European Commission Adopts Rules On Securitisation Risk Retention

On 7 July 2023, the European Commission ("EC") approved the text of a delegated regulation supplementing the EU Securitisation Regulation (the "EUSR") regarding regulatory technical standards on risk retention (the "RR RTS"). The RR RTS were one of the last rulemakings left to be finalised under the EUSR.

Broadly, Article 6 of the EUSR requires the originator, sponsor or original lender of a securitisation to retain, on an ongoing basis, a material net economic interest in the securitisation of not less than 5%. Such net economic interest can be held in one of five ways permitted by Article 6. The RR RTS detail, among other things, the various permissible methods of retaining risk, measuring the level of retention, and the prohibition on hedging or selling the retained interest to ensure that the relevant parties have sufficient "skin in the game" in the securitisation.