EU Risk Retention Update: A New Interpretation March(es) In

On March 31, 2025, a Joint Committee (JC) comprised of the European Banking Authority, European Insurance and Occupational Pensions Authority and European Securities and Markets Authority published a report (JC Report) on the functioning of the EU Securitisation Regulation. While the report contained a large number of proposals, which we will cover in a separate briefing, the immediate takeaway for CLO participants is that the JC has issued guidance regarding the interpretation of the sole purpose test. Some risk retention vehicles will need to reassess compliance with the sole purpose test in light of the new guidance; however, we expect properly structured manager/originator retention vehicles to meet the new interpretation.