Securitisation - DLA Piper Investment Rules of the World (2024)

EUSR Article 6 and Risk Retention RTS (CDR 2023/2175)

PRA Chapter 1, Chapter 2, Article 6 and Chapter 4

RTS Article 1 (Definitions)

For the purposes of this Regulation, the following definitions shall apply:

(a) ‘synthetic form of retention’ means the retention of a material net economic interest through the use of derivative instruments;

(b) ‘contingent form of retention’ means the retention of a material net economic interest through the use of credit support that ensures an immediate enforcement of the retention, including by guarantees, letters of credit, or similar forms of credit support.

5.1 Interpretation and application

5.1.3 R

(1) ‘contingent form of retention’ means retention of a material net economic interest through the use of guarantees, letters of credit and other similar forms of credit support ensuring an immediate enforcement of the retention;

(2) ‘synthetic form of retention’ means retention of a material net economic interest through the use of derivative instruments; and

(3) ‘UK Solvency II Firm’ has the same definition as in Article 2.1 of Chapter 2, Solvency II Firms: Insurance General Application of the PRA Rulebook.

1. Applications and definitions

contingent form of retention

means retention of a material net economic interest through the use of guarantees, letters of credit and other similar forms of credit support ensuring an immediate enforcement of the retention.

synthetic form of retention

means retention of a material net economic interest through the use of derivative instruments.

Article 6 Risk retention

1. The originator, sponsor or original lender of a securitisation shall retain on an ongoing basis a material net economic interest in the securitisation of not less than 5 %. That interest shall be measured at the origination and shall be determined by the notional value for off-balance-sheet items.

5.2 Retention of a material net economic interest

5.2.1 R

The originator, sponsor or original lender of a securitisation shall retain on an ongoing basis a material net economic interest in the securitisation of not less than 5%. That interest shall be measured at the origination and shall be determined by the notional value for off-balance-sheet items.

Chapter 2, Article 6 Risk retention

1. The originator, sponsor or original lender of a securitisation shall retain on an ongoing basis a material net economic interest in the securitisation of not less than 5%. That interest shall be measured at the origination and shall be determined by the notional value for off-balance-sheet items.

Where the originator, sponsor or original lender have not agreed between them who will retain the material net economic interest, the originator shall retain the material net economic interest.

5.2.2 R

Where the originator, sponsor or original lender have not agreed between them who will retain the material net economic interest, the originator shall

retain the material net economic interest.

Where the originator, sponsor or original lender have not agreed between them who will retain the material net economic interest, the originator shall retain the material net economic interest.

There shall be no multiple applications of the retention requirements for any given securitisation.

5.2.3 R

There shall be no multiple applications of the retention requirements for any given securitisation.

The material net economic interest shall not be split amongst different types of retainers and not be subject to any credit-risk mitigation or hedging.

5.2.4 R

The material net economic interest shall not be split amongst different types of retainers and shall not be subject to any credit-risk mitigation or hedging.

For the purposes of this Article, an entity shall not be considered to be an originator where the entity has been established or operates for the sole purpose of securitising exposures.

5.2.5 R

For the purposes of SECN 5, an entity shall not be considered to be an originator where the entity has been established or operates for the sole purpose of securitising exposures.

For the purposes of this Article and Chapter 4, an entity shall not be considered to be an originator where the entity has been established or operates for the sole purpose of securitising exposures.

RTS Article 2 (Retainers of a material net economic interest)

1. The requirement laid down in Article 6(1), first subparagraph, of Regulation (EU) 2017/2402, which states that the retained material net economic interest shall not be split amongst different types of retainers, shall be fulfilled by any of the following:

(a) the originator or originators;

(b) the sponsor or sponsors;

(d) the servicer or servicers in a traditional NPE securitisation, provided that they meet the requirement on expertise set out in Article 19 of this Regulation.

[see 5.3.1 below]

Chapter 4, Article 2 Retainers of material net economic interest

1. The requirement that the retained material net economic interest shall not be split amongst different types of retainers under Article 6(1) of Chapter 2 shall be fulfilled by any of the following:

(a) the originator or originators;

(b) the sponsor or sponsors; or

[See Article 6(2) below]

5.2.6 R

Subject to SECN 5.2.7R, originators shall not select assets to be transferred to the SSPE with the aim of rendering losses on the assets transferred to the SSPE, measured over the life of the transaction, or over a maximum of 4 years where the life of the transaction is longer than 4 years, higher than the

losses over the same period on comparable assets held on the balance sheet of the originator.

[See Article 6(2) below]

2. Where more than one originator is eligible to fulfil the retention requirement, each originator shall fulfil that requirement on a pro rata basis by reference to the securitised exposures for which it is the originator.

[see 5.3.2 below]

[The FCA rule tracks EUSR Recital (11):

“… However, that obligation should not prejudice in any way the right of originators or sponsors to select assets to be transferred to the SSPE that ex ante have a higher-than-average credit-risk profile compared to the average credit-risk profile of comparable assets that remain on the balance sheet of the originator, as long as the higher credit-risk profile of the assets transferred to the SSPE is clearly communicated to the investors or potential investors…”]

5.2.7 R

Originators may select assets to be transferred to the SSPE that ex ante have a higher than average credit risk profile as compared to the comparable assets, if any, that remain on the balance sheet of the originator provided that the higher credit risk profile of the assets transferred to the SSPE is clearly communicated to the investors or potential investors.

[see 2A below]

[see Article 6(3)]

5.2.8 R

[This corresponds to Article 6(3) in the EUSR and the PRA rules, and so is set out below alongside those]

[see Article 6(3)]

See Article 6(4) below]

5.2.9 R (1)

Where:

(a) a mixed financial holding company;

(b) a UK parent institution;

(d) a subsidiary of such a company or institution,

as an originator or sponsor, securitises exposures from one or more CRR firms, FCA investment firms or other financial institutions which are included in the scope of supervision on a consolidated basis, the requirements set out in SECN 5.2.1R to SECN 5.2.5R may be satisfied based on the consolidated situation of the mixed financial holding company, UK parent institution or financial holding company concerned.

See Article 6(4) below]

(2) Subject to the modifications for FCA investment firms in (3), (1) applies only if CRR firms, FCA investment firms or financial institutions which created the securitised exposures:

(a) comply with the requirements in Chapter 4 of the Internal Capital Adequacy Assessment Part of the PRA Rulebook; and

(b) deliver the information needed to satisfy the requirements in SECN 4 or equivalent PRA rules, in a timely manner, to the originator or sponsor and, if the originator or sponsor is a subsidiary, to the mixed financial holding company, UK parent institution or financial holding company which is the parent undertaking of the subsidiary.

See Article 6(4) below]

[No equivalent]

(3) In the case of FCA investment firms, compliance with the requirements set out in Article 4.2 of Chapter 4 of the Internal Capital Adequacy Assessment Part of the PRA Rulebook are modified in accordance with this subparagraph:

(a) FCA investment firms must have internal methodologies that enable them to assess the credit risk of exposures to individual obligors, securities or securitisation positions and credit risk at the portfolio level;

(b) the internal methodologies must not rely solely or

mechanistically on external credit ratings; and

(c) where an FCA investment firm determines the amount of own funds that it should hold by reference to a rating by an external credit assessment institution or by reference to the fact that an exposure is unrated, this does not exempt the FCA investment firm from additionally considering other relevant information for assessing its allocation of internal capital.

[No equivalent]

(4) In SECN 5.2.9R ‘subsidiary’ has the meaning given in Article 4(1)(16) of UK CRR.

5.2.10 R

[This corresponds to Article 6(5) in the EUSR and the PRA rules, and so is set out below alongside those]

5.2.11 R

[This corresponds to Article 6(6) in the EUSR and the PRA rules, and so is set out below alongside those]

[See RTS Article 2(1) above]

5.3.1 R

The requirement that the retained material net economic interest shall not be split among different types of retainers under SECN 5.2.4R shall be fulfilled by any of the following:

(1) the originator or originators;

(2) the sponsor or sponsors; or

(3) the original lender or original lenders.

[See Chapter 4, Article 2(1) above]

[See RTS Article 2(2) above]

5.3.2 R

Where more than one originator is eligible to fulfil the retention requirement each originator shall fulfil that requirement on a pro rata basis by reference to the securitised exposures for which it is the originator.

[See Chapter 4, Article 2(2) above]

3. Where more than one original lender is eligible to fulfil the retention requirement, each original lender shall fulfil that requirement on a pro rata basis by reference to the securitised exposures for which it is the original lender.

5.3.3 R

Where more than one original lender is eligible to fulfil the retention requirement, each original lender shall fulfil that requirement on a pro rata basis by reference to the securitised exposures for which it is the original lender.

4. By way of derogation from paragraphs 2 and 3, the retention requirement may be fulfilled in full by a single originator or original lender provided that one of the following conditions is met:

5.3.4 R

By way of derogation from SECN 5.3.2R and SECN 5.3.3R, the retention requirement may be fulfilled in full by a single originator or original lender provided that either of the following conditions is met:

4. By way of derogation from paragraphs 2 and 3, the retention requirement may be fulfilled in full by a single originator or original lender provided that either of the following conditions is met:

(a) the originator or original lender has established and is managing the asset-backed commercial paper (ABCP) programme or other securitisation;

(1) the originator or original lender has established and is managing the ABCP programme or other securitisation; or

(a) the originator or original lender has established and is managing the ABCP programme or other securitisation; or

(b) the originator or original lender has established the ABCP programme or other securitisation and has contributed more than 50 % of the total securitised exposures measured by nominal value at origination.

