceedings. In the course of private realisation, the assets serving as security can be either sold to a third party in a private sale or auction or acquired by the security trustee or agent for the account of the secured parties. Any such transaction must be made at market value. Private enforcement is permitted only if the security provider has consented to this enforcement method in advance. If the security trustee or agent chooses to enforce the security by way of official enforcement proceedings, it must apply for the commencement of debt-collection proceedings with the competent debt-collection office. Such proceedings involve multiple states, some of which require court involvement and are cumbersome. The actual enforcement typically takes the form of a public auction.Commingling risk
Is commingling risk relating to collections an issue in your jurisdiction?
In the international securitisation context, the commingling risk is usually addressed by implementing a trust structure. Although the concept of a trust does not exist under Swiss law, Switzerland accepts the Hague Trust Convention which has the effect that foreign trust structures are generally recognised and can thus be used to mitigate any commingling risk. However, structures making use of a trust are the exception in the Swiss market. Rather, the commingling risk is addressed by the following (non-exhaustive) measures:
- the introduction of short intervals for the transfer of collections to the special purpose vehicle (SPV);
- instructing debtors to make all payments directly to a bank account held by the SPV (in any case or after certain trigger events); and
- the introduction of mechanisms to ensure that debtors are notified immediately following certain trigger events and are instructed to make all payments to the SPV.