Published in: FinanzNachrichten
Luxembourg, 22 June 2023 – Onshore instead of offshore ensures significant improvements in transparency and tradability. Increasingly, investment concepts are implemented not through funds but through securitisations. Daniel Knoblach, Board Member at Fair Alpha, explains, “The benefits are obvious: lower costs, greater flexibility, and faster set-up. In lieu of establishing securitisations in foreign nations, ever more structures are being established in Luxembourg.“ Transparency and tradability are significantly enhanced by using onshore rather than offshore options.
Well-known tax havens and even the Channel Islands have served as popular locations for securitisations for a long time. According to Knoblach, “the regulatory requirements are frequently less stringent there, which occasionally results in slightly cheaper products. However, locations outside the EU have significant disadvantages as well.” For instance, there are frequently no double taxation treaties with certain nations, which may result in higher tax rates on income. In addition, tradability and segregation – key factors for issuer risk – are frequently not provided in complete.
“In addition, no auditors may be required for launching and monitoring products”, explains Knoblach. This reduces the price of the products slightly, but it’s cutting corners where it’s not worth it. “Institutional investors are particularly dependent on compliance with all regulatory requirements”, Knoblach adds. For them, EU-issued investment vehicles are the best method to implement an investment concept or to participate in a strategy. By passing a securitisation law in 2014, Luxembourg went a long way toward regulating securitisations, and subsequent amendments have gradually brought it in accordance with market realities.
“Luxembourg’s location is optimal, as the country itself is already very internationally positioned, which is also reflected in the regulatory legislation”, Knoblach says. “The political climate is very stable, allowing for the creation of securitisations for the entire EU.” After Brexit, it has become uncertain whether products issued in the United Kingdom will continue to be permitted to be purchased and distributed in euros over the long term. “Let alone the Channel Islands as the location of securitisations. Due to their status as Crown Dependencies and their partial affiliation with the jurisdiction of the United Kingdom, there is even a double layer of legal uncertainty”, Knoblach points out.