(2) the originator or original lender has established the ABCP programme or other securitisation and has contributed over 50% of the total securitised exposures measured by nominal value at origination.

(b) the originator or original lender has established the ABCP programme or other securitisation and has contributed over 50% of the total securitised exposures measured by nominal value at origination.

5. Where more than one sponsor is eligible to fulfil the retention requirement, the retention requirement shall be fulfilled by either:

5.3.5 R

Where more than one sponsor is eligible to fulfil the retention requirement, the retention requirement shall be fulfilled by either:

5. Where more than one sponsor is eligible to fulfil the retention requirement, the retention requirement shall be fulfilled by either:

(a) the sponsor whose economic interest is most closely aligned with the investor’s interest as agreed by all involved sponsors on the basis of objective criteria, including all of the following:

(i) the transaction’s fee structure;

(ii) the sponsor’s involvement in the establishment and management of the ABCP programme or other securitisation; and

(iii) the exposure to the credit risk of the securitisations; or

(1) the sponsor whose economic interest is most appropriately aligned with investors as agreed by the multiple sponsors on the basis of objective criteria including, but not limited to, the transaction’s fee structure, the sponsor’s involvement in the establishment and management of the ABCP programme or other securitisation and exposure to credit risk of the securitisations; or

(a) the sponsor whose economic interest is most appropriately aligned with investors as agreed by the multiple sponsors on the basis of objective criteria including, but not limited to, the transaction’s fee structure, the sponsor’s involvement in the establishment and management of the ABCP programme or other securitisation and exposure to credit risk of the securitisations; or

(b) each sponsor in proportion to the total number of sponsors.

(2) by each sponsor in proportion to the total number of sponsors.

(b) by each sponsor in proportion to the total number of sponsors.

6. Where more than one servicer is eligible to fulfil the retention requirement, the retention requirement shall be fulfilled by either:

(a) the servicer with the predominant economic interest in the successful workout of the exposures of the traditional NPE securitisation, as agreed by all servicers involved on the basis of objective criteria, including the transaction’s fee structure and the servicer’s available resources and expertise to manage the exposures’ workout process; or

(b) each servicer on a pro rata basis by reference to the securitised exposures that it manages, which shall be calculated as the sum of the net value of the securitised exposures that qualify as non-performing exposures and of the nominal value of the performing securitised exposures.

[No equivalent]

Only the EUSR permits the servicer (in respect of a securitisation of NPEs) to hold the risk retention.

7. An entity shall not be considered to have been established or to operate for the sole purpose of securitising exposures as referred to in Article 6(1), second subparagraph, of Regulation (EU) 2017/2402 where all of the following applies:

5.3.6 R

The following must be taken into account when assessing whether an entity has been established or operates for the sole purpose of securitising exposures as referred to in SECN 5.2.5R:

6. The following must be taken into account when assessing whether an entity has been established or operates for the sole purpose of securitising exposures, as referred to in the fifth sub-paragraph of Article 6(1) of Chapter 2:

(a) the entity has a strategy and the capacity to meet payment obligations consistent with a broader business model that involves material support from capital, assets, fees or other sources of income, by virtue of which the entity does not rely on the exposures to be securitised, on any interests retained or proposed to be retained in accordance with Article 6 of Regulation (EU) 2017/2402, or on any corresponding income from such exposures and interests, as its sole or predominant source of revenue;

(1) the entity has a business strategy and the capacity to meet payment obligations consistent with a broader business model and involving material support from capital, assets, fees or other income available to the entity, relying neither on the exposures being securitised, nor on any interests retained or proposed to be retained in accordance with SECN 5, as well as any corresponding income from such exposures and interests; and

(a) the entity has a business strategy and the capacity to meet payment obligations consistent with a broader business model and involving material support from capital, assets, fees or other income available to the entity, relying neither on the exposures being securitised, nor on any interests retained or proposed to be retained in accordance with Article 6 of Chapter 2, as well as any corresponding income from such exposures and interests; and

(b) the members of the management body have the necessary experience to enable the entity to pursue the established business strategy, as well as adequate corporate governance arrangements.

(2) the members of the management body have the necessary experience to enable the entity to pursue the established business strategy, and the entity has adequate corporate governance arrangements.

(b) the members of the management body have the necessary experience to enable the entity to pursue the established business strategy, as well as adequate corporate governance arrangements.

The PRA and FCA broadly follow the now-superseded EBA draft risk retention RTS in requiring that it should be “taken into account” whether the entity has a business strategy and payment capacity “consistent with a broader business model” and whether the members of its management body have the necessary experience to enable the entity to pursue the established business strategy and the entity has adequate corporate governance arrangements. Article 2(7) of the EU risk retention RTS (CDR 2023/2175) has made this into a safe harbour rather than a ”take into account” requirement, and the “predominant” requirement makes the safe harbour less accessible: the securitised exposures, the retained interest, and any corresponding income, must not be its “predominant source of revenue”. This seems to mean these cannot exceed 49% of its total income (assuming that “predominant” means “main”). Of course, if it does not meet the safe harbour test, that does not necessarily mean that it fails the sole purpose test: the RTS cannot change the meaning of the level 1 text. In any event, in practice the sole purpose test seems capable of being passed.

See further “Risk retention” and “Sole purpose”.

RTS Article 3 (Fulfilment of the retention requirement through a synthetic or contingent form of retention)

1. The fulfilment of the retention requirement in a manner equivalent to one of the options set out in Article 6(3) of Regulation (EU) 2017/2402 through a synthetic or contingent form of retention shall meet all of the following conditions:

5.4 Fulfilment of the retention requirement through a synthetic form of retention or contingent form or retention

5.4.1 R

(1) The fulfilment of the retention requirement in a manner equivalent to one of the options set out in SECN 5.2.8R through a synthetic or contingent form of retention shall meet all of the following conditions:

Article 3 Fulfilment of the retention requirement through a synthetic form of retention or contingent form of retention

1. The fulfilment of the retention requirement in a manner equivalent to one of the options set out in Article 6(3) of Chapter 2 through a synthetic form of retention or contingent form of retention, shall meet all of the following conditions:

(a) the amount retained is at least equal to the amount required under the option which the synthetic or contingent form of retention corresponds to;

(a) the amount retained is at least equal to the amount required under the option which the synthetic or contingent form of retention corresponds to; and

(a) the amount retained is at least equal to the amount required under the option which the synthetic form of retention or contingent form of retention corresponds to; and

(b) the retainer has explicitly disclosed in the final offering document, prospectus, transaction summary or overview of the main features of the securitisation that it will retain a material net economic interest in the securitisation through a synthetic or contingent form on an ongoing basis.

For the purposes of point (b), the retainer shall disclose in the final offering document, prospectus, transaction summary or overview of the main features of the securitisation all the details on the applicable synthetic or contingent form of retention, including the methodology used in the determination of the material net interest retained and an explanation to which of the options set out in Article 6(3), points (a) to (e), of Regulation (EU) 2017/2402 the retention is equivalent.

(2) For the purposes of SECN 5.4.1R(1)(b) the retainer shall disclose in the final offering document, prospectus transaction summary or overview of the main features of the securitisation, all the details on

the applicable synthetic form of retention or contingent form of retention, including, the methodology used in its determination of the material net interest retained and an explanation on which of the options in in SECN 5.2.8R the retention is equivalent to.

For the purposes of point (b), the retainer shall disclose in the final offering document, prospectus transaction summary or overview of the main features of the securitisation, all the details on the applicable synthetic form of retention or contingent form of retention, including the methodology used in its determination of the material net interest retained and an explanation on which of the options in Article 6(3) of Chapter 2 the retention is equivalent to.

2. Where an entity other than an institution as defined in Article 4(1), point (3), of Regulation (EU) No 575/2013 and other than an insurance or reinsurance undertaking as defined in Article 13, points (1) and (4), of Directive 2009/138/EC, retains an economic interest through a synthetic or contingent form of retention, that retained interest shall be fully collateralised in cash and be held under arrangements as referred to in Article 16(9) of Directive 2014/65/EU of the European Parliament and of the Council.

(3) Where an entity other than a CRR firm or a UK Solvency II Firm retains an economic interest through a synthetic form of retention or contingent form of retention, that interest retained on a synthetic or contingent basis must be fully collateralised in cash and held on a segregated basis as client money as referred to in CASS 7.12.1R.

2. Where an entity other than a CRR firm or a UK Solvency II Firm, retains an economic interest through a synthetic form of retention or contingent form of retention, that interest retained on a synthetic or contingent basis shall be fully collateralised in cash and held on a segregated basis as client money’ as referred to in CASS 7.12.1R of the FCA Handbook.

The UK rules extend the scope of the cash collateralisation exemption from only credit institutions to all CRR and Solvency II firms.

