- Question ID
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2023_6742
- Legal act
- Regulation (EU) No 2017/2402 (SecReg)
- Topic
- Provisions applicable to all securitisations
- Article
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6
- COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
- Not applicable
- Article/Paragraph
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N/A
- Name of institution / submitter
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Centotrenta Servicing S.p.A.
- Country of incorporation / residence
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Italy
- Type of submitter
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Other
- Subject matter
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Risk retention obligation in case of voluntary liquidation of an Alternative investment fund (“AIF”) acting as retention holder under Article 6(3) of the Securitisation Regulation
- Question
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Assuming an alternative investment fund (“AIF”) set up to disburse loans to be subsequently securitised acts as retention holder under Article 6(3) of Regulation (EU) 2402/2017 (hereinafter, the “Securitisation Regulation”), should it be resolved to voluntarily liquidate the relevant AIF, what would be the appropriate modality to continue to retain the relevant net economic interest? Would the retained net economic interest be distributed to AIF’s unit-holders, pro quota to their holdings, or would AIF’s liquidator be obliged to wait and complete the liquidation process only after the retention obligation has ceased to exist?
- Background on the question
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An AIF, established pursuant to Directive (UE) 61/2011, provides financings and, in accordance with the Securitisation Regulation, securitises the related exposures and complies with its risk retention obligations according to Article 6(3) of the Securitisation Regulation: it is unclear whether, after the voluntary winding-up of the fund, title to the retained assets (i.e. the net economic interest of the securitisation) may be transferred to the relevant AIF’s unit-holders or whether it shall remain with the AIF until the retention obligation ceases to exist on the basis that, as envisaged by Article 6(1) of the Securitisation Regulation, the retained material net economic interest shall not be split amongst different types of retainers and not be subject to any credit-risk mitigation or hedging. In EBA’s final draft regulatory technical standards specifying the requirements for originators, sponsors, original lenders and servicers relating to risk retention pursuant to Article 6(7) of Regulation (EU) 2017/2402 as amended by Regulation (EU) 2021/557 -EBA/RTS/2022/04 (hereinafter, “Final Draft RTS”) more details are provided: in particular it is clarified, under Article 12(1), that “The obligation in the first subparagraph of Article 6(1) of Regulation (EU) 2017/2402 to retain on an ongoing basis a material net economic interest in the securitisation shall be deemed to have been met only where, taking into account the economic substance of the transaction, both of the following conditions are met: (a) the retained material net economic interest is not subject to any credit risk mitigation or hedging of either the retained securitisation positions or the retained exposures. Hedges of the net economic interest shall be permitted only where they do not hedge the retainer against the credit risk of either the retained securitisation positions or the retained exposures; b) the retainer shall not sell, transfer or otherwise surrender all or part of the rights, benefits or obligations arising from the retained net economic interest”. Provided that the obligation under b) above does not apply when, based upon Article 12(3)(b) “the retainer is, for legal reasons beyond its control and beyond the control of its shareholders, unable to continue acting in that capacity”.
In other words, for example, should the retainer be subjected to a compulsory liquidation proceeding in respect of which neither it nor its unit-holders have any control, then the relevant retainer ceasing to comply with the retention obligation would not violate its retention obligations.
- Submission date
- Final publishing date
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- Final answer
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The RTS on risk retention establishes in its Article 12(1)(b) the prohibition of selling, transferring or otherwise surrendering all or part of the rights, benefits or obligations arising from the retained net economic interest. However, according to paragraph 3, this shall not apply in any of the following events:
(a) in the event of the insolvency of the retainer;
(b) where the retainer, for legal reasons beyond its control and beyond the control of its shareholders, is unable to continue acting as a retainer;
(c) in the case of retention on a consolidated basis as referred to in Article 14.
In the case at hand, and subject to the fulfilment of the requirements in Article 2(7) of the RTS on risk retention by the AIF in order to be an eligible retainer, as the liquidation is voluntary, the exception set out in points a and b above do not apply. Therefore, the AIF’s liquidator shall be obliged to wait and complete the liquidation process only after the retention obligation has ceased to exist.
- Status
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Final Q&A
- Answer prepared by
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Answer prepared by the Joint ESAs Q&A
- Note to Q&A
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The present Q&A is also published as SecReg Q&A No. 19 on the Joint Q&A page.
Disclaimer
The Q&A refers to the provisions in force on the day of their publication. The EBA does not systematically review published Q&As following the amendment of legislative acts. Users of the Q&A tool should therefore check the date of publication of the Q&A and whether the provisions referred to in the answer remain the same.