Final draft adopted by the EBA and submitted to the European Commission
These Regulatory Technical Standards (RTS) specifying the requirements for originators, sponsors, original lenders and servicers related to risk retention, in line with the Securitisation Regulation, aim to clarify requirements relating to risk retention, thus reducing the risk of moral hazard and aligning interests. They also provide clarity on new topics, including risk retention in traditional securitisation of non-performing exposures (NPE).
The European Banking Authority (EBA) launched today a public consultation on draft Regulatory Technical Standards (RTS) specifying the requirements for originators, sponsors, original lenders and servicers related to risk retention, in line with the Securitisation Regulation. The RTS aim to clarify requirements relating to risk retention, thus reducing the risk of moral hazard and aligning interests. The RTS also provide clarity on new topics, including risk retention in traditional securitisation of non-performing exposures (NPE). The consultation runs until 30 September 2021.
The RTS carry over a substantial amount of provisions from the EBA RTS on risk retention submitted to the European Commission in July 2018. The RTS also include a number of new provisions, such as specifying modalities of risk retention in traditional NPE securitisations and specifying requirements for the expertise of servicers acting as a retainers in such NPE securitisations. In addition, the RTS address some specific issues, related, for instance, to the impact of fees payable to the retainer on risk retention, risk retention in re-securitisations or in securitisations of own issued debt instruments. They also provide clarification on the treatment of synthetic excess spread.
By providing additional clarity on risk retention in case of portfolios of NPE, this publication is also part of the EBA comprehensive work on supporting the functioning of the secondary markets for NPE. For more information about the EBA work on NPE you can read here.
Comments to this consultation can be sent to the EBA by clicking on the "send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 30 September 2021. All contributions received will be published following the end of the consultation, unless requested otherwise.
A public hearing will take place online on 14 September 2021 from 11:00 to 12:00 Paris time.
These draft RTS have been developed on the basis of Article 6(7) of Securitisation Regulation (Regulation (EU) 2017/2402), as amended by the Capital Market Recovery Package (Regulation (EU) 2021/557), which mandates the EBA to specify in greater detail the risk retention requirement in securitisation.
The European Banking Authority (EBA) published today its final draft Regulatory Technical Standards (RTS) specifying the requirements for originators, sponsors and original lenders related to risk retention as laid down in the Securitisation Regulation and as amended by the Capital Markets Recovery Package (CMRP). These RTS aim to provide clarity on the risk retention requirements ensuring a better alignment of interests and reducing the risk of moral hazard, thus contributing further to the development of a sound, safe and robust securitisation market in the EU.
The minimum retention requirement of 5% of the material net economic interest in the securitisation is essential to ensure that the sell-side parties have “skin in the game” addressing the fundamental issue of the possible misalignment of interest between the originators, sponsors and original lenders and investors.
Several modifications have been made to the 2018 EBA RTS on risk retention, which were not implemented in a Delegated Regulation by the Commission, to ensure consistency with the new mandate and to provide further clarity on some specific aspects, namely the adverse selection of assets by originators.
The modifications due to the CMRP focus on the modalities of risk retention in non-performing exposure (NPE) securitisations and the impact of fees payable to retainers on the risk retention requirement. These changes aim to facilitate the securitisation of non-performing exposures and are part of EBA’s broader work on supporting the functioning of the secondary markets for NPE. In addition, the RTS provide further clarity on the application of the risk retention requirement to resecuritisations, as well as the treatment of synthetic excess spread as a possible form of compliance.
Finally, while these RTS will replace the existing 2014 Commission Delegated Regulation, the Securitisation Regulation contains transitional provisions regarding the application of the existing Delegated Regulation to those securitisations whose securities were issued before its application date.
The RTS have been developed in accordance with Article 6 (7) of the Securitisation Regulation (EU) 2017/2402 as amended by the Regulation (EU) 2021/557 of 31 March 2021 (as part of the Capital Markets Recovery Package (CMRP), which mandates the EBA, in close cooperation with the ESMA and the European Insurance and Occupation Pensions Authority (EIOPA) to develop the RTS further specifying the risk retention requirements.
The European Banking Authority (EBA) launched today a public consultation on draft Regulatory Technical Standards (RTS) specifying the requirements for originators, sponsors, original lenders and servicers related to risk retention, in line with the Securitisation Regulation. The RTS aim to clarify requirements relating to risk retention, thus reducing the risk of moral hazard and aligning interests. The RTS also provide clarity on new topics, including risk retention in traditional securitisation of non-performing exposures (NPE). The consultation runs until 30 September 2021.
The RTS carry over a substantial amount of provisions from the EBA RTS on risk retention submitted to the European Commission in July 2018. The RTS also include a number of new provisions, such as specifying modalities of risk retention in traditional NPE securitisations and specifying requirements for the expertise of servicers acting as a retainers in such NPE securitisations. In addition, the RTS address some specific issues, related, for instance, to the impact of fees payable to the retainer on risk retention, risk retention in re-securitisations or in securitisations of own issued debt instruments. They also provide clarification on the treatment of synthetic excess spread.
By providing additional clarity on risk retention in case of portfolios of NPE, this publication is also part of the EBA comprehensive work on supporting the functioning of the secondary markets for NPE. For more information about the EBA work on NPE you can read here.
Comments to this consultation can be sent to the EBA by clicking on the "send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 30 September 2021. All contributions received will be published following the end of the consultation, unless requested otherwise.
A public hearing will take place online on 14 September 2021 from 11:00 to 12:00 Paris time.
These draft RTS have been developed on the basis of Article 6(7) of Securitisation Regulation (Regulation (EU) 2017/2402), as amended by the Capital Market Recovery Package (Regulation (EU) 2021/557), which mandates the EBA to specify in greater detail the risk retention requirement in securitisation.