RTS Article 4 (Retention equivalent to not less than 5% of the nominal value of each of the tranches sold or transferred to investors)

The retention referred to in Article 6(3), point (a), of Regulation (EU) 2017/2402 (vertical slice) shall be fulfilled by any of the following methods:

5.5 Retention of not less than 5% of the nominal value of each of the tranches sold or transferred to investors

5.5.1 R

The retention of not less than 5% of the nominal value of each of the tranches sold or transferred to the investors referred to in SECN 5.2.8R(1)(a) may be complied with through any of the following methods:

Article 4 Retention of not less than 5% of the nominal value of each of the tranches sold or transferred to investors

1. The retention of not less than 5% of the nominal value of each of the tranches sold or transferred to the investors as referred to in Article 6(3)(a) of Chapter 2 may be complied with through any of the following methods:

(a) direct retention of not less than 5 % of the nominal value of each of the tranches sold or transferred to investors;

[No equivalent but covered by (3) below]

[No No equivalent but covered by (c) below

[see (c) below]

(1) the retention of not less than 5% of the nominal value of each of the securitised exposures, provided that the retained credit risk ranks pari passu with or is subordinated to the credit risk securitised in relation to the same exposures;

(a) the retention of not less than 5% of the nominal value of each of the securitised exposures, provided that the retained credit risk ranks pari passu with or is subordinated to the credit risk securitised in relation to the same exposures;

(b) the retention of an exposure which exposes its holder to the credit risk of each issued tranche of a securitisation transaction on a pro-rata basis of not less than 5 % of the total nominal value of each of the issued tranches;

[see (3) below]

[see (c) below]

(c) the retention of not less than 5 % of the nominal value of each of the securitised exposures, provided that the retained credit risk ranks pari passu with or is subordinated to the credit risk securitised in relation to the same exposures;

[see (1) above]

[see (a) above]

(d) the provision, in the context of an ABCP programme, of a liquidity facility, provided that all of the following conditions are met:

(i) the liquidity facility covers 100 % of the share of the credit risk of the securitised exposures of the securitisation transaction that is funded by the ABCP programme;

(ii) the liquidity facility covers the credit risk for as long as the retainer has to retain the material net economic interest;

(iii) the liquidity facility is provided by the originator, sponsor or original lender in the securitisation transaction;

(iv) the investors have been given access to information within the initial disclosure that enables them to verify that points (i), (ii) and (iii) are complied with.

(2) the provision, in the context of an ABCP programme, of a liquidity facility, where all the following conditions are met:

(a) the liquidity facility covers 100% of the share of the credit risk of the securitised exposures of the relevant securitisation transaction that is being funded by the respective ABCP programme;

(b) the liquidity facility covers the credit risk for as long as the retainer has to retain the material net economic interest by means of such liquidity facility for the relevant securitisation transaction;

(c) the liquidity facility is provided by the originator, sponsor or original lender in the securitisation transaction; and

(d) the investors becoming exposed to such securitisations have been given access to appropriate information with the initial disclosure to enable them to verify that (a), (b) and (c) are complied with; or

(b) the provision, in the context of an ABCP programme, of a liquidity facility, where the following conditions are met:

(i) the liquidity facility covers 100% of the share of the credit risk of the securitised exposures of the relevant securitisation transaction that is being funded by the respective ABCP programme;

(ii) the liquidity facility covers the credit risk for as long as the retainer has to retain the material net economic interest by means of such liquidity facility for the relevant securitisation transaction;

(iii) the liquidity facility is provided by the originator, sponsor or original lender in the securitisation transaction; and

(iv) the investors becoming exposed to such securitisation have been given access to appropriate information with the initial disclosure to enable them to verify that points (i), (ii) and (iii) are complied with; or

[see (b) above]

(3) the retention of an exposure which exposes its holder to the credit risk of each issued tranche of a securitisation transaction on a prorata basis (vertical tranche) of not less than 5% of the total nominal value of each of the issued tranches.

(c) the retention of an exposure which exposes its holder to the credit risk of each issued tranche of a securitisation transaction on a pro-rata basis (vertical tranche) of not less than 5% of the total nominal value of each of the issued tranches.

RTS Article 5 (Retention of the originator’s interest in a revolving securitisation or securitisation of revolving exposures)

The retention of the originator’s interest of not less than 5 % of the nominal value of each of the securitised exposures as referred to in Article 6(3), point (b), of Regulation (EU) 2017/2402 shall only be considered fulfilled where the retained credit risk of such exposures ranks pari passu with, or is subordinated to, the credit risk securitised in relation to the same exposures.

5.6 Retention of the originator’s interest in a revolving securitisation of revolving exposures

5.6.1 R

The retention of the originator’s interest of not less than 5% of the nominal value of each of the securitised exposures as referred to in SECN 5.2.8R(1)(b) shall only be considered fulfilled where the retained credit risk of such exposures ranks pari passu with or is subordinated to the credit risk securitised in relation to the same exposures.

Article 5 Retention of the originator’s interest in a revolving securitisation of revolving exposures

1. The retention of the originator’s interest of not less than 5% of the nominal value of each of the securitised exposures as referred to in point (b) of Article 6(3) of Chapter 2 shall only be considered fulfilled where the retained credit risk of such exposures ranks pari passu with or is subordinated to the credit risk securitised in relation to the same exposures.

RTS Article 6 (Retention of randomly selected exposures equivalent to no less than 5% of the nominal value of the securitised exposures)

1. The pool of at least 100 potentially securitised exposures from which retained non-securitised and securitised exposures are to be randomly selected, as referred to in Article 6(3), point (c), of Regulation (EU) 2017/2402, shall be sufficiently diverse to avoid an excessive concentration of the retained interest.

5.7 Retention of randomly selected exposures equivalent to not less than 5% of the nominal value of the securitised exposures

5.7.1 R

(1) The pool of at least 100 potentially securitised exposures from which retained non-securitised and securitised exposures are to be randomly selected, as referred to in SECN 5.2.8R(1)(c), shall be sufficiently diverse to avoid an excessive concentration of the retained interest.

Article 6 The retention of randomly selected exposures equivalent to not less than 5% of the nominal value of the securitised exposures

1. The pool of at least 100 potentially securitised exposures from which retained non-securitised and securitised exposures are to be randomly selected, as referred to in point (c) of Article 6(3) of Chapter 2, shall be sufficiently diverse to avoid an excessive concentration of the retained interest.

2. When selecting the exposures referred to in paragraph 1, retainers shall take into account quantitative and qualitative factors that are appropriate for the type of securitised exposures to ensure that the distinction between retained nonsecuritised and securitised exposures is random. For that purpose, and where relevant, retainers shall take into consideration the following factors when selecting exposures:

(a) the time of origination of the loan (vintage);

(b) the type of securitised exposures;

(d) the origination date;

(e) the maturity date;

(f) the loan to value ratio;

(g) the collateral type;

(h) the industry sector;

(i) the outstanding loan balance;

(j) any other factor deemed relevant by the retainer.

(2) When selecting the exposures, referred to in SECN 5.7.1R(1), retainers shall take into account quantitative and qualitative factors that are appropriate for the type of securitised exposures to ensure that the distinction between retained non securitised and securitised exposures is random. For that purpose, and where relevant, retainers shall take into consideration the following factors when selecting exposures:

(a) the time of the origination of the loan (vintage);

(b) the type of securitised exposures;

(d) the origination date;

(e) the maturity date;

(f) the loan to value ratio;

(g) the collateral type;

(h) the industry sector;

(i) the outstanding loan balance; and

(j) any other factor deemed relevant by the retainer.

2. When selecting the exposures referred to in paragraph 1, retainers shall take into account quantitative and qualitative factors that are appropriate for the type of securitised exposures to ensure that the distinction between retained non-securitised and securitised exposures is random. For that purpose, and where relevant, retainers shall take into consideration the following factors when selecting exposures:

(a) the time of the origination of the loan (vintage):

(b) the type of securitised exposures;

(d) the origination date;

(e) the maturity date;

(f) the loan to value ratio;

(g) the collateral type;

(h) the industry factor;

(i) the outstanding loan balance; and

(j) any other factor deemed relevant by the retainer.

3. Retainers shall not select different individual exposures at different points in time, except where that may be necessary to fulfil the retention requirement in relation to a securitisation in which the securitised exposures fluctuate over time, either due to new exposures being added to the securitisation or to changes in the level of the individual securitised exposures.

(3) Retainers shall not select different individual exposures at different points in time, except where that may be necessary to fulfil the retention requirement in relation to a securitisation in which the securitised exposures fluctuate over time, either due to new exposures being added to the securitisation or to changes in the level of the individual securitised exposures.

4. Where the retainer is the securitisation’s servicer, the selection conducted in accordance with this Article shall not lead to a deterioration in the servicing standards applied by the retainer on the transferred exposures relative to the retained exposures.

(4) Where the retainer is the securitisation’s servicer, the selection conducted in accordance with SECN 5.7.1R must not lead to a deterioration in the servicing standards applied by the retainer on the

transferred exposures relative to the retained exposures.

exposures relative to the retained exposures.

RTS Article 7 (Retention of the first loss tranche)

1. The retention of the first loss tranche referred to in Article 6(3), point (d), of Regulation (EU) 2017/2402 shall be fulfilled by any of the following methods:

(a) holding either on-balance sheet or off-balance sheet positions;

5.8 Retention of the first loss tranche

5.8.1 R (1)

The retention of the first loss tranche referred to in SECN 5.2.8R(1)(d) may be fulfilled by holding either on-balance sheet or off-balance sheet positions and by either of the following methods:

Article 7 Retention of the first loss tranche

1. The retention of the first loss tranche referred to in point (d) of Article 6(3) of Chapter 2 may be fulfilled by holding either on-balance sheet or off-balance sheet positions and by any of the following methods:

(b) holding an exposure by means of a provision of a contingent form of retention or of a liquidity facility in the context of an ABCP programme, which fulfils all of the following criteria:

(a) provision of a contingent form of retention or of a liquidity facility in the context of an ABCP programme, which fulfils all of the following criteria:

(a) provision of a contingent form of retention or of a liquidity facility in the context of an ABCP programme which fulfils all of the following criteria:

(i) the exposure covers at least 5 % of the nominal value of the securitised exposures;

(i) the exposure covers at least 5% of the nominal value of the securitised exposures;

(ii) the exposure constitutes a first loss position in relation to the securitisation;

(iii) the exposure covers the credit risk for the entire duration of the retention commitment;

(iv) the exposure is provided by the retainer;

(iv) the exposure is provided by the retainer; and

(v) the investors have been given access within the initial disclosure to all information necessary to verify that points (i) to (iv) are complied with;

(v) the investors have been given access within the initial disclosure to all information necessary to verify that (i) to (iv) are complied with; or

(v) the investors have been given access within the initial disclosure to all information necessary to verify that points (i) to (iv) are complied with; or

(c) overcollateralisation, as defined in Article 242, point (9), of Regulation (EU) No 575/2013, if that overcollateralisation operates as a ‘first loss’ position of not less than 5 % of the nominal value of the securitised exposures.

