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Since its early days in the 1980s, European securitisation has become increasingly sophisticated with ever more ingenious structures being employed. The ingenuity and invention shown in securitisation structures develops as the range of assets to which the technique is applied grows and the reasons for undertaking securitisation become more diverse.The basic principles of securitisation remain the same. A traditional securitisation involves the legal or economic transfer of assets or obligations to a third party (commonly, but not invariably, a special purpose vehicle (SPV)) which issues securities using the identifiable and predictable cashflows of the underlying assets to support the payment obligations on those securities. Synthetic securitisation refers to structured transactions in which banks use credit derivatives to transfer the credit risk of a specified pool of assets to third parties. While securitisation structures are often complex and will vary according to the assets being securitised and the reason for undertaking the exercise, a number of common components may be identified. At the heart of a securitisation is the issue of securities into the capital markets. For these purposes an entity to issue the securities will be required. In those securitisations where the originator of the assets producing the underlying income stream divests itself of those assets, a purchasing vehicle may also be required.Jersey is well placed as a jurisdiction in which to establish those vehicles. It has a modern and flexible legal framework allowing a range of vehicles to be established with characteristics suited to an efficient securitisation structure. It has a regulatory regime that is accustomed to analysing securitisation structures, which is responsive to the commercial requirements of transactions. The tax system allows for the tax neutrality essential for the issuer and other vehicles and the political background is stable and highly regarded. Unlike many offshore jurisdictions, Jersey is a member of the OECD and enjoys an AAA sovereign risk rating.

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