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PCS user guidebook
Webinar Presentation
December 2012
Agenda
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Introduction
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Summary of PCS Initiative
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The PCS Organisation
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Summary of PCS Eligibility Criteria
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The Label Process:
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High level principles
Summary of Eligibility Criteria
Key Themes of PCS Process
Nine practical PCS Label Process Steps
Why Apply for the PCS Label
Introduction
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PCS is open for business as of 14th November, 2012
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The PCS Label test run phase has been completed and the first
label has been awarded to Bilkreditt 3 Limited
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The PCS user guidebook is a practical guide to the process of
obtaining and maintaining a PCS label
Summary of PCS initiative
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PCS is a non profit, initiative with the purpose of creating a
label for high-quality securitisations
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The purpose of the PCS Initiative includes:
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Revitalising the European securitisation market
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Supporting the growth of the European real economy
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Fostering the development of best market practices for the
European securitisation market with agreed standards of quality,
transparency, simplicity and standardisation
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Improving market confidence for all participants including investors,
issuers and regulators
The PCS Organisation
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The PCS Association
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The PCS Secretariat
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The Board of PCS Association
The PCS Market Committee
Other PCS Committees
The Board of PCS Secretariat
PCS Staff
Other partners
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Screening Partners
IT, Legal and other support
Note: The Board of PCS Association and PCS Market Committee will meet on a
quarterly basis
PCS user guidebook
PCS Association
(Belgian not-for-profit association)
This is the PCS Board. 9 member
Board appoints committees 12
person Market Committee will
assist/advise PCS Secretariat
Market Committee
External
Committee
PCS Secretariat
(UK Private Limited Company)
Ian Bell
Head of PCS Secretariat
Mark Lewis
Managing Director
Tris Lateward
Office Manager
Arbitration
Committee
PCS Secretariat contracts with third
parties to support its work
Screening
Partners
IT and other
Advisors
PCS Association – Members
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Allen & Overy
Allianz
AXA
Baker & McKenzie
Barclays
Bank of America Merrill Lynch
BBVA
Bishopsfield Capital Partners
Bloomberg
BNP Paribas
BNY Mellon
Clifford Chance
Credit Suisse
Deutsche Bank
DNB Bank
European Banking Federation
HSBC
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HSBC Global Asset Management
ING
Intesa San Paolo
J.P. Morgan
KPMG Advisory N.V.
Lewtan Technologies
Linklaters
Lloyds Banking Group
Mayer Brown
Nationwide Building Society
NIBC Bank
Obvion
Rabobank
Royal Bank of Scotland
RBS Asset Management
Santander
Securitisation Services
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Swiss Re
Societe Generale
TwentyFour Asset Management
UBS
UniCredit
Weil, Gotshal & Manges
PCS Association – Observers
A number of other institutions and associations are “Permanent Observers”
of the PCS Association:
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Association for Financial Markets in Europe (AFME)
European Central Bank (ECB)
European Fund and Asset Management Association (EFAMA)
European Financial Services Roundtable (EFR)
European Investment Bank (EIB)
European Investment Fund (EIF)
Dutch Securitisation Association (DSA)
Insurance Europe
KfW
True Sale International (TSI)
The PCS Organisation
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Key PCS documents
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The PCS Rule Book
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The PCS Procedures Manual including appendices
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The PCS Application Form
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The PCS Terms and Conditions
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The PCS Checklist
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The Originator Certificate
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The PCS Label Certificate
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The PCS Compliance Certificate
The PCS website
www.pcsmarket.org
The PCS Process – High Level Principles
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PCS will only include asset classes that have performed well, are important
to the real economy and meet investor needs on simplicity, transparency,
quality and liquidity
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PCS is not a credit rating and is not intended to replace credit analysis
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Rating eligibility criterion will be the highest achievable credit rating in the
relevant jurisdiction provided that it is investment grade
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Process is substantially algorithmic (enabling for a quicker and simpler
process)
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On-going loan level reporting requirements
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Dynamic over time to accommodate market and regulatory developments
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The PCS Label can be awarded to both “market” and “retained” transactions
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Retrospective eligibility – label can be awarded to existing bonds
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Recognising existing market practices (e.g. country specific and asset class
specific) provided they are consistent with investor need
The PCS Process - Summary of
Eligibility Criteria
Eligible Asset Classes
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Auto Loans and Leases, Consumer Loans, Credit Cards, Dealer Floorplan Loans, Nonauto Leases, Residential Mortgages, SME Loans
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All other asset classes and some products are excluded: such as “sub-prime” mortgages
(self-certification products, equity release products), CMBS, re-securitisations and
synthetic transactions
Quality
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Strict criteria exist regarding such credit components such as loan-to-value.