(b) overcollateralisation, if it operates as a ‘first loss’ position of not less than 5% of the nominal value of the securitised exposures.

(b) overcollateralisation, as defined to [sic] in point (9) of Article 242 of CRR, if that overcollateralisation operates as a ‘first loss’ position of not less than 5% of the nominal value of the securitised exposures.

2. Where the first loss tranche exceeds 5 % of the nominal value of the securitised exposures, the retainer may choose to retain a pro-rata portion of such first loss tranche only, provided that that portion is equivalent to at least 5 % of the nominal value of the securitised exposures.

(2) Where the first loss tranche exceeds 5% of the nominal value of the securitised exposures, the retainer may choose to retain a pro-rata portion of such first loss tranche only, provided that portion is equivalent to at least 5% of the nominal value of the securitised exposures.

2. Where the first loss tranche exceeds 5% of the nominal value of the securitised exposures, the retainer may chose [sic] to retain a pro-rata portion of such first loss tranche only, provided that this portion is equivalent to at least 5% of the nominal value of the securitised exposures.

RTS Article 8 (Retention of a first loss exposure of not less than 5% of every securitised exposure)

1. The retention of a first loss exposure at the level of every securitised exposure as referred to in Article 6(3), point (e), of Regulation (EU) 2017/2402 shall only be considered to be fulfilled where the retained credit risk is subordinated to the credit risk securitised in relation to the same exposures.

5.9 Retention of a first loss exposure of not less than 5% of every securitised exposure

5.9.1 R

(1) The retention of a first loss exposure at the level of every securitised exposure as referred to in SECN 5.2.8R(1)(e) shall only be considered to be fulfilled where the retained credit risk is subordinated to the credit risk securitised in relation to the same exposures.

Article 8 Retention of a first loss exposure of not less than 5% of every securitised exposure

1. The retention of a first loss exposure at the level of every securitised exposure as referred to in point (e) of Article 6(3) of Chapter 2 shall only be considered to be fulfilled where the retained credit risk is subordinated to the credit risk securitised in relation to the same exposures.

2. By way of derogation from paragraph 1, the retention of a first loss exposure at the level of every securitised exposure as referred to in Article 6(3), point (e), of Regulation (EU) 2017/2402 may also be fulfilled through the sale by the originator or original lender of the underlying exposures at a discounted value where each of the following conditions is met:

(2) By way of derogation from (1), the retention of a first lost exposure at the level of every securitised exposure as referred to in SECN 5.2.8R(1)(e) may also be fulfilled through the sale by the originator or original lender of the underlying exposures at a discounted value where each of the following conditions is met:

2. By way of derogation from paragraph 1 of this Article, the retention of a first loss exposure at the level of every securitised exposure as referred to in point (e) of Article 6(3) of Chapter 2 may also be fulfilled through the sale by the originator or original lender of the underlying exposures at a discounted value where each of the following conditions is met:

(a) the amount of the discount is not less than 5 % of the nominal value of each exposure;

(a) the amount of the discount is not less than 5% of the nominal value of each exposure; and

(b) the discounted sale amount is refundable to the originator or original lender only if that discounted sale amount is not absorbed by losses related to the credit risk associated to the securitised exposures.

RTS Article 9 (Application of the retention options on traditional NPE securitisations)

1. In the case of NPE securitisations as referred to in Article 6(3a) of Regulation (EU) 2017/2402, for the purpose of applying Article 4, point (a), and Articles 5 to 8 of this Regulation to the share of non-performing exposures in the pool of underlying exposures of a securitisation, any reference to the nominal value of the securitised exposures shall be construed as a reference to the net value of the non-performing exposures.

5.10 Application of the retention options on NPE securitisations

5.10.1 R

(1) In case of NPE securitisations as referred to in SECN 5.2.8(2), for the purposes of applying SECN 5.5.1R(1) and SECN 5.6R to SECN 5.9R to the share of non-performing exposures in the pool of underlying exposures of a securitisation, any reference to the nominal value of the securitised exposures shall be construed as a reference to the net value of the non-performing exposures.

Article 9 Application of the retention options on NPE securitisations

1. In the case of NPE securitisations as referred to in Article 6(3A) of Chapter 2, for the purposes of applying Article 4(1)(a) and Articles 5 to 8 of this Chapter to the share of non-performing exposures in the pool of underlying exposures of a securitisation, any reference to the nominal value of the securitised exposures shall be construed as a reference to the net value of the non-performing exposures.

2. For the purposes of Article 6 of this Regulation, the net value of the retained non-performing exposures shall be calculated using the same amount of the non-refundable purchase price discount that would have been applied had the retained non-performing exposures been securitised.

(2) For the purposes of SECN 5.7, the net value of the retained nonperforming exposures shall be calculated using the same amount of the non-refundable purchase price discount that would have been applied had the retained non-performing exposures been securitised.

2. For the purposes of Article 6 of this Chapter, the net value of the retained non-performing exposures shall be calculated using the same amount of the non-refundable purchase price discount that would be applied had the retained non-performing exposures been securitised.

3. For the purposes of Article 4, point (a), Article 5 and Article 8 of this Regulation, the net value of the retained part of the non-performing exposures shall be calculated using the same percentage of the non-refundable purchase price discount that applies to the part that is not retained.

(3) For the purposes of SECN 5.2.8R(1)(a), SECN 5.6 or SECN 5.9 the net value of the retained part of the non-performing exposures shall be computed using the same percentage of the non-refundable purchase price discount that applies to the part that is not retained.

3. For the purposes of Article 4(1)(a), Article 5 and Article 8 of this Chapter, the net value of the retained part of the non-performing exposures shall be computed using the same percentage of the non-refundable purchase price discount that applies to the part that is not retained.

4. Where the non-refundable purchase price discount as referred to in Article 6(3a), second subparagraph, of Regulation (EU) 2017/2402 has been agreed at the level of the pool of underlying non-performing exposures or at sub-pool level, the net value of individual securitised non-performing exposures included in the pool or sub-pool, as applicable, shall be calculated by applying a corresponding share of the non-refundable purchase price discount to each of the nonperforming securitised exposures in proportion to their nominal value or, where applicable, their outstanding value at the time of origination.

(4) Where the non-refundable purchase price discount as referred to in SECN 5.2.8(2)(b) has been agreed at the level of the pool of underlying non-performing exposures, the net value of individual securitised non-performing exposures included in the pool or subpool, as applicable, shall be calculated by applying a corresponding share of the non-refundable purchase price discount agreed at pool or sub-pool level to each of the securitised non-performing exposures in proportion to their nominal value or, where applicable, their outstanding value at the time of origination.

4. Where the non-refundable purchase price discount as referred to in the second subparagraph of Article 6(3A) of Chapter 2 has been agreed at the level of the pool of underlying nonperforming exposures, the net value of individual securitised non-performing exposures included in the pool or sub-pool, as applicable, shall be calculated by applying a corresponding share of the non-refundable purchase price discount agreed at pool or sub-pool level to each of the securitised non-performing exposures in proportion to their nominal value or, where applicable, their outstanding value at the time of origination.

5. Where the non-refundable purchase price discount includes the difference between the nominal amount of one tranche or several tranches of an NPE securitisation underwritten by the originator for subsequent sale and the price at which that tranche or those tranches are first sold to unrelated third parties as referred to in Article 6(3a), second subparagraph, of Regulation (EU) 2017/2402, that difference shall be taken into account in the calculation of the net value of individual securitised non-performing exposures by applying a corresponding share of the difference to each of the non-performing securitised exposures in proportion to their nominal value.

(5) Where the non-refundable purchase price discount includes the difference between the nominal amount of one tranche or several tranches of a NPE securitisation underwritten by the originator for subsequent sale and the price at which that tranche or those tranches are first sold to unrelated third parties as referred to in SECN 5.2.8R(2)(c), that difference shall be taken into account in the calculation of the net value of individual securitised non-performing exposures by applying a corresponding share of the difference to each of the securitised non-performing exposures in proportion to their nominal value.

5. Where the non-refundable purchase price discount includes the difference between the nominal amount of one tranche or several tranches of a NPE securitisation underwritten by the originator for subsequent sale and the price at which that tranche or those tranches are first sold to unrelated third parties as referred to in the second subparagraph of Article 6(3A) of Chapter 2, that difference shall be taken into account in the calculation of the net value of individual securitised non-performing exposures by applying a corresponding share of the difference to each of the securitised non-performing exposures in proportion to their nominal value.

