Security Structure
The security structure is available to all WSW participants, most of whom are housing associations. It consists of:
WSW’s security structure can be summarized as follows:
Primary security
The primary security is the housing associations’ own capital. WSW assesses the creditworthiness of housing associations applying to join. In the first instance a housing association must be able to meet its financial commitments itself. If its own resources are insufficient, a housing association may in certain circumstances be eligible for restructuring support from the Central Fund for Social Housing.
Secondary security
The secondary security is WSW’s capital. If housing associations fail to meet their interest and repayment commitments, the lender may call on WSW for these amounts. WSW has capital of €477 million (at the 2011 year-end) for this eventuality. If WSW’s capital falls below a certain level, it has to call on its participants’ committed capital. The total capital available to WSW for meeting payment liabilities consequently amounts to €3.7 billion.
If a WSW guarantee is called, WSW has the right to seek recourse from the relevant participant. The participant has undertaken not to grant any other parties a mortgage on properties made available to WSW as security and, on WSW’s request, to establish a mortgage in WSW’s favor on such properties. WSW also has recourse to the participant’s other assets. This limits as far as possible the losses that can be incurred by WSW.
Tertiary security
As well as the primary security, which comprises the assets of the housing associations, and the secondary security, which comprises WSW’s capital, it is important for lenders that there is also a tertiary form of security. This comprises:
- central government backstop (50%)
- municipalities’ backstop (50%).
If the first two forms of security are insufficient, WSW will request interest-free loans for the amount of the shortfall in its capital base, which has to amount to at least 0.25% of the guaranteed capital.
The terms and conditions applying are detailed in backstop agreements with the central government and municipalities. Neither the central government nor the municipalities can, however, cancel their backstop agreements in respect of existing loans or the refinancing of these loans. These backstops will remain valid until all existing commitments have been repaid since these commitments were entered into in the past with the consent of the central government. Twice a year WSW holds consultations with the central government and the Association of Netherlands Municipalities. The issues discussed at these meetings include budgets and cash flow forecasts, annual reports and accounts, the policy on discounts, the policy on assessing the creditworthiness of registered housing associations and developments in WSW’s capital.
The backstop position of the central government and municipalities consequently represents the ultimate layer of security in the structure.
Calls on WSW guarantees
WSW has never faced a claim under any guarantee it has provided and there are no indications to suggest that this is likely. WSW performs thorough annual checks of participants’ creditworthiness and does not guarantee more than the value of the collateral at a municipal level.