# Commission Delegated Regulation (EU) No 625/2014Show full title

Commission Delegated Regulation (EU) No 625/2014 of 13 March 2014 supplementing Regulation (EU) No 575/2013 of the European            Parliament and of the Council by way of regulatory technical standards specifying the requirements for investor, sponsor,            original lenders and originator institutions relating to exposures to transferred credit risk (Text with EEA relevance)         

        - Previous
        - Next

U.K.

# Commission Delegated Regulation (EU) No 625/2014                     

# of 13 March 2014

# supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council by way of regulatory technical standards                        specifying the requirements for investor, sponsor, original lenders and originator institutions relating to exposures to transferred                        credit risk                     

# (Text with EEA relevance)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements                           for credit institutions and investment firms and amending Regulation (EU) No 648/2012(1), and in particular Article 410(2) thereof,                        

Whereas:

(1)The retention of an economic interest aims at aligning interests between the parties respectively transferring and assuming                              the credit risk of the securitised exposures. Where an entity securitises its own liabilities, alignment of interests is established                              automatically, regardless of whether the final debtor collateralises its debt. Where it is clear that the credit risk remains                              with the originator the retention of interest by the originator is unnecessary and would not improve on the pre-existing position.

(2)It is appropriate to clarify when exposure to transferred credit risk is deemed to occur in relation to certain specific instances                              in which institutions, other than when acting as originator, sponsor or original lender, may become exposed to the credit                              risk of a securitisation position, including when institutions act as a counterparty to a derivative instrument with the securitisation                              transaction, as a hedge counterparty with the securitisation transaction, as a liquidity facility provider to the transaction                              and when institutions hold securitisation positions in the trading book in the context of market making activities.

(3)In re-securitisation transactions credit risk transfer occurs at the level of the first securitisation of assets and at the                              second ‘repackaged’ level of the transaction. The two levels of the transaction, and the two corresponding instances of credit                              risk transfer, are independent with respect to the requirements set out in this Regulation. Retention of net economic interest                              and due diligence should be ensured at each level of the transaction by the institutions that become exposed to transferred                              credit risk at that particular level. Therefore if an institution becomes exposed only to the second ‘repackaged’ level of                              the transaction, the requirements relating to retention of net economic interest and due diligence only apply to that institution                              in relation to the second level of the transaction. Within the same re-securitisation transaction, those institutions who                              became exposed to the first level of securitisation of assets should comply with the retention and due diligence requirements                              in relation to the first level of securitisation in the transaction.

(4)It is appropriate to specify in greater detail the application of the retention commitment including compliance when there                              are multiple originators, sponsors or original lenders, details regarding the different retention options, how to measure                              the retention requirement at origination and on an on-going basis, and how to apply the exemptions.

(5)Points (a) to (e) of Article 405(1) of Regulation (EU) No 575/2013 lay down various options pursuant to which the required                              retention of interest may be fulfilled. This Regulation, clarifies in detail the ways to comply with each of those options.

(6)The retention of an interest could be achieved through a synthetic or contingent form of retention, provided that such methods                              fully comply with one of the options laid down in points (a) to (e) of Article 405(1) of Regulation (EU) No 575/2013, to which                              the synthetic or contingent form of retention can be equated, and provided that compliance with the disclosure requirements                              is ensured.

(7)Hedging of or selling the retained interest is prohibited where those techniques undermine the purpose of the retention requirement,                              implying that they can be permitted where they do not hedge the retainer against the credit risk of either the retained securitisation                              positions or the retained exposures.

(8)In order to ensure the ongoing maintenance of the net economic interest, institutions should ensure that there is not any                              embedded mechanism in the securitisation structure by which the minimum retention requirement at origination would necessarily                              decline faster than the interest transferred. Similarly, the retained interest should not be prioritised in terms of cash                              flows to preferentially benefit from being repaid or amortised such that it would fall below 5 % of the ongoing nominal value                              of the tranches sold or exposures securitised. Moreover, the credit support provided to the institution assuming exposure                              to a securitisation position should not decline disproportionately relative to the rate of repayment on the underlying exposures.

