European Banking Authority releases final draft regulatory on EU risk retention

According to the Article 6 of the EU Securitisation Regulation, it is required that the originator, sponsor, or original lender of a securitisation to retain on an ongoing basis a material net economic interest not less than 5%, using one of the five possible methods. 

The EU Securitisation Regulation Amendment included changes to facilitate securitisation of non-performing exposures (NPEs) and the introduction of an STS framework. Moreover, the risk retainer would be required to take into account any fees that may be in practice to reduce the effective material net economic interest.

As a result of the EU Securitisation Regulation Amendment, the material net economic interest may be held by the servicer of an NPE securitisation. The 2022 Final Draft RTS was designed to mention how it can be established that the servicer has the requisite expertise and requires disclosure of the relevant years of experience to investors.