Article 51 Requirements for retained interest
United Kingdom
AIFMs shall assume exposure to the credit risk of a securitisation on behalf of one or more AIFs it manages only if the originator, sponsor or original lender has explicitly disclosed to the AIFM that it retains, on an ongoing basis, a material net economic interest, which in any event shall not be less than 5 %.
Only any of the following shall qualify as retention of a material net economic interest of not less than 5 %:
retention of no less than 5 % of the nominal value of each of the tranches sold or transferred to the investors;
in the case of securitisations of revolving exposures, retention of the originator’s interest of no less than 5 % of the nominal value of the securitised exposures;
retention of randomly selected exposures, equivalent to not less than 5 % of the nominal value of the securitised exposures, where such exposures would otherwise have been securitised in the securitisation, provided that the number of potentially securitised exposures is not less than 100 at origination;
retention of the first loss tranche and, 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;
retention of a first loss exposure of not less than 5 % of every securitised exposure in the securitisation.
Net economic interest shall be measured at the origination and shall be maintained on an ongoing basis. The net economic interest, including retained positions, interest or exposures, shall not be subject to any credit risk mitigation or any short positions or any other hedge and shall not be sold. The net economic interest shall be determined by the notional value for off-balance sheet items.
There shall be no multiple applications of the retention requirements for any given securitisation.
Paragraph 1 shall not apply—
where the securitised exposures are claims or contingent claims on or fully, unconditionally and irrevocably guaranteed by an institution in relation to which securitisation rules provide an exemption from risk retention requirements that would otherwise be imposed by the rules, or
to transactions which are based on an index and in relation to which securitisation rules provide an exemption from risk retention requirements that would otherwise be imposed by the rules,
and for this purpose “securitisation rules” means rules made by the FCA by virtue of regulation 5 of the Securitisation Regulations 2024 or rules made by the Prudential Regulation Authority under section 137G of the Financial Services and Markets Act 2000 which relate to securitisation.
Annotations
Textual amendments
- F1
Art. 51(2) substituted (1.11.2024) by The Securitisation (Amendment) Regulations 2024 (S.I. 2024/705), reg. 1(3), Sch. 2 para. 16