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The EBA has reviewed the supervisory measures taken by Competent Authorities to ensure compliance with securitisation risk retention, disclosure and due diligence requirements and has highlighted in its report that in most jurisdictions - at least in those countries with an active securitisation market - actions have been taken. The limited number of cases of breaches reported by Competent Authorities is a positive signal in this respect.
Following a comprehensive analysis, the EBA is of the opinion that the retention requirements and its multiple components, namely the type of retainer (originator, original lender or sponsor), the forms of retention used, the level of net economic interest retained, and the assessment of the consolidated situation of the retainer, are appropriate, and recommends to introduce certain additional safeguards and provisions to support the current framework.
In particular, the EBA recommends to implement a complementary ‘direct' approach (where the onus is on the originator, sponsor or original lender) together with the existing ‘indirect' approach (where the onus on the investors) aimed at creating more certainty and transparency for investors.
In addition, the report highlights that as a result of the wide scope of the definition of ‘originator' in the CRR , securitisation transactions may be structured so as to meet the legal requirements of the regulation without, however, following the ‘spirit' of the regulation. The EBA believes that the scope of the originator definition should be narrowed down to ensure that industry participants do not abuse the rules.
Furthermore, the EBA advises that the disclosure requirements are appropriate and fit for purpose to ensure investor protection as well as financial stability and that the due diligence requirements are sufficient and proper.
Finally, when comparing and reviewing the regulations at international level, the EBA observed several differences. The EBA believes that if the EU regime and the foreign legislation are not harmonised, it might drive a real wedge between the global securitisation markets and may further prevent EU issuers from benefitting from global investors base and reduce EU investors' ability to benefit from global securitisation investments. This would reduce the competitiveness of the EU financial industry and its ability to be engaged in the global securitisation market.
Securitisation risk retention opinion
Securitisation risk retention report