EBA欧洲银行-Draft-RTS-on-risk-retention-28EBA-RTS-2018-0129_47页_671kb

EBA Final Draft Regulatory Technical Standards (EBA/RTS/2018/01)

Core Content

The EBA Final Draft Regulatory Technical Standards (RTS) are developed under Article 6(7) of the Securitisation Regulation (EU) 2017/2402, aiming to specify detailed requirements for originators, sponsors, and original lenders regarding risk retention. These standards replace the previous mandate from Article 410 of Regulation (EU) No 575/2013 and are intended to ensure alignment of interests and transparency in securitisation transactions.

Main Features of the RTS

• Alignment of Interests: The RTS aim to align the interests of originators, sponsors, and original lenders with investors by ensuring they retain a material net economic interest.
• Retention Requirements: Entities must retain a material net economic interest of at least 5% of the nominal value of securitised exposures or tranches.
• Retention Modalities: Retention can be achieved through:
  • Synthetic form of retention: Using derivative instruments.
  • Contingent form of retention: Through guarantees, letters of credit, or other credit support mechanisms.
• Prohibition on Hedging: Hedging of retained interests is generally prohibited unless it addresses risks other than credit risk, and is conducted as a prudent element of credit granting or risk management.
• Consolidated Retention: Rules for consolidated retention are outlined, including the requirement for retainers to ensure the retained interest is not prioritised in cash flows.
• Exemptions: Certain transactions may be exempt if they are based on a clear, transparent, and accessible index.
• Disclosure: Initial disclosure to investors must include information on the retainer, retention option, retained interest, and ongoing commitment to retain interest.

Key Provisions and Clarifications

• Re-securitisation: In re-securitisation, retention requirements apply at each level of the transaction. Institutional investors must verify compliance at the level to which they are directly exposed.
• Exposure to Credit Risk: Entities acting as counterparties to derivatives, hedge providers, or liquidity facility providers are deemed exposed to the credit risk of the securitisation position if they assume such risk.
• Exemptions: If an entity is not material to the trading book, and there is no disproportionate share of trading activities, it may not be in breach of the retention requirements.
• Clarification of Retainer Status: Rules are provided to determine whether an entity is established or operates solely for securitisation, which affects its eligibility to act as a retainer.
• Amendments to Previous Regulation: Commission Delegated Regulation (EU) No 625/2014 is partially repealed and replaced, with some provisions retained for certain securitisations issued before 1 January 2019.

New Provisions Introduced

• Synthetic and Contingent Retention: These forms of retention are now explicitly allowed, provided they are equivalent to the retention options in Article 6(3) of the Securitisation Regulation and are disclosed in the final offering document.
• Clarification on Hedging: Hedging is only permitted if it does not undermine the retention requirement and is conducted prudently.
• Proportionality in Retention: Retained interests should not be prioritised over transferred interests, and must be maintained at a level not below 5% of the nominal value of the securitised exposures.
• Exemption Conditions: Exemptions from the retention requirement are allowed for securitisations based on a clear index, provided that the conditions in Article 6(6) are met.

Next Steps

• The final draft RTS will be submitted to the European Commission for adoption.
• After adoption, the RTS will be subject to scrutiny by the European Parliament and the Council.
• It will then be published in the Official Journal of the European Union.

Background and Rationale

• The financial crisis highlighted misaligned incentives and conflicts of interest in securitisation markets, which led to loss of investor confidence.
• Article 405 of Regulation (EU) 575/2013 required institutions to retain a material net economic interest in securitised exposures, unless they were acting as originators, sponsors, or original lenders.
• The Securitisation Regulation (EU) 2017/2402 replaced the previous framework and introduced risk retention requirements in Article 6, which are consistent with the earlier rules but more comprehensive.
• The EBA, in cooperation with ESMA and EIOPA, was tasked with developing detailed RTS to implement these requirements.

Key Definitions

Summary of Key Requirements

• Retention Level: At least 5% of the nominal value of each securitised exposure or tranche.
• Disclosure: Initial disclosure must include the identity of the retainer, the retention option, the retained interest, and the commitment to retain it on an ongoing basis.
• Exemptions: Transactions based on a clear index may be exempt from the retention requirement.
• Consolidation: Retention on a consolidated basis is allowed under certain conditions, with transparency and clarity required.
• Hedging: Prohibited unless it addresses non-credit risks and is conducted prudently.

Implementation and Compliance

• The RTS are designed to facilitate the implementation of risk retention requirements.
• They ensure that retainers are not able to structure the securitisation in a way that undermines the purpose of the retention requirement.
• Institutions must verify compliance with the retention requirement at each level of the transaction to which they are exposed.