The issuing vehicle must be incorporated in the EEA (or Switzerland)
The securitised assets must be originated in the the EEA (or Switzerland)
Only the most senior tranche of any securitisation is eligible for the PCS Label.
Strict criteria exist to deal with the quality of underwriting (e.g. underwritten residential
mortgages)
Simplicity
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Re-securitisations and synthetic transactions (such as CDO squared) are not eligible for
the PCS Label
Eligibility criteria deal with the issue of granularity with minimum number of assets in a
transaction
The PCS Process - Summary of
Eligibility Criteria
Transparency
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The originator must provide (where required) loan level and cash flow data
The originator must provide ongoing information on the performance of the
transaction throughout its life
Liquidity
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Transactions must meet minimum size requirements
The originator must provide information on the proportion of any issue that is not
sold to third party investors
Please see the PCS rule book and PCS Checklist for full details which can be seen at:
www.pcsmarket.org/the-label/downloads
The PCS Process – Key Themes
The PCS Label is awarded based on explicit and public criteria
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Deal by deal approval process
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The PCS Label process is centered on the prospectus, Checklist and
Originator Certificate
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The PCS Label is “binary”: all the criteria need to be met or the Label will not
be capable of being awarded
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Complete accuracy in responding to the Checklist questions is critical; “near”
or “almost” or “substantially” or “missing” or “partial” replies are not
accepted. The wording in the Checklist and Originator Certificate responses
must 100% match that of the Checklist questions.
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The PCS Eligibility Criteria are designed to remove or minimise any
subjective process
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PCS Secretariat will support the Applicant by advising upon and, for certain
questions, interpreting issues that may arise in relation to the Checklist (and
Label process)
The PCS Process – Key Themes
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The Checklist and Originator Certificate may be subject to amendment over time
for reasons including market relevance and accuracy. The board of the PCS
Association will have sole discretion over any changes to criteria but will have the
ability to consult with the Market Committee over any changes. The Market
Committee may propose changes to the Board of the Association
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The PCS Process is fundamentally driven by the transactional law firm i.e. the law
firm advising the Applicant
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The transactional law firm prepares the central document: “the PCS checklist”
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The transactional law firm must also draft the prospectus and Originator Certificate
so that it allows the eligibility criteria/checklist to be screened against the
prospectus and Originator Certificate
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The prospectus is a document subject to securities law and supervision of listing
authorities; the checklist will therefore have a sound legal underpinning
The PCS Label Process – Steps in the Process
The nine practical PCS Label Process steps are:
1.
Intention to make an Application
2.
Label Application
3.
Screening Partners
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Checklist, Originator Certificate and Prospectus
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Checklist Changes and Checklist Interpretations
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Issues and Disputes with the Checklist, Originator Certificate and/or
Prospectus
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Awarding the Label
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PCS Label Fees
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On-going Label maintenance
The PCS label process – Step 1
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Intention to make an Application
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Early notice is encouraged especially where new label applicants, new asset
classes, new jurisdictions or updated Checklists are involved
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A place in the queue, if any, for Screening Partner checklist work will be
determined by date of notice of an intention to make an application or
Application, whichever is the earlier
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A notice of an intention to make an application should be sent by email to
[email protected] together with a telephone call to PCS UK staff
The PCS label process – Step 2
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Label Application
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An application form may be downloaded from the PCS website, filled in with
the necessary details, signed and returned to [email protected]
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PCS will review the application and confirmation that the application, if
accepted, will be sent within one London business day
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In the case of material issues or new technical issues, assets, jurisdictions,
applicant or arranger, a verbal conversation may be necessary to discuss
and review those issues and/or check that all initial checklist points have
been checked and are in order or will be checked and will likely be in order
The PCS label process – Step 3
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Screening Partners
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The Screening Partners are the Irish Stock Exchange, KPMG and
the TSI
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Screening Partners will be chosen for a transaction according to
certain rules including country of asset and currency although as
far as possible in strict rotational order
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The choice of Screening Partner is the Secretariat’s and not the
Applicant’s.
