Article 8 Retention option (d): retention of the first loss tranche

The retention of the first loss tranche in accordance with point (d) of the second subparagraph of Article 405(1) of Regulation (EU) No 575/2013 shall be fulfilled by either on-balance sheet or off-balance sheet positions and may also be fulfilled by any of the following:

1. (a)

   provision of a contingent form of retention as referred to in Article 1(1)(c) or of a liquidity facility in the context of an ABCP programme, which fulfils the following criteria:

   1. (i)

      it covers at least 5 % of the nominal value of the securitised exposures;

   2. (ii)

      it constitutes a first loss position in relation to the securitisation;

   3. (iii)

      it covers the credit risk for the entire duration of the retention commitment;

   4. (iv)

      it is provided by the originator, sponsor or original lender in the securitisation;

   5. (v)

      the institution becoming exposed to such securitisation has been given access to appropriate information to enable it to verify that points (i), (ii), (iii) and (iv) are complied with;

2. (b)

   overcollateralisation, as a form of credit enhancement, if that overcollateralisation acts as a "first loss" retention of no less than 5 % of the nominal value of the tranches issued by the securitisation.

Where the first loss tranche exceeds 5 % of the nominal value of the securitised exposures, it shall be possible for the retainer to only retain a portion of such first loss tranche, where this portion is equivalent to at least 5 % of the nominal value of the securitised exposures.

For the fulfilment of the risk retention requirement at a securitisation scheme level institutions shall not take into account the existence of underlying transactions in which the originators or original lenders retain a first loss exposure at the transaction-specific level.