Shearman & Sterling LLP | Financial Regulatory Developments Focus | Final Draft EU Technical Standards on Securitization Risk Retention Requirements
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  • Final Draft EU Technical Standards on Securitization Risk Retention Requirements
    07/31/2018
    The European Banking Authority has published a final report and final draft Regulatory Technical Standards under the EU Securitization Regulation (or STS Regulation) on the risk retention requirements for originators, sponsors and original lenders. The Securitization Regulation requires, among other things, originators, sponsors or original lenders of a securitization to retain on an ongoing basis a material net economic interest in the securitization of at least 5 %. The final draft RTS specify in greater detail the risk retention requirement, including the modalities of retaining risk, the measurement of the level of retention, the prohibition of hedging or selling the retained interest and the conditions for retention on a consolidated basis.

    The final draft RTS have been submitted to the European Commission for endorsement. The final RTS will apply directly across the EU twenty days after publication in the Official Journal of the European Union.

    The Securitization Regulation, which will apply from January 1, 2019, has replaced the risk retention requirements in the Capital Requirements Regulation. Once the final RTS enter into force, the existing Commission Delegated Regulation ((EU) No 625/2014) on risk retention requirements, made under the Capital Requirements Regulation, will be repealed.

    View the final draft RTS.

    View the existing Delegated Regulation on risk retention requirements

    View details of the EBA's consultation on the draft RTS.

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