Risk Retention Reinvention: Some Questions Answered

On May 22, 2013, the European Banking Authority (the "EBA") published a consultation paper¹(the "Consultation Paper") including draft regulatory technical standards (the "RTS") and implementing technical standards (the "ITS") in relation to the risk retention requirements set out in Articles 393-399 of the EU Capital Requirements Regulation (the "CRR"). The draft technical standards, which are subject to a 3-month consultation period, before finalisation and submission to the European Commission for adoption as a regulation with direct effect across the European Union from 1 January 2014², re-write the existing interpretation of the risk retention framework previously published by the EBA (and its predecessor, the Committee of European Banking Supervisors ("CEBS")); the immediate market reaction and consensus appears to be that these changes are substantial and, for Europe's newly re-emergent CLO industry, not for the better. Indeed, although the Consultation Paper