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The Applicant will be notified of the chosen Screening Partner
following confirmation that the Application is accepted
The PCS label process – Step 4
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Checklist, Originator Certificate and Prospectus
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A checklist may be downloaded from the PCS website at
www.pcsmarket/the-label/checklist
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The transaction lawyers would typically fill in the checklist indicating for
each question in the prospectus page/ref box where the relevant
information can be found in the prospectus and/or Originator Certificate
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The completed checklist should then be sent to the Screening Partner
with a copy to [email protected] together with the transaction
Prospectus and Originator Certificate
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Good examples of completed Checklists, Originator Certificates and
Prospectuses can be found at www.pcsmarket.org/pcs-transactions
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If the Application and full documentation is in acceptable form, an
Applicant should expect to receive a positive response from the PCS
Secretariat within 4 days from submission of documentation
The PCS label process – Step 5
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Checklist Changes and Checklist Interpretations
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Changes to the Checklist are subject to review by the PCS Market
Committee and review and approval of the Board of PCS Association
which meet on a quarterly basis
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An updated PCS Checklist is expected to be published in the next few
days (after a review of the existing Checklist subsequent following a
number of Checklist “test” and “live” runs)
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The PCS Secretariat may provide interpretations of the Checklist for
Applicants subject that interpretations of a material nature will be
passed to the PCS Market Committee and Board of PCS Association
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Please see www.pcsmarket.org/the-label/interpretations for a full list of
PCS Checklist interpretations to assist the Applicant to correctly
complete the Checklist and Originator Certificate
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A selection of relevant and recent interpretations of the checklist can be
found in the following slides of this presentation
Checklist
Interpretation
Checklist Information
Source
Some Checklist questions are required to be answered by
reference to prospectus, some by Originator Certificate and some
by a choice of either (until 15th April 2013, after which for those
questions prospectus only)
FX rate
Question 3 (d) (i) and others may require the provision of
exchange rate information. FX rates for Checklist use will be made
available from PCS Secretariat and PCS website
Eligible Currencies
A list of Eligible currencies will be made available on the PCS
website and from PCS Secretariat
Highest achievable ratings
question 3 (a) (ii)
The required ratings levels will shortly be published on the PCS
website for certain key European countries and otherwise
available from PCS Secretariat
Question 5 (b) (i) and
similar
“prospectus…discloses
reps, warranties…”
These questions simply require confirmation that the relevant
representations, warranties, etc. are given rather than an analysis
of the quality of them
Domestic Market
guidelines (“DMG”)
At present, DMG only include the DSA guidelines. The list may
expand in the future
Checklist
Interpretation
Question 6 (b) (xvii) and
other yes/no questions
The responses are only “yes, plus reference” or “no”. Partial or not
applicable responses are not permitted
“As far as the Originator is
aware”
This response can be used for certain questions involving
statements of fact e.g. question 3 (e) (xvii). Further information is
available on the PCS website or from PCS Secretariat
Specified date
This is a hard date (subject to possible amendment next few days)
but please be careful to ensure Specified Dates are within use
Question 3 (b) (iv) ratings
triggers
This question only requires certain information where triggers
exist or a statement that none exist. In transactions where triggers
exist, information is not required on aspects of those transactions
where no triggers exist
Question 3 (e) (vii)
definition of default
Default is not a defined term at present and is determined by the
use given in the relevant prospectus
The PCS label process – Step 6
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Issues and disputes with the Checklist, Originator Certificate
and/or Prospectus
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An Application may be rejected for a number of reasons including:
o Checklist not in acceptable form
o Originator Certificate not in acceptable form
o Prospectus not in acceptable form
o Reputational issues
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PCS Secretariat, the Screening Partner will discuss, in good faith, solutions
