However some long-standing market concerns with the RTS remain unresolved. The Final Draft RTS largely replicate the 2021 Draft RTS, but also incorporates a number of welcome amendments and clarifications reflecting industry responses to the Consultation Paper. The 2021 Draft RTS for the most part followed the 2018 Draft RTS, but with additional provisions primarily relating to the CMRP changes. On 30 June 2021 the EBA published a consultation paper (the “ Consultation Paper”) containing revised final draft regulatory technical standards relating to risk retention (the “ 2021 Draft RTS”). As a result, the EBA’s mandate in respect of the risk retention RTS was expanded to address the CMRP amendments. In 2021 various amendments were made to the EUSR as part of the EU COVID-19 economic recovery plan known as the Capital Markets Recovery Package (the “ CMRP”), including amendments to the risk retention provisions for securitisations of non-performing exposures (“ NPEs”) and to consider the impact of any fees that may be used to reduce the effective material net economic interest. This was partly mitigated by the fact that the 2018 Draft RTS preserved, in large part, the substance of the CRR RTS and that many of its new rules, such as the prohibition on a ‘sole purpose’ originator retaining, were already being followed by market participants as a result of informal regulatory guidance. As regulators themselves acknowledged, 4 this was problematic because the 2018 Draft RTS contained new provisions, such as the definition of a ‘sole purpose’ originator and ‘adverse selection of assets’ requirements that were not addressed in the CRR RTS.Īs a result, uncertainty about the final content of the RTS has affected market participants’ level of confidence in structuring risk retention for complex securitisations. In the meantime, market participants have been required to apply the risk retention provisions in Article 6 of the EU Securitisation Regulation (“ EUSR”), as interpreted by the more detailed guidance in the CRR RTS. The EBA published a final draft of the risk retention regulatory technical standards on 31 July 2018 (the “ 2018 Draft RTS”), but these have not been adopted by the European Commission and so have never come into force. The publication of the Final Draft RTS marks the culmination of a long process. It will replace the current risk retention technical standards (the “ CRR RTS”) 2 under the EU Capital Requirements Regulation (the “ CRR”). The Final Draft RTS is still to be adopted by the European Commission and will enter into force on the 20 th day following its publication in the Official Journal of the European Union. On 12 April 2022 the European Banking Authority (“ EBA”) published final draft regulatory technical standards relating to risk retention pursuant to Article 6 of the EU Securitisation Regulation 1 (the “ Final Draft RTS”).
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