Applicable legislation

Purpose

• A société de crédit foncier is a French credit institution authorized by the Autorité de contrôle prudentiel et de résolution to operate as a établissement de crédit spécialisé.
• The main purpose of the company is the financing or refinancing of loans and securities. See Article L. 513-2and following of the Monetary and Financial Code.
• According to its by-laws and the licence: Authorization of the CECEI, Caisse Française de Financement Local must limit its activity to transactions with public sector entities or entities they fully guarantee.
• SCF issues covered bonds called obligations foncières which benefit from a legal privilege. See. Article L. 513-11.

Relevant legislation

Legislative texts

Article L. 513-2 : The purpose of sociétés de crédit foncier

Assets

By its by-laws and its licence: Authorization of the CECEI, Caisse Française de Financement Local may only hold the following items:

• exposures on public sector entities. See articles Article L. 513-4 and R. 513-2 of the Monetary and Financial Code;
• exposures on or guaranteed by credit institutions, investment firms or portfolio management companies of (i) first level credit quality within the limit of 15% of the obligations foncières and other resources benefiting from the privilege, ( ii) second level of credit quality within the limit of 10% of obligations foncières and other resources benefiting from the privilege and exposures on or guaranteed by credit institutions, investment firms or portfolio management companies established in a Member State of the European Union or a party to the agreement on the European Economic Area of ​​third best level of credit quality within the limit of 8% of the obligations foncières and other resources benefiting from the privilege. See articles Article L. 513-7 and R. 513-6.

Relevant legislation

Legislative texts

• Article L. 513-4 : Exposures on public sector entities
• Article L. 513-7 : Replacement Assets
• Article L. 513-8 : Coverage for liquidity requirements
• Article L. 513-9 : Report on asset quality
• Article L. 513-10 : Derivative instruments

Regulatory texts

• Article R. 513-2 : Evaluation of credit quality
• Article R. 513-4 : Equivalent guarantees
• Article R. 513-6 : Securities, exhibitions, and safe liquid deposits
• Article R. 513-7 : Coverage of liquidity needs

Legal privilege and protection

• The assets held by a société de crédit foncier (SCF) are allocated by priority to the payment of any debt benefiting from the privilege. See article  Article L. 513-11 
• In the event of bankruptcy proceedings (redressement or liquidation judiciaire), any debt benefiting from the privilege, including derivative instruments, is paid at the contractual due date, in priority to all other debt, until fully reimbursed. See article  Article L. 513-11 3rd 
• Bankruptcy proceedings of a company which holds shares of an SCF cannot be extended to the SCF.
  See article Article L. 513-20

Relevant legislation

Legislative texts

• Article L. 513-11 Privileged debt
• Article L. 513-20 Liquidation proceedings of the parent company cannot be extended to the SCF
• Article L. 513-21 Termination of the management and recovery agreements

Regulatory texts

• Article R. 513-9 Definition of the privilege in financing agreements

Over-collateralization

The over-collateralization ratio of sociétés de crédit foncier may be illustrated by the gap between the amortization curves of the assets and issues benefiting from the privilege. This ratio must be at least 105%. See articles L. 513-12 and R. 513-8

Caisse Française de Financement Local has committed to maintain this ratio at a level equal to or higher than 105%. This ratio is calculated on the basis of l’instruction 2022-I-03 and règlement CRBF 99-10.

Relevant legislation

Legislative texts

• Article L. 513-12 : Over-collateralization ratio

Regulatory texts

• Article R. 513-8 : Legal minimum ratio.

Instruction n°2022-I-03 Calculation of the coverage ratio. 

CRBF standard 99-10

Acquisition of receivables

• Acquisition of receivables allows for a secured transfer of receivables to a société de crédit foncier.
  See article Article L. 513-13
• An agreement of public sector entities may be necessary for an acquisition of receivables. See article Article L. 513-14

Relevant legislation

Legislative texts

• Article L. 513-13 Assignment of receivables
• Article L. 513-14 Acceptance by the public sector

Regulatory texts

• Article R. 513-12 Characteristics of the receipt

Role of the servicer

• A regulated financial institution carries out all management functions for the société de credit foncier. See article Article L. 513-15 
• The servicer is empowered to bring legal action before a court and on behalf of the SCF. See article Article L. 513-16

Relevant legislation

Legislative texts

• Article L. 513-15 Servicing
• Article L. 513-16 Servicer, the legal representative of the SCF
• Article L. 513-17 Change of servicer

Supervision

Sociétés de crédit foncier are monitored by different supervisors.

Relevant legislation

Legislative texts

• Article L. 513-22 Role of the Autorité de Contrôle Prudentiel et de Résolution
• Article L. 513-23 Role of the specific controller
• Article L. 513-24 Role of the specific controller in the event of liquidation or receivership

Regulatory texts

• Article R. 513-15 Designation of the specific controller
• Article R. 513-16 Responsibilities of the specific controller
• Article R. 513-18 Register of loans

Other provisions

A Société de crédit foncier may acquire its own obligations foncières with the sole aim of pledging them to guarantee credit operations with the Banque de France in the event the SCF would be unable to cover its liquidity requirements by other means at its disposal. These obligations foncières may not represent more than 10% of the total outstanding resources benefiting from the privilege at the date of the acquisition. See article Article L. 513-26

Relevant legislation

Partie législative

• Article L. 513-26  Subscription of obligations foncières