Question ID:
Legal Act:
Regulation (EU) No 575/2013 (CRR)
Securitisation and Covered Bonds
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:
Not applicable
Disclose name of institution / entity:
Name of institution / submitter:
Clifford Chance
Country of incorporation / residence:
Type of submitter:
Consultancy firm
Subject Matter:
Risk Retention

Can the retention requirements under Article 405 of Regulation (EU) No 575/2013 (CRR) be satisfied by the provider of the junior/first loss funding for a CLO warehouse where such an entity has also been involved in the selection of the exposures and the setting of criteria, as it can be said, in such capacity, to be acting as "originator"? Also, where the warehouse provides financing for the acquisition of the majority of the exposures but further exposures are acquired from different sources after closing (and in accordance with pre-defined criteria), will this prevent the first loss warehouse provider from being the "originator"?

Background on the question:

"Originator" is defined under Article 4(13) of the CRR to include: "an entity which 26purchases a third party's exposures for its own account and then securitises them". This would appear to include junior/first loss funders of a CLO warehouse, and in so doing would comply with both the spirit as well as the letter of the CRR since it would clarify that entities which put together, fund and take risk on a portfolio for a securitisation are "originators".

Date of submission:
Published as Final Q&A:
Final Answer:

The first loss provider to a Collateralised Loan Obligation warehouse does not meet the definition of "originator" in Article 4(1)(13) of Regulation (EU) No 575/2013 since the first loss provider is not itself or through related entities, directly or indirectly, involved in the original agreement which created the obligations or potential obligations of the debtor or potential debtor giving rise to the exposure being securitised, nor does it acquire the portfolio of assets for its own account and then securitise them.  


This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General Financial Stability, Financial Services and Capital Markets Union) has prepared the answer, albeit that only the Court of Justice of the European Union can provide definitive interpretations of EU legislation. This is an unofficial opinion of that Directorate General, which the European Banking Authority publishes on its behalf. The answers are not binding on the European Commission as an institution. You should be aware that the European Commission could adopt a position different from the one expressed in such Q&As, for instance in infringement proceedings or after a detailed examination of a specific case or on the basis of any new legal or factual elements that may have been brought to its attention.


Final Q&A
Answer prepared by:
Answer prepared by the European Commission because it is a matter of interpretation of Union law.
Note to Q&A:

Update 26.03.2021: This Q&A has not yet been reviewed by the European Commission in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR).