CIF Euromortgage has restructured its obligations foncières programme to remove RMBS from the cover pool, taking advantage of changes to French legislation to ensure it is CRR-compliant when a long-standing waiver in respect of RMBS expires at the end of this year.

The société de crédit foncier (SCF) is no longer active as a covered bond issuer, being part of the Crédit Immobilier de France group that that had to be rescued by the French government in 2013 and is now being wound-down and financed with government-guaranteed debt.

CIF Euromortgage had previously issued obligations foncières backed primarily by senior tranches of residential mortgage backed securities (RMBS), CIF Assets 2001-1, collateralised by loans granted by group members, which suited the group’s structure. For many years it could do so and remain CRD-compliant since a temporary waiver had been granted for such use of RMBS and periodically renewed.

However, the regulatory authorities, notably the European Central Bank, have clamped down on including securitisations as collateral for covered bonds – whether internal or external – and under the Capital Requirements Regulation (CRR) a limit of 10% was placed on their use, with the waiver due to expire at the end of this year.

Like Axa, CIF Euromortgage has now taken advantage of December changes to French covered bond legislation that allow issuers of obligations foncières to use a collateralised loan structure that obviates the use of RMBS, and at the same time limits the use of RMBS to 10% in line with CRR. CIF Euromortgage announced the move on Wednesday of last week.

“On 15 February 2017 the Group dissolved CIF Assets and, accordingly, changed its financing procedure,” it said. “It now raises funding by having CIF Euromortgage grant secured loans to the Group backed by contractually eligible receivables that have been transferred to it as absolute property, pursuant to CMF § L.211-38.”

The move ensures that, by remaining CRR-compliant, the obligations foncières will continue to benefit from a preferential risk weighting.

Moody’s and Fitch affirmed their ratings of the outstanding covered bonds at Aa2 and AA.