EBA · 2023_6912 Rejected question

Risk retention

Regulation
Regulation (EU) No 2017/2402 (SecReg)
Article
6
Topic
Provisions applicable to all securitisations
Submitted by
Credit institution
Submitted
2023-10-13
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Question

Where an SSPE that directly purchases securitised exposures from the seller is fully consolidated for accounting purposes by an entity, with a view to exposing such entity to (i) the risks (first loss in an amount at least equal to the expected loss) and (ii) the benefit of the excess spread deriving from such exposures, based on the performance of the portfolio which depends on the management of the assets by such entity, can such entity be considered as the limb(b) originator and as such, be eligible to hold the risk retention piece under Article 6(3)(b) of Regulation (EU) No 2017/2402, even though such entity is not directly a party to the purchase arrangement?

Background

Originator is defined under Article 2(3)(b) of Regulation (EU) No 2017/2402 as an entity which purchases a third party's exposures on its own account and then securitises them. An entity that fully consolidates an SSPE, from an accounting point of view, holds the assets on its balance sheet as if it had acquired the assets itself. When international accounting standards (IFRS 10) are used in accordance with Regulation (EU) No 2002/1606 to consider the consolidation of the SSPE: (i) power over the investee; (ii) exposure, or rights, to variable returns from its involvement with the investee and (iii) the ability to use its power over the investee to affect the amount of the investor’s returns, the SSPE acts on the account of the consolidating entity.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2023_6912

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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