This was one of the five reforms heralded by H.M. Treasury’s December 2022 policy note. The UK rules provide that the 5% retention should be calculated based on the value, and not the nominal amount. The EUSR has already done this, and gone further, for example (Article 6(1)) by permitting the servicer to hold the risk retention. The PRA said in CP15/23 that it “does not at this point propose any other policy change relating to NPE securitisations, but may consider this in the future”.

RTS Article 10 (Measurement of the level of retention)

1. When measuring the level of retention of the net economic interest, the following criteria shall be applied:

5.11 Measurement of the level of retention

5.11.1 R (1) When measuring the level of retention of the net economic interest, the following criteria shall be applied:

Article 10 Measurement of the level of retention

1. When measuring the level of retention of the net economic interest, the following criteria shall be applied:

(a) the origination shall be the time at which the exposures were first securitised, which shall be one of the following:

(i) the date of the issuance of securities;

(ii) the date of the signature of the credit protection agreement;

(iii) the date of the agreement on a refundable purchase price discount;

(a) the origination shall be considered as the time at which the exposures were first securitised;

(b) where the calculation of the level of retention is based on nominal values, the acquisition price of assets shall not be taken into account for the purpose of that calculation;

(b) where the calculation of the level of retention is based on nominal values, it shall not take into account the acquisition price of assets;

(c) the finance charge collections and other fee income received in respect of the securitised exposures in a traditional securitisation net of costs and expenses (traditional excess spread) shall not be taken into account when measuring the retainer’s net economic interest;

(c) finance charge collections and other fee income in respect of the securitised exposures net of costs (‘excess spread’) shall not be taken into account when measuring the retainer’s net economic interest; and

(‘excess spread’) shall not be taken into account when measuring the retainer’s net economic interest; and

(d) where the originator acts as the securitisation’s retainer and applies the retention option referred to in Article 6(3), point (d), of Regulation (EU) 2017/2402, and where the exposure value of the synthetic excess spread that provides credit enhancement to all the tranches of the synthetic securitisation and serves as a first loss protection is subject to capital requirements in accordance with the prudential regulation applicable to the originator, the originator may take the exposure value of the synthetic excess spread into account when calculating the material net economic interest in accordance with Article 7 of this Regulation by treating the exposure value of the synthetic excess spread as retention of the first loss tranche, in addition to any actual retention of the first loss tranche;

[no equivalent]

(e) the retention option and methodology used to calculate the net economic interest shall not be changed during the life of a securitisation, unless exceptional circ*mstances require a change and that change is not used as a means to reduce the amount of the retained interest.

(d) the retention option and methodology used to calculate the net economic interest shall not be changed during the life of a securitisation transaction, unless exceptional circ*mstances require a change and that change is not used as a means to reduce the amount of the retained interest.

2. The retainer shall not be required to constantly replenish or readjust its retained interest to at least 5 % when losses are realised on its retained exposures or allocated to its retained positions.

(2) The retainer shall not be required to replenish or readjust its retained interest to at least 5% as losses are realised on its retained exposures or allocated to its retained positions.

2. The retainer shall not be required to replenish or readjust its retained interest to at least 5% as losses are realised on its retained exposures or allocated to its retained positions.

RTS Article 11 (Measurement of the material net economic interest to be retained for exposures in the form of drawn and undrawn amounts of credit facilities)

The calculation of the net economic interest to be retained for credit facilities, including credit cards, shall be based on amounts already drawn, realised or received only and shall be adjusted in accordance with changes to those amounts.

5.11A Measurement of the material net economic interest to be retained for exposures in the form of drawn and undrawn amounts of credit facilities

5.11A.1 R

Article 11 Measurement of the material net economic interest to be retained for exposures in the form of drawn and undrawn amounts of credit facilities

1. The calculation of the net economic interest to be retained for credit facilities, including credit cards, shall be based on amounts already drawn, realised or received only and shall be adjusted in accordance with changes to those amounts.

RTS Article 12 (Prohibition of hedging or selling the retained interest)

1. The obligation laid down in Article 6(1), first subparagraph, 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:

5.12 Prohibition of hedging or selling the retained interest

5.12.1 R

(1) The obligation in SECN 5.2.1R 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:

Article 12 Prohibition of hedging or selling the retained interest

1. The obligation in the first subparagraph of Article 6(1) of Chapter 2 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,

(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; and

(b) the retainer does not sell, transfer or otherwise surrender all or part of the rights, benefits or obligations arising from the retained net economic interest.

By way of derogation from point (a), the retainer may hedge the net economic interest where the hedge is not against the credit risk of either the retained securitisation positions or the retained exposures.

[Paragraph 2 appears below, after recital (7).]

(2) By way of derogation from SECN 5.12.1R(1)(a), the retainer may hedge the net economic interest where the hedge:

(a) is not against the credit risk of either the retained securitisation positions or the retained exposures; or

1A. By way of derogation of [sic] paragraph 1(a) of this Article, the retainer may hedge the net economic interest where the hedge:

(a) is not against the credit risk of either the retained securitisation positions or the retained exposures; or

Recital (7) of the risk retention RTS:

… Hedging should, however, also be allowed where it is undertaken prior to the securitisation as a legitimate and prudent element of credit granting or risk management and does not create a differentiation for the retainer’s benefit between the credit risk of the retained securitisation

positions or exposures and the securitisation positions or exposures transferred to investors…

(b) is undertaken prior to the securitisation as a prudent element of credit granting or risk management and does not create a differentiation for the retainer’s benefit between the credit risk of the retained securitisation positions or exposures and the securitisation positions or exposures transferred to investors.

(b) ) is undertaken prior to the securitisation as a prudent element of credit granting or risk

management and does not create a differentiation for the retainer’s benefit between the credit risk of the retained securitisation positions or exposures and the securitisation positions or exposures transferred to investors

2. The retainer may use retained exposures or securitisation positions as collateral for secured funding purposes including, where relevant, funding arrangements that involve a sale, transfer or other surrender of all or part of the rights, benefits or obligations arising from the retained net economic interest, provided that such use as collateral does not transfer the exposure to the credit risk of those retained exposures or securitisation positions to a third party.

(3) The retainer may use retained exposures or securitisation positions as collateral for secured funding purposes including, where relevant, funding arrangements that involve a sale, transfer or other surrender of all or part of the rights, benefits or obligations arising from the retained net economic interest, provided that such use as collateral does not transfer the exposure to the credit risk of those retained exposures or securitisation positions to a third party.

3. Paragraph 1, point (b), shall not apply in any of the following events:

(4) SECN 5.12.1R(1)(b) shall not apply:

3. Paragraph 1(b) of this Article shall not apply:

(a) in the event of the insolvency of the retainer;

(a) in the event of the insolvency of the retainer; or

(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;

[no equivalent]

(b) in the case of retention on a consolidated basis, in accordance with SECN 5.14.

(b) in the case of retention on a consolidated basis, in accordance with Article 14 of this Chapter.

The FCA and PRA rules permit a change of the risk retainer in the event of the retainer’s insolvency. This was one of the five reforms heralded by H.M. Treasury’s December 2022 policy note.

Article 12(3) of the Risk retention RTS goes further, also permitting a change “where the retainer, for legal reasons beyond its control and beyond the control of its shareholders, is unable to continue acting as a retainer”.

The UK rules do not go this far. Instead, the PRA (in PS7/24) directs attention to its CP3/24 consultation paper, “The Prudential Regulation Authority’s approach to rule permissions and waivers”, and in PS24/4, the FCA adopts a similar approach. Both the FCA and the PRA have two types of powers under FSMA to grant waivers: under section 138BA, which was introduced by FSMA 2023, and under section 138A. The tone of both PS7/24 and the FCA’s policy statement PS24/4 is that section 138A is the preferred approach.

It is worth noting that, in both the UK and the EU, if a risk retainer goes into insolvency, it can only transfer to another willing party which is a sponsor, an originator or the original lender, and so if the now-insolvent entity had been both the originator and the original lender, there would be no possible transferee complying with the basic risk retention requirement.

This was one of the five reforms heralded by H.M. Treasury’s December 2022 policy note.

RTS Article 13 (transactions for which the retention requirement does not apply, as referred to Article 6(6) of regulation (EU) 2017/2402)

Transactions for which the retention requirement does not apply, as referred to in Article 6(6) of Regulation (EU) 2017/2402, shall include securitisation positions in the correlation trading portfolio which are either reference instruments as referred to in Article 338(1), point (b), of Regulation (EU) No 575/2013 or which are eligible for inclusion in the correlation trading portfolio.

5.13 Transactions for which the retention requirement does not apply as referred to in SECN 5.2.11R

5.13.1 R Transactions for which the retention requirement does not apply, as referred to in SECN 5.2.11R, shall include securitisation positions in the correlation trading portfolio, which are either reference instruments satisfying the criterion in Article 338(1)(b) of the UK CRR or which are eligible for inclusion in the correlation trading portfolio.

Article 13 Transactions for which the retention requirement does not apply as referred to in Article 6(6) of Chapter 2

1. Transactions for which the retention requirement does not apply, as referred to in Article 6(6) of Chapter 2, shall include securitisation positions in the correlation trading portfolio which are either reference instruments satisfying the criterion in Article 338(1)(b) of CRR or which are eligible for inclusion in the correlation trading portfolio.

RTS Article 14 (retention on a consolidated basis)

Mixed financial holding companies as defined in Article 2, point (15), of Directive 2002/87/EC of the European Parliament and of the Council, parent institutions, or financial holding companies, that are established in the Union and that satisfy the requirements referred to in Article 6(1) of Regulation (EU) 2017/2402 on the basis of their consolidated situation in accordance with paragraph 4 of that Article shall, where the retainer is no longer included in the scope of supervision on a consolidated basis, ensure that one or more of the remaining entities included in the scope of supervision on a consolidated basis fulfils the retention requirement.

