Euro Secured Notes Issuer (ESNI)

Euro Secured Notes Issuer

Created in 2014, ESNI is open to all French and European credit institutions that meet the criteria set out in Guideline ECB/2015/27.

ESNI converts credit claims into securities, turning assets that could previously only be used as central bank collateral into very high quality financial instruments that can be exchanged on the interbank market.

By allowing banks to turn their corporate loans into high-quality collateral for use in interbank transactions, ESNI helps to encourage corporate financing, and especially the financing of SMEs and VSEs.

The issued securities (ESNs) are based on the FIBEN rating of the underlying credit claim debtor (or on banks’ internal risk assessments). This means they do not need to be rated by an external agency before being posted as collateral in Eurosystem refinancing operations.

How do you open an ESNI compartment?

All credit institutions meeting the eligibility criteria (for counterparties to monetary policy operations) can use ESNI to issue non-marketable debt instruments backed by eligible credit claims (DECCs).

All you need to do is send a request to ESNI (or to your management company) asking that it open a dedicated compartment on your behalf.

The compartment will then issue Euro Secured Notes backed by credit claims originated by your credit institution, or by other eligible institutions from the same banking group. The claims will make up the hedging portfolio for the securities issued by this ESNI compartment.

How do you submit credit claims to ESNI?

For simplicity, the operational methodology for submitting credit claims to ESNI is the same as that indicated in the TRICP specifications for the direct submission of claims to the Banque de France. You can consult these specifications by contacting ESNI or your management company. The calendar for submitting claims is the same as that applicable for the submission of claims to the Banque de France via TRICP.

Non-marketable debt instruments backed by eligible credit claims

The Eurosystem accepts non-marketable debt instruments backed by eligible credit claims (DECC) as collateral for its refinancing operations.

Main features of DECCs

DECCs are securities whose coupon structure must meet the Eurosystem’s eligibility criteria. They have two main features :

They are backed by a pool of credit claims:

• The value of the portfolio of underlying credit claims must always exceed the outstanding amount of DECCs.
• Each individual credit claim must meet the Eurosystem’s eligibility criteria.
• A haircut is applied to each credit claim, corresponding to the rate that would be applied if the claim were submitted individually to the Banque de France.
• The quality of each claim is assessed using one of the four credit assessment sources recognised by the Eurosystem (the Banque de France’s ICAS – FIBEN – and the bank internal rating systems already validated by the Eurosystem.
• The credit claim portfolio must be homogeneous (i.e. non-financial corporate claims cannot be grouped with public sector claims) and reporting should be carried out on a loan-by-loan basis via the Eurosystem portal.

Holders of DECCs have dual recourse, both to the originator of the claim and to the pool of claims.

Eurosystem eligibility of Euro Secured Notes

Only DECCs issued by a vehicle that has been approved by the Eurosystem are eligible as collateral for Eurosystem refinancing operations. France’s Euro Secured Notes Issuer (ESNI) has received Eurosystem approval.

Securities issued by ESNI can therefore be used as DECCs with the Banque de France, provided they meet the eligibility criteria for this asset class (as defined in Decision by the Governor No. 2015-03 amending Decision No. 2015-01). 

• Decision No. 2015-01 (in French)
• Decision No. 2015-03 (in French)