EU Risk Retention Update: Priced Deals March Forward

Recent developments suggest that deals which priced prior to March 31 will not be subject to the Joint Committee's interpretation of the sole purpose test.

As detailed in our OnPoint published earlier this week (which can be found here), 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. The JC Report included guidance regarding the interpretation of the sole purpose test, stating that the term "predominant" should be interpreted as a threshold of more than 50%. As a result of this interpretation, more than 50% of an originator's revenues must be derived from sources other than the exposures to be securitized or the risk-retained assets (or any corresponding income from such exposures and risk-retained assets).