5.14 Retention on a consolidated basis

5.14.1 R A mixed financial holding company, a UK parent institution or financial holding company established in the United Kingdom satisfying, in

accordance with SECN 5.2.9R, the retention requirement on the basis of its consolidated situation shall, in the case the retainer is no longer included in the scope of supervision on a consolidated basis, ensure that one or more of the remaining entities included in the scope of supervision on a consolidated basis fulfils the retention requirement.

Article 14 Retention on a consolidated basis

1. A mixed financial holding company, a UK parent institution or financial holding company established in the UK (as defined in Article 6(4) of Chapter 2) satisfying, in accordance with Article 6(4) of Chapter 2, the retention requirement on the basis of its consolidated situation shall, in the case the retainer is no longer included in the scope of supervision on a consolidated basis, ensure that one or more of the remaining entities included in the scope of supervision on a consolidated basis fulfils the retention requirement.

RTS Article 15 (Requirements on the allocation of cash flows and losses to the retained interest and on fees payable to the retainer)

1. Retainers shall not use arrangements or embedded mechanisms in the securitisation by virtue of which the retained interest at origination would decline faster than the interest transferred. In the allocation of cash flows, the retained interest shall not be prioritised to preferentially benefit from being repaid or amortised ahead of the transferred interest. The amortisation of the retained interest via cash flow allocation in accordance with the first subparagraph or through the allocation of losses that, in effect, reduces the level of retention over time, shall be allowed.

5.15 Arrangements or embedded mechanisms

5.15.1 R

Retainers shall not use arrangements or embedded mechanisms in the securitisation by virtue of which the retained interest at origination would decline faster than the interest transferred. In the allocation of the cash flows, the retained interest shall not be prioritised to preferentially benefit from being repaid or amortised ahead of the transferred interest. The

amortisation of the retained interest via cash flow allocation or through the allocation of losses that, in effect, reduce the level of retention over time, shall be allowed.

Article 15 Arrangements or embedded mechanisms

2. The amortisation of the retained interest via cash flow allocation set out in paragraph 1 or through the allocation of losses that, in effect, reduce the level of retention over time shall be allowed.

2. For the purposes of paragraph 1, arrangements on any fees, either fixed or contingent on the volume or the performance of the securitised exposures or the evolution of relevant market benchmarks, payable to the retainer on a priority basis to remunerate that retainer for any services provided to the securitisation shall only be deemed consistent with the requirements on the retained interest laid down in that paragraph where all of the following conditions are met:

(a) the amount of the fees is set on an arm’s length basis having regard to comparable transactions in the market;

(b) the fees are structured as a consideration for the provision of the service and do not create a preferential claim in the securitisation cash flows that effectively declines the retained interest faster than the transferred interest.

For the purposes of point (a), in the absence of comparable transactions in the relevant market, the amount of the fees shall comply with the requirement that those fees are set on an arm’s length basis where those fees are set by reference to fees payable in similar transactions in other markets, or are set by using valuation metrics that appropriately take into account the type of securitisation and the service being provided.

The conditions in the first subparagraph, points (a) and (b), shall not be considered to be met when the fees are guaranteed or payable up-front in any form, in full or in part in advance of the service being provided post-closing, and the effective material net economic interest after deducting the fees is lower than the minimum net economic interest required under the retention option chosen from the options laid down in Article 6(3), points (a) to (e), of Regulation (EU) 2017/2402.

[no equivalent]

Although the UK do not have any equivalent of 15(2), it is understood that the market in practice operates on this basis in any event (for example, in relation to fee sharing arrangements in respect of CLO management fees).

RTS Article 16 (Fulfilment of the retention requirement in securitisations of own issued debt instruments)

Where an entity securitises its own issued debt instruments, including covered bonds as defined in Article 3, point (1), of Directive (EU) 2019/2162 of the European Parliament and of the Council, and the underlying exposures of the securitisation comprise exclusively those own-issued debt instruments, the retention requirement in Article 6(1) of Regulation (EU) 2017/2402 shall be considered complied with.

5.16 Fulfilment of the retention requirements in securitisations of own issued debt instruments

5.16.1 R

Where an entity securitises its own issued debt instruments, including covered bonds, and the underlying exposures of the securitisation comprise exclusively those own-issued debt instruments, the retention requirement in SECN 5.2.1R to SECN 5.2.5R shall be considered complied with.

Article 16 Fulfilment of the retention requirement in securitisations of own issued debt instruments

1. Where an entity securitises its own issued debt instruments, including covered bonds as defined in the FCA Handbook, and the underlying exposures of the securitisation comprise exclusively those own-issued debt instruments, the retention requirement in Article 6(1) of Chapter 2 shall be considered complied with.

RTS Article 17 (retention requirement in resecuritisations)

1. For resecuritisations permitted by Article 8 of Regulation (EU) 2017/2402, a retainer shall retain the material net economic interest in relation to each of the respective transaction levels.

5.17 Retention requirement on resecuritisations

5.17.1 R

(1) Subject to (2), in the context of resecuritisation as far as enabled in accordance with SECN 7.2 and SECN 7.3, a retainer must retain the material net economic interest in relation to each of the respective transaction levels.

Article 17 Retention requirement on resecuritisations

1. Subject to paragraph 2 of this Article, in the context of a resecuritisation as far as enabled in accordance with Article 8 of Chapter 2, a retainer shall retain the material net economic interest in relation to each of the respective transaction levels.

2. By way of derogation from paragraph 1, the originator of a resecuritisation shall not be obliged to retain a material net economic interest at the transaction level of the resecuritisation where all of the following conditions are met:

(2) The originator of a resecuritisation is not obliged to retain a material net economic interest at the transaction level of the resecuritisations where all of the following conditions are met:

2. The originator of a resecuritisation shall not be obliged to retain a material net economic interest at the transaction level of the resecuritisation where all of the following conditions are met:

(a) the originator of the resecuritisation is also the originator and the retainer of the underlying securitisation;

(a) the originator of the resecuritisation is also the originator and the retainer of the underlying securitisations;

(a) the originator of the resecuritisation is also the originator and the retainer of the underlying securitisation;

(b) the resecuritisation is backed by a pool of exposures comprising solely exposures or positions which were retained by the originator in the underlying securitisation in excess of the required minimum net economic interest prior to the date of origination of the resecuritisation;

[no equivalent]

(3) A fully supported ABCP programme, which meets the requirements of SECN 7.3 is not a resecuritisation for the purposes of SECN 5.17.

3. A fully supported ABCP programme, which meets the requirements of Article 8(4) of Chapter 2 shall not be deemed a resecuritisation for the purposes of this Article.

3. For the purposes of paragraph 1 and 2, retranching by the securitisation’s originator of an issued tranche into contiguous tranches shall not constitute a resecuritisation.

(4) The retranching by the securitisation’s originator of an issued tranche into contiguous tranches shall not constitute a resecuritisation.

4. The retranching by the securitisation’s originator of an issued tranche into contiguous tranches shall not constitute a resecuritisation for the purposes of this Article.

RTS Article 18 (Assets transferred to the SSPE)

1. For the purposes of Article 6(2) of Regulation (EU) 2017/2402, assets held on the balance sheet of the originator that according to the documentation of the securitisation meet the eligibility criteria, shall be deemed to be comparable to the assets to be transferred to the SSPE where, at the time of the selection of the assets, both of the following conditions are met:

5.18 Assets transferred to SSPE

5.18.1 R

(1) For the purposes of SECN 5.2.6R, assets held on the balance sheet of the originator that according to the documentation of the securitisation meet the eligibility criteria shall be deemed to be comparable to the assets to be transferred to the SSPE where, at the time of the selection of the assets, both of the following conditions are met:

Article 18 Assets transferred to SSPE

1. For the purposes of Article 6(2) of Chapter 2, assets held on the balance sheet of the originator that according to the documentation of the securitisation meet the eligibility criteria shall be deemed to be comparable to the assets to be transferred to the SSPE where, at the time of the selection of the assets, both of the following conditions are met:

(a) the expected performance of both the assets to be further held on the balance sheet and the assets to be transferred is determined by similar factors;

(a) the expected performance of both the assets to be further held on the balance sheet and the assets to be transferred is determined by similar factors; and

(b) on the basis of indications, including past performance and applicable models, it can be reasonably expected that the performance of the assets to be further held on the balance sheet will not be significantly better during the time period referred to in Article 6(2) of Regulation (EU) 2017/2402 than the performance of the assets to be transferred.

(b) on the basis of indications including past performance and applicable models, it can be reasonably expected that the performance of the assets to be further held on the balance sheet will not be significantly better during the time period referred to in SECN 5.2.6R than the performance of the assets to be transferred.

(b) on the basis of indications including past performance and applicable models, it can be reasonably expected that the performance of the assets to be further held on the balance sheet will not be significantly better during the time period referred to in Article 6(2) of Chapter 2 than the performance of the assets to be transferred.

2. The assessment whether the originator has complied with Article 6(2) of Regulation (EU) 2017/2402 shall take into account whether the originator has taken any actions to comply with that Article, and in particular whether the originator has put in place any internal policies, procedures and controls to prevent the systematic or intentional selection for securitisation purposes of assets of a worse average credit quality than comparable assets retained on its balance sheet.