(9)Institutions should be able to make use of financial models developed by third parties, other than ECAIs, in order to reduce                              administrative burden and compliance costs for the fulfilment of due diligence obligations. Institutions should only use third                              party financial models where they have taken due care, prior to investing, to validate the relevant assumptions in, and structuring                              of, the models and to understand the methodology, assumptions and results of such models.

(10)It is essential to further specify how frequently institutions should review their compliance with due diligence requirements,                              how to assess whether the use of different policies and procedures for the trading book and non-trading book is appropriate,                              how to assess compliance when the positions pertain to the correlation trading portfolio and to clarify certain terms under                              Article 406, Regulation (EU) No 575/2013, such as ‘risk characteristics’ and ‘structural features’.

(11)Pursuant to Article 14(2) of Regulation (EU) No 575/2013, entities established in third countries which are included in the                              consolidation in accordance with Article 18 of Regulation (EU) No 575/2013, but do not directly fall within the scope of application                              of the additional risk weights, should, in limited circumstances, such as for exposures held in the trading book for the purpose                              of market-making activities, not be deemed to be in breach of Article 405 of Regulation (EU) No 575/2013. Institutions should                              not be considered to be in breach of that Article where any such exposures or positions in the trading book are not material                              and do not form a disproportionate share of the trading activities, provided that there is a thorough understanding of the                              exposures or positions, and that formal policies and procedures have been implemented which are appropriate and commensurate                              with that entity's and the group's overall risk profile.

(12)Initial and ongoing disclosure to investors on the level of the retention commitment and of all materially relevant data,                              including on the credit quality and performance of the underlying exposure, is necessary for effective due diligence on the                              securitisation positions. Disclosed data should include details of the identity of the retainer, the retention option chosen                              and the original and ongoing commitment to retain an economic interest. Where exemptions provided for in Article 405(3) and                              (4) of Regulation (EU) No 575/2013 are applicable, there should be explicit disclosure of securitised exposures where the                              retention requirement does not apply and the reason for the disapplication.

(13)This Regulation is based on the draft regulatory technical standards submitted by the European Supervisory Authority (European                              Banking Authority) to the Commission.

(14)The European Supervisory Authority (European Banking Authority) has conducted open public consultations on the draft regulatory                              technical standards on which this Regulation is based, analysed the potential related costs and benefits and requested the                              opinion of the Banking Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1093/2010 of the                              European Parliament and of the Council(2),

HAS ADOPTED THIS REGULATION:

## CHAPTER IU.K.**DEFINITIONS AND EXPOSURE TO THE RISK OF A SECURITISATION**

### Article 1U.K.Definitions

For the purposes of this Regulation the following definitions apply:

‘retainer’ means the entity acting as originator, sponsor or original lender which retains a net economic interest in the                              securitisation in accordance with Article 405(1) of Regulation (EU) No 575/2013;                           

‘Synthetic form of retention’ means retention of economic interest through the use of derivative instruments;

‘Contingent form of retention’ means retention of economic interest through the use of guarantees, letter of credits and other                              similar forms of credit support ensuring an immediate enforcement of the retention;                           

‘Vertical tranche’ means a tranche which exposes the holder of the tranche to the credit risk of each issued tranche of the                              securitisation transaction on a pro-rata basis.                           

## CHAPTER IIU.K.**EXPOSURE TO THE CREDIT RISK OF A SECURITISATION POSITION**

### Article 2U.K.Particular cases of exposure to the credit risk of a securitisation position

1.Where an institution acts as a credit derivative counterparty or as a counterparty providing the hedge or as a liquidity facility                        provider with regard to a securitisation transaction, it shall be deemed to become exposed to the credit risk of a securitisation                        position when the derivative, the hedge or the liquidity facility assumes the credit risk of the securitised exposures or                        the securitisation positions.                  

2.For the purposes of Article 405 and 406 of Regulation (EU) No 575/2013, where a liquidity facility complies with the conditions                        specified in paragraph 2 of Article 255 of Regulation (EU) No 575/2013, the liquidity provider shall not be deemed to become                        exposed to the credit risk of a securitisation position.                  

3.In the context of a re-securitisation with more than one level or a securitisation with multiple discrete underlying transactions,                        an institution shall be deemed to become exposed to the credit risk only of the individual securitisation position or transaction                        to which it is assuming exposure.                  

