SWITZERLAND Trends and Developments Contributed by: Johannes Bürgi, Roger Amman, Lukas Wyss and Maurus Winzap, Walder Wyss Ltd
Given the relatively low costs, short time to implement and overall versatility of receivable securitisation transactions making use of exist - ing platforms (compared to, for example, stand- alone public ABS transactions), it is expected that Swiss companies will continue to partici - pate in and make use of such programmes in the future. Covered Bonds Introduction During the low interest rate period of the past several years, the overall prices for real estate and the volume of residential and commercial mortgage loans has grown considerably in Swit - zerland. While few securitisations of mortgage loans have been implemented in the past in Switzerland, mortgage loans have historical - ly served as collateral for financings of banks under Pfandbriefe and under contractual cov - ered bonds. Owing to the flexibility that contractual covered bonds provide over Pfandbriefe , the number of covered bond transactions in Switzerland involv - ing residential and commercial mortgage loans has increased considerably during the past cou - ple of years, with first-time issuers setting up new programmes in 2020, 2022 and 2023, with the last one being set up with a volume of up to CHF20 billion by a global Swiss bank. Covered bond transactions in Switzerland are typically structured with one bankruptcy remote SPE, which is incorporated by the issuer and acts as guarantor of the payment obligations of the issuer under the covered bonds. The col - lateral to cover the guarantee is provided by the issuer, which in recent transactions in the Swiss market consisted mainly of residential and commercial mortgage loans, but also auto lease assets. The transaction structure will typically
require a certain level of over-collateralisation to be maintained by the issuer during the lifetime of the covered bond. Different from (true sale) securitisation transactions, the collateral is not sold but rather transferred for security purposes to the guarantor. The covered bonds are usually issued under a programme and publicly placed and listed or privately placed, whereby the pro - ceeds from the issuance of the covered bonds are typically used for the general business pur - poses of the issuer. The arrangers and managers are normally involved in the structuring, whereby additional transaction parties include servicers for the guarantor, the note trustees, the bond - holder’s representative, account banks, asset monitors and further third-party service provid - ers. Unlike contractual covered bond structures that were implemented in Switzerland during the early 2010s, which regularly provided for cer - tain elements of the structure to be governed by laws other than Swiss law (eg, English law), the recently implemented public covered bond programmes all provided for an entirely or pre - dominantly Swiss law governed structure, which has been well perceived by the market. In addi - tion to residential and commercial mortgage loans, there have also been issuances of cov - ered bonds relying on other assets serving as collateral to secure the claims of the covered bondholders, such as auto lease receivables. Certain elements of the typical covered bond structure in Switzerland Guarantor The guarantor is set up as an SPE, which is incorporated in the form of a limited liability stock corporation ( Aktiengesellschaft ) in Switzer - land. The shares of the guarantor are held by the issuer and two independent shareholders. The governing corporate documentation provides
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