2. [Note: Provision left blank]

3. An originator shall be deemed to have complied with Article 6(2) of Regulation (EU) 2017/2402 where, after the securitisation, there are no exposures left on the originator’s balance sheet that are comparable to the securitised exposures, other than the exposures which the originator is already contractually committed to securitise, and provided that that fact has been clearly communicated to investors.

(2) An originator shall be deemed to have complied with SECN 5.2.6R where, after the securitisation, there are no exposures left on the originator’s balance sheet that are comparable to the securitised

exposures, other than the exposures which the originator is already contractually committed to securitise, and provided that that fact has been clearly communicated to investors.

3. An originator shall be deemed to have complied with Article 6(2) of Chapter 2 where, after the securitisation, there are no exposures left on the originator’s balance sheet that are comparable to the securitised exposures, other than the exposures which the originator is already contractually committed to securitise, and provided that that fact has been clearly communicated to investors.

[No equivalent]

5.18.2 G In assessing whether the originator has complied with SECN 5.2.6R, the FCA would expect to take into account the actions the originator has taken to comply with that rule. In particular, the FCA would expect to take account of any internal policies, procedures and controls put in place by the originator to prevent the systematic or intentional selection for securitisation purposes of assets of a higher average credit risk profile than comparable assets retained on its balance sheet.

No equivalent]

[There are no Articles 19-21]

[There seems to be no direct equivalent of the FCA or PRA rule]

5.19 Disclosure of the level of the commitment to maintain a net economic interest

5.19.1 R

(1) The retainer shall disclose to investors within the final offering document, prospectus, transaction summary or overview of the main features of the securitisation at least the following information regarding the level of its commitment to maintain a net economic interest in the securitisation:

Article 22 Disclosure of the level of the commitment to maintain a net economic interest

1. The retainer shall disclose to investors within the final offering document, prospectus, transaction summary or overview of the main features of the securitisation at least the following information regarding the level of its commitment to maintain a net economic interest in the securitisation:

(a) confirmation of the retainer’s identity, whether it retains as originator, sponsor or original lender and, where the retainer is the originator, how it meets the requirement set out in SECN 5.2.5R taking into account the principles set out in SECN 5.3.6R;

(a) confirmation of the retainer's identity, whether it retains as originator, sponsor or original lender and, where the retainer is the originator, how it meets the requirements set out in the fifth subparagraph of Article 6(1) of Chapter 2 taking into account the principles set out in Article 2(6) of this Chapter;

(b) which of the modalities provided for in SECN 5.2.8R(1) has been applied to retain a net economic interest; and

(b) which of the modalities provided for in points (a), (b), (c), (d) or (e) of the second subparagraph of Article 6(3) of Chapter 2 has been applied to retain a net economic interest; and

(c) confirmation of the level of retention at origination and of the commitment to retain on an ongoing basis, which shall relate only to the continuation of fulfilment of the original obligation and shall not require data on the current nominal or market value, or on any impairments or write-downs on the retained interest.

(c) confirmation of the level of retention at origination and of the commitment to retain on an on-going basis, which shall relate only to the continuation of fulfilment of the original obligation and shall not require data on the current nominal or market value, or on any impairments or write-downs on the retained interest.

[There seems to be no direct equivalent of the FCA or PRA rules]

(2) Where the exemptions referred to in SECN 5.2.10R and SECN 5.2.11R apply to a securitisation transaction, firms acting as originator, sponsor or original lender shall disclose within the final offering document, prospectus, transaction summary or overview of the main features of the securitisation information on the applicable exemption to investors.

2. Where the exemptions referred to in paragraph 5 or 6 of Article 6 of Chapter 2 apply to a securitisation transaction, firms acting as originator, sponsor or original lender shall disclose within the final offering document, prospectus, transaction summary or overview of the main features of the securitisation information on the applicable exemption to investors.

[There seems to be no direct equivalent of the FCA or PRA rule]

(3) The disclosure referred to in (1) and (2) shall be appropriately documented within the final offering document, prospectus, transaction summary of overview of the main features of the securitisation and made publicly available, except in bilateral or private transactions where private disclosure is considered by the parties to be sufficient. The inclusion of a statement on the retention commitment in the prospectus for the securities issued under the securitisation programme is an appropriate means of fulfilling the requirement.

3. The disclosure referred to in paragraphs 1 and 2 of this Article shall be appropriately documented within the final offering document, prospectus, transaction summary or overview of the main features of the

securitisation and made publicly available, except in bilateral or private transactions where private disclosure is considered by the parties to be sufficient. The inclusion of a statement on the retention commitment in the prospectus for the securities issued under the securitisation programme shall be considered an appropriate means of fulfilling the requirement.

RTS Article 19 (Expertise requirement on the servicer of traditional NPE securitisations)

1. In the case of traditional NPE securitisations, servicers shall be deemed to have expertise in servicing exposures of a similar nature to those securitised, as referred to in Article 6(1), fourth subparagraph, of Regulation (EU) 2017/2402 where one of the following conditions is fulfilled:

(a) the members of the management body of the servicer and the senior staff, other than the members of the management body, responsible for servicing exposures of a similar nature to those securitised have adequate knowledge and skills in the servicing of such exposures;

(b) the business of the servicer, or of its consolidated group for accounting or prudential purposes, has included the servicing of exposures of a similar nature to those securitised for at least five years prior to the date of the securitisation;

(i) at least two of the members of the servicer’s management body have relevant professional experience in the servicing of exposures of a similar nature to those securitised, on a personal level, of at least five years;

(ii) senior staff, other than the members of the management body, who are responsible for managing the servicing by the servicer of non-performing exposures have relevant professional experience in the servicing of such exposures, on a personal level, of at least five years;

(iii) the servicing function of the servicer is backed up by a back-up servicer that complies with point (b).

2. Servicers shall substantiate and disclose their professional experience in sufficient detail to enable institutional investors to comply with their due diligence obligations laid down in Article 5 of Regulation (EU) 2017/2402, while respecting the applicable confidentiality requirements.

[No equivalent]

[EUSR Article 6(1) continued]

When measuring the material net economic interest, the retainer shall take into account any fees that may in practice be used to reduce the effective material net economic interest.

[No equivalent]

In the case of traditional NPE securitisations, the requirement of this paragraph may also be fulfilled by the servicer provided that the servicer can demonstrate that it has expertise in servicing exposures of a similar nature to those securitised and that it has well-documented and adequate policies, procedures and risk-management controls in place relating to the servicing of exposures.

[No equivalent]

2. Originators shall not select assets to be transferred to the SSPE with the aim of rendering losses on the assets transferred to the SSPE, measured over the life of the transaction, or over a maximum of 4 years where the life of the transaction is longer than four years, higher than the losses over the same period on comparable assets held on the balance sheet of the originator.

[see 5.2.6 above]

2. Subject to paragraph 2A of this Article, originators shall not select assets to be transferred to the SSPE with the aim of rendering losses on the assets transferred to the SSPE, measured over the life of the transaction, or over a maximum of four years where the life of the transaction is longer than four years, higher than the losses over the same period on comparable assets held on the balance sheet of the originator.

Where the competent authority finds evidence suggesting contravention of that prohibition, the competent authority shall investigate the performance of assets transferred to the SSPE and comparable assets held on the balance sheet of the originator. If the performance of the transferred assets is significantly lower than that of the comparable assets held on the balance sheet of the originator as a consequence of the intent of the originator, the competent authority shall impose a sanction pursuant to Articles 32 and 33.

[No equivalent]

[The PRA rule tracks EUSR Recital (11)]

[see 5.2.7 above]

2A. Originators may select assets to be transferred to the SSPE that ex ante have a higher than average credit risk profile as compared to the average credit risk profile of comparable assets, if any, that remain on the balance sheet of the originator provided that the higher credit risk profile of the assets transferred to the SSPE is clearly communicated to the investors or potential investors.

The corresponding provision in the RTS is Article 18 (Assets transferred to the SSPE) – see above)

The UK rules include an exception which appears in Recital (11) of the EUSR, i.e. that the rules should not restrict the ability of originators or sponsors to select assets which as a whole have a higher risk profile (e.g., non-performing corporate loans) than other asset classes on the balance sheet of the originator (e.g. corporate loans), so long as that higher risk profile is clearly communicated to the investors or potential investors.

3. Only the following shall qualify as a retention of a material net economic interest of not less than 5% within the meaning of paragraph 1:

5.2.8 R

(1) Only the following shall qualify as a retention of a material net economic interest of not less than 5% within the meaning of SECN 5.2.1R:

3. Only the following shall qualify as a retention of a material net economic interest of not less than 5% within the meaning of paragraph 1 of this Article:

(a) the retention of not less than 5 % of the nominal value of each of the tranches sold or transferred to investors;

(a) the retention of not less than 5% of the nominal value of each of the tranches sold or transferred to investors;

(b) in the case of revolving securitisations or securitisations of revolving exposures, the retention of the originator’s interest of not less than 5 % of the nominal value of each of the securitised exposures;

(b) in the case of revolving securitisations or securitisations of revolving exposures, the retention of the originator’s interest of not less than 5% of the nominal value of each of the securitised exposures;

(c) the retention of randomly selected exposures, equivalent to not less than 5 % of the nominal value of the securitised exposures, where such non-securitised exposures would otherwise have been securitised in the securitisation, provided that the number of potentially securitised exposures is not less than 100 at origination;

(c) the retention of randomly selected exposures, equivalent to not less than 5% of the nominal value of the securitised exposures, where such non-securitised exposures would otherwise have been securitised in the securitisation, provided that the number of potentially securitised exposures is not less than 100 at origination;

(d) the retention of the first loss tranche and, where such retention does not amount to 5 % of the nominal value of the securitised exposures, if necessary, other tranches having the same or a more severe risk profile than those transferred or sold to investors and not maturing any earlier than those transferred or sold to investors, so that the retention equals in total not less than 5 % of the nominal value of the securitised exposures; or

(d) the retention of the first loss tranche and, where such retention does not amount to 5% of the nominal value of the securitised exposures, if necessary, other tranches having the same or a more severe risk profile than those transferred or sold to investors and not maturing any earlier than those transferred or sold to investors, so that the retention equals in total not less than 5% of the nominal value of the securitised exposures; or

(e) the retention of a first loss exposure of not less than 5 % of every securitised exposure in the securitisation.