4.Institutions shall not be deemed to be in breach of Article 405 of Regulation (EU) No 575/2013 in accordance with Article                        14(2) of Regulation (EU) No 575/2013 on a consolidated basis provided that the following conditions are met:                  

(a)the entity which holds the securitisation positions is established in a third country and is included in the consolidated                        group in accordance with Article 18 of Regulation (EU) No 575/2013;                  

(b)the securitisation positions are held in the trading book of the entity referred to in point (a) for the purposes of market                        making activities;                  

(c)the securitisation positions are not material with respect to the overall risk profile of the trading book of the group referred                        to in point (a) and do not form a disproportionate share of the trading activities of the group.                  

## CHAPTER IIIU.K.**RETENTION OF NET ECONOMIC INTEREST**

### Article 3U.K.Retainers of material net economic interest

1.The retained material net economic interest shall not be split amongst different types of retainer. The requirement to retain                        a material net economic interest shall be fulfilled in full by any of the following:                  

(a)the originator or multiple originators;                  

(b)the sponsor or multiple sponsors;                  

(c)the original lender or multiple original lenders.                  

2.Where the securitised exposures are created by multiple originators, the retention requirement shall be fulfilled by each                        originator, in relation to the proportion of the total securitised exposures for which it is the originator.                  

3.Where the securitised exposures are created by multiple original lenders, the retention requirement shall be fulfilled by                        each original lender, in relation to the proportion of the total securitised exposures for which it is the original lender.                  

4.By way of derogation from paragraphs 2 and 3, where the securitised exposures are created by multiple originators or multiple                        original lenders, the retention requirement may be fulfilled in full by a single originator or original lender provided that                        either of the following conditions are met:                  

(a)the originator or original lender has established and is managing the programme or securitisation scheme;                  

(b)the originator or original lender has established the programme or securitisation scheme and has contributed over 50 % of                        the total securitised exposures.                  

5.Where the securitised exposures have been sponsored by multiple sponsors, the retention requirement shall be fulfilled by                        either:                  

(a)the sponsor whose economic interest is most appropriately aligned with investors as agreed by the multiple sponsors on the                        basis of objective criteria including the fee structures, the involvement in the establishment and management of the programme                        or securitisation scheme and exposure to credit risk of the securitisations;                  

(b)by each sponsor proportionately in relation to the number of sponsors.                  

### Article 4U.K.Fulfilment of the retention requirement through a synthetic or contingent form of retention

1.The retention requirement may be fulfilled in a manner equivalent to one of the options set out in the second subparagraph                        of Article 405(1) of Regulation (EU) No 575/2013 through a synthetic or contingent form of retention where the following conditions                        are met:                  

(a)the amount retained is at least equal to the requirement under the option to which the synthetic or contingent form of retention                        can be equated;                  

(b)the retainer has explicitly disclosed that it will retain, on an ongoing basis, a material net economic interest in that manner,                        including details of the form of retention, the methodology used in its determination and its equivalence to one of those                        options.                  

2.Where an entity other than a credit institution as defined in Article 4(1)(1) of Regulation (EU) No 575/2013 acts as a retainer                        through a synthetic or contingent form of retention, the interest retained on a synthetic or contingent basis shall be fully                        collateralised in cash and held on a segregated basis as ‘clients’ funds as referred to in Article 13(8) of Directive 2004/39/EC                        of the European Parliament and of the Council(3).                  

### Article 5U.K.Retention option (a): pro rata retention in each of the tranches sold or transferred to investors

1.A retention of no less than 5 % of the nominal value of each of the tranches sold or transferred as referred to in point (a)                        of Article 405(1) of the Regulation (EU) No 575/2013 may also be achieved by the following:                  

(a)retention of at least 5 % of the nominal value of each of the securitised exposures, provided that the credit risk of such                        exposures ranks *pari passu* with or is subordinated to the credit risk securitised for the same exposures. In the case of a revolving securitisation,                        as defined in Article 242(13) of Regulation (EU) No 575/2013, this would occur through retention of the originator's interest                        assuming the originator's interest was for at least 5 % of the nominal value of each of the securitised exposures and ranked                        *pari passu* with or subordinated to the credit risk that has been securitised with respect to those same exposures;                  

(b)the provision, in the context of an ABCP programme, of a liquidity facility which may be senior in the contractual waterfall,                        where the following conditions are fulfilled:                  

the liquidity facility covers 100 % of the credit risk of the securitised exposures;

the liquidity facility covers the credit risk for as long as the retainer has to retain the economic interest by means of                              such liquidity facility for the relevant securitisation position;                           

the liquidity facility is provided by the originator, sponsor or original lender in the securitisation transaction;

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

(c)retention of a vertical tranche which has a nominal value of no less than 5 % of the total nominal value of all the issued                        tranches of notes.                  