to the problem/s with a view to amending the documentation into an
acceptable form
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Matters relating to the interpretation of the labeling criteria will be determined
by the Head of the PCS Secretariat
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If the Applicant does not accept the determination of the Head of the PCS
Secretariat, it shall be entitled to lodge an appeal with the PCS Market
Committee
The PCS label process – Step 6
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Following the judgment of the PCS Market Committee, the
Applicant may make a final appeal to the but only on
grounds of procedure or natural justice
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Please see full process in relation to problems and appeals
in the PCS Procedures Manual or go to
www.pcsmarket.org/the-label/downloads
The PCS label process – Step 7
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Awarding the label
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When the Screening Partner has completed its checks, it will send a letter to
PCS Secretariat advising that the checklist has been fully and correctly filed
out or there certain issues that cannot be resolved
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PCS will review the application and confirmation that the application, if
accepted, will be sent within one London business day
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In the case of material issues or new technical issues, assets, jurisdictions,
applicant or arranger, a verbal conversation may be necessary to discuss
and review those issues and/or check that all initial checklist points have
been checked and are in order or will be checked and will likely be in order.
The PCS label process – Step 8
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PCS Label fees
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The fees for the PCS Label shall be payable in Euros or Pounds Sterling
depending on the currency in which the securities are denominated
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The fees become payable as soon as a checklist is received by a Screening
Partner irrespective of whether the PCS Label is awarded. Payment should
be made by the Applicant within 30 days of receiving an invoice which is
typically sent around closing date
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The PCS Label fee, if denominated in Euros is: Euro 9,650 + VAT (if
applicable); The PCS Label fee, if denominated in GBP is: GBP 7,500. + VAT
(if applicable)
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From the start of 2015, an annual maintenance fee will be charged for each
transaction receiving the label after April 30, 2013 of GBP 5,000 or Euro
6,000 + VAT (if applicable)
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For the full terms and conditions regarding fees and the PCS Label, please
consult the PCS Terms and Conditions and the PCS policies and procedures
manual or visit www.pcsmarket.org/the-label/application-forms-fees
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Please note that PCS reserves the right to increase the fees in the
circumstances set out in the PCS Terms and Conditions
The PCS label process – Step 9
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On-going label maintenance
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On an annual basis, no later than one month after the award of the PCS
Label, the Applicant will be required to send to the PCS Secretariat a
Compliance Certificate in the form of Appendix 6 of the PCS policies and
procedures manual
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The Compliance Certificate form may be found at www.pcsmarket.org/thelabel/downloads
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Failure to send in the annual compliance Certificate will result in a withdrawal
of the label
Why Apply for the PCS Label ?
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Support for the return of a broad and strong European
securitisation market
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All-industry initiative with support across the European
spectrum
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Help establish the PCS Label with European investors,
regulators, central banks and policy makers; stronger
participation will lead to stronger attention to the PCS Label
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Low cost of access to the PCS Label
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Significant potential future benefits of the PCS Label; leveling
the regulatory playing field
Contacts at the PCS Secretariat
Ian Bell, Head of PCS Secretariat
Tel: +44 (0) 20 3440 3721
Mob: +44 (0) 7500 558 040
E:
[email protected]
Mark Lewis, Head of PCS Operations
Tel: +44 (0) 20 3440 3722
Mob: +44 (0) 7500 448 833
E:
[email protected]
Tris Lateward, Office Manager
Tel: +44 (0) 20 3440 3723
Mob: +44 (0) 7780 333 895
E:
[email protected]
[email protected] (for general enquiries)
[email protected] (for the label applications)
www.pcsmarket.org/contact-us
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