(e) the retention of a first loss exposure of not less than 5% of every securitised exposure in the securitisation.

3a. By way of derogation from paragraph 3, in the case of NPE securitisations, where a non-refundable purchase price discount has been agreed, the retention of a material net economic interest for the purposes of that paragraph shall not be less than 5 % of the sum of the net value of the securitised exposures that qualify as non-performing exposures and, if applicable, the nominal value of any performing securitised exposures.

(2) (a) By way of derogation from (1), in the case of NPE securitisations, where a non-refundable purchase price discount has been agreed, the retention of a material net economic interest for the purposes of (1) shall not be less than 5% of the sum of the net value of the securitised exposures that qualify as non-performing exposures and, if applicable, the nominal value of any performing securitised exposures.

3A. By way of derogation from paragraph 3 of this Article, in the case of NPE securitisations, where a non-refundable purchase price discount has been agreed, the retention of a material net economic interest for the purposes of that paragraph shall not be less than 5% of the sum of the net value of the securitised exposures that qualify as non-performing exposures and, if applicable, the nominal value of any performing securitised exposures.

The net value of a non-performing exposure shall be calculated by deducting the non-refundable purchase price discount agreed at the level of the individual securitised exposure at the time of origination or, where applicable, a corresponding share of the non-refundable purchase price discount agreed at the level of the pool of underlying exposures at the time of origination from the exposure’s nominal value or, where applicable, its outstanding value at the time of origination. In addition, for the purpose of determining the net value of the securitised non-performing exposures, the non-refundable purchase price discount may include the difference between the nominal amount of the tranches of the NPE securitisation underwritten by the originator for subsequent sale and the price at which these tranches are first sold to unrelated third parties.

(b) The net value of a non-performing exposure shall be calculated by deducting the non-refundable purchase price discount agreed at the level of the individual securitised exposure at the time of origination or, where applicable, a corresponding share of the non-refundable purchase price discount agreed at the level of the pool of underlying

exposures at the time of origination from the exposure’s nominal value or, where applicable, its outstanding value at the time of origination.

(c) In addition, for the purpose of determining the net value of the securitised non-performing exposures, the nonrefundable purchase price discount may include the difference between the nominal amount of the tranches of the NPE securitisation underwritten by the originator for subsequent sale and the price at which these tranches are first

sold to unrelated third parties.

4. Where a mixed financial holding company established in the Union within the meaning of Directive 2002/87/EC of the European Parliament and of the Council, a parent institution or a financial holding company established in the Union, or one of its subsidiaries within the meaning of Regulation (EU) No 575/2013, as an originator or sponsor, securitises exposures from one or more credit institutions, investment firms or other financial institutions which are included in the scope of supervision on a consolidated basis, the requirements referred to in paragraph 1 may be satisfied on the basis of the consolidated situation of the related parent institution, financial holding company, or mixed financial holding company established in the Union.

[See 5.2.9 above]

4. Where:

(a) a mixed financial holding company;

(b) a UK parent institution;

(d) a subsidiary of such a company or institution;

as an originator or sponsor, securitises exposures from one or more CRR firms, FCA investment firms or other financial institutions which are included in the scope of supervision on a consolidated basis, the requirements set out in paragraph 1 of this Article may be satisfied on the basis of the consolidated situation of the mixed financial holding company, UK parent institution or financial holding company concerned.

The first subparagraph shall apply only where credit institutions, investment firms or financial institutions which created the securitised exposures comply with the requirements set out in Article 79 of Directive 2013/36/EU of the European Parliament and of the Council ( 5 ) and deliver the information needed to satisfy the requirements provided for in Article 5 of this Regulation, in a timely manner, to the originator or sponsor and to the Union parent credit institution, financial holding company or mixed financial holding company established in the Union.

Subject to the modifications set out in the third subparagraph of SECN 5.2.9R of the FCA Handbook to the requirements set out in Article 79 of Directive 2013/36/EU of the European Parliament and of the Council in respect of FCA investment firms, the first subparagraph applies only if CRR firms, FCA investment firms or financial institutions which created the securitised exposures comply with the requirements set out in Article 79 of Directive 2013/36/EU of the European Parliament and of the Council and deliver the information needed to satisfy the requirements provided for in Article 5 of this Chapter, in a timely manner, to the originator or sponsor and, if the originator or sponsor is a subsidiary, to the mixed financial holding company, UK parent institution or financial holding company which is the parent undertaking of the subsidiary.

In this paragraph:

(a) 'CRR firm', 'financial holding company', 'financial institution', 'FCA investment firm', 'subsidiary' and 'UK parent institution' have the meaning given in Article 4 of CRR; and

(b) 'mixed financial holding company’ has the meaning given in regulation 1(2) of the Financial Conglomerates Regulations.

5. Paragraph 1 shall not apply where the securitised exposures are exposures on or exposures fully, unconditionally and irrevocably guaranteed by:

5.2.10

SECN 5.2.1R to SECN 5.2.5R shall not apply where the securitised exposures are exposures to or exposures fully, unconditionally and irrevocably guaranteed by:

5. Paragraph 1 of this Article shall not apply where the securitised exposures are exposures to or exposures fully, unconditionally and irrevocably guaranteed by:

(a) central governments or central banks;

(1) central governments or central banks;

(a) central governments or central banks;

(b) regional governments, local authorities and public sector entities within the meaning of point (8) of Article 4(1) of Regulation (EU) No 575/2013 of Member States;

(2) regional governments, local authorities and ‘public sector entities’ within the meaning of Article 4(1)(8) of UK CRR;

(b) regional governments, local authorities and public sector entities within the meaning of point (8) of Article 4(1) of CRR;

(c) institutions to which a 50 % risk weight or less is assigned under Part Three, Title II, Chapter 2 of Regulation (EU) No 575/2013;

(3) institutions to which a 50% risk weight or less is assigned under Part Three, Title II, Chapter 2 of UK CRR and articles 132a to 132c of Chapter 3 of the Standardised Approach and Internal Ratings Based Approach to Credit Risk (CRR) Part of the PRA Rulebook;

(c) institutions to which a 50% risk weight or less is assigned under Part Three, Title II, Chapter 2 of CRR and Articles 132a to 132c of Chapter 3 of the Standardised Approach and Internal Ratings Based Approach to Credit Risk (CRR) Part;

(d) national promotional banks or institutions within the meaning of point (3) of Article 2 of Regulation (EU) 2015/1017 of the European Parliament and of the Council ( 6w); or

(4) national promotional banks or institutions within the meaning of Article 2(3) of Regulation (EU) 2015/1017 of the European Parliament and of the Council; or

(d) national promotional banks or institutions within the meaning of point (3) of Article 2 of Regulation (EU) 2015/1017; or

(e) the multilateral development banks listed in Article 117 of Regulation (EU) No 575/2013.

(5) the multilateral development banks listed in Article 117 of UK CRR.

(e) the multilateral development banks listed in Article 117 of CRR.

6. Paragraph 1 shall not apply to transactions based on a clear, transparent and accessible index, where the underlying reference entities are identical to those that make up an index of entities that is widely traded, or are other tradable securities other than securitisation positions.

5.2.11 R

SECN 5.2.1R to SECN 5.2.5R shall not apply to transactions based on a clear, transparent and accessible index, where the underlying reference entities are identical to those that make up an index of entities that is widely traded, or are other tradable securities other than securitisation positions.

6. Paragraph 1 of this Article shall not apply to transactions based on a clear, transparent and accessible index, where the underlying reference entities are identical to those that make up an index of entities that is widely traded, or are other tradable securities other than securitisation positions.

7. EBA, in close cooperation with the ESMA and the European Insurance and Occupational Pensions Authority (EIOPA) which was established by Regulation (EU) No 1094/2010 of the European Parliament and of the Council ( 7 ), shall develop draft regulatory technical standards to specify in greater detail the risk-retention requirement, in particular with regard to:

(a) the modalities for retaining risk pursuant to paragraph 3, including the fulfilment through a synthetic or contingent form of retention;

(b) the measurement of the level of retention referred to in paragraph 1;

(d) the conditions for retention on a consolidated basis in accordance with paragraph 4;

(e) the conditions for exempting transactions based on a clear, transparent and accessible index referred to in paragraph 6;

(f) the modalities of retaining risk pursuant to paragraphs 3 and 3a in the case of NPE securitisations;

(g) the impact of fees paid to the retainer on the effective material net economic interest within the meaning of paragraph 1.

EBA shall submit those draft regulatory technical standards to the Commission by 10 October 2021.

The Commission is empowered to supplement this Regulation by adopting the regulatory technical standards referred to in this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

[No equivalent]