Banca Bohemia(BB), a bank incorporated in Panguay in S. America, has been required by its central bank to reduce its loan exposure
International Financial law master’s distinction exam model answer is required for the following question, between 1000 words, Law exam referencing:
Note: I need the work by 11am tomorrow morning please, I can’t get an extension, thank you.
Banca Bohemia(BB), a bank incorporated in Panguay in S. America, has been required by its central bank to reduce its loan exposure to South American corporates or face increased capital requirements. It is therefore considering securitizing twenty percent of its S. American loan portfolio. It requires your advice on the following:
a) whether it can achieve this result through a synthetic securitization structure which does not involve selling its loan portfolio; you are not required at this stage to consider banking regulation in Panaguay but, only whether synthetics have the same legal effect on risk reduction in relation to the loan portfolio as a traditional securitisation;
b) what provision it will need to put in place in the legal structure of a traditional securitisation to achieve “bankruptcy remoteness” as required by the rating agencies;
c) the countries from which legal opinions will be necessary to ensure that “true sale” will be achieved as required by the rating agencies;
d) if the rating agencies require credit enhancement what legal advantages does the use of over collateralisation by 120% have, if any, over the use of “tranching” whereby BB purchases a percentage of subordinated unlisted bonds (“equity”) to provide equivalent protection to the methodology of overcollateralization?) Would “tranching” have an additional legal benefit if the securitised bonds are to be sold to Financial Institutions in the EU and if yes, why?
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