SECN 5.9 Retention of a first loss exposure of not less than 5% of every securitised exposure

1The retention of a first loss exposure at the level of every securitised exposure as referred to in SECN 5.2.8R(1)(e) shall only be considered to be fulfilled where the retained credit risk is subordinated to the credit risk securitised in relation to the same exposures.

By way of derogation from (1), the retention of a first lost exposure at the level of every securitised exposure as referred to in SECN 5.2.8R(1)(e) may also be fulfilled through the sale by the originator or original lender of the underlying exposures at a discounted value where each of the following conditions is met:

1. (a)

   the amount of the discount is not less than 5% of the nominal value of each exposure; and

2. (b)

   the discounted sale amount is refundable to the originator or original lender only if that discounted sale amount is not absorbed by losses related to the credit risk associated to the securitised exposures.