### Article 6U.K.Retention option (b): retention of the originator's interest for revolving exposures

A retention as referred to in point (b) of Article 405(1) of Regulation (EU) No 575/2013 may be achieved by retaining at least                     5 % of the nominal value of each of the securitised exposures, provided that the retained credit risk of such exposures ranks                     pari passu with or is subordinated to the credit risk securitised for the same exposures.                  

### Article 7U.K.Retention option (c): retention of randomly selected exposures

1.The pool of at least 100 potentially securitised exposures from which retained and securitised exposures are randomly selected,                        referred to in point (c) of the second subparagraph of Article 405(1) of Regulation (EU) No 575/2013, shall be sufficiently                        diverse to avoid the excessive concentration of the retained interest. When preparing for the selection process, the retainer                        shall take appropriate quantitative and qualitative factors into account in order to ensure that the distinction between retained                        and securitised exposures is genuinely random. The retainer of randomly selected exposures shall take into consideration,                        where appropriate, factors such as vintage, product, geography, origination date, maturity date, loan to value ratio, property                        type, industry sector, and outstanding loan balance when selecting exposures.                  

2.The retainer shall not designate different individual exposures as retained exposures at different points in time, unless                        this is necessary to fulfil the retention requirement in relation to a securitisation in which the securitised exposures fluctuate                        over time, either due to new exposures being added to the securitisation or to changes in the level of the individual securitised                        exposures.                  

### Article 8U.K.Retention option (d): retention of the first loss tranche

1.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:                  

(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:                  

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

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

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

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

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;                           

(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.                  

2.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.                  

3.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.                  

### Article 9U.K.Retention option (e): retention of a first loss in every securitised exposure

1.The retention of a first loss exposure at the level of every securitised exposure in accordance with point (e) of the second                        subparagraph of Article 405(1) shall be applied so that the credit risk retained is always subordinated to the credit risk                        that has been securitised in relation to those same exposures.                  

2.The retention referred to in paragraph 1 may be fulfilled by the sale at a discounted value of the underlying exposures by                        the originator or original lender, where the amount of the discount is not less than 5 % of the nominal value of each exposure                        and where the discounted sale amount is only refundable to the originator or original lender where it is not absorbed by losses                        related to the credit risk associated to the securitised exposures.                  

### Article 10U.K.Measurement of the level of retention

1.Where measuring the level of retention of net economic interest, the following criteria shall be applied:                  

(a)origination shall be considered as the time at which the exposures were first securitised;                  

(b)the calculation of the level of retention shall be based on nominal values and the acquisition price of assets shall not be                        taken into account;                  

(c)‘excess spread’ as defined in Article 242(1) of Regulation (EU) No 575/2013 shall not be taken into account when measuring                        the retainer's net economic interest;                  

(d)the same retention option and methodology shall be used to calculate the net economic interest during the life of a securitisation                        transaction, unless exceptional circumstances require a change and that change is not used as a means to reduce the amount                        of retained interest.                  

2.In addition to the criteria set out in paragraph 1, provided that there is no embedded mechanism by which the retained interest                        at origination would decline faster than the interest transferred, the fulfilment of the retention requirement shall not be                        deemed to have been affected by the amortisation of the retention via cash flow allocation or through the allocation of losses,                        which, in effect, reduce the level of retention over time. A retainer shall not be required to constantly replenish or readjust                        its retained interest to at least 5 % as losses are realised on its exposures or allocated to its retained position.                  

### Article 11U.K.Measurement of retention for the undrawn amounts in exposures in the form of credit facilities

The calculation of the net economic interest to be retained for credit facilities, including credit cards, shall be based                     only on amounts already drawn, realised or received and shall be adjusted in accordance with changes to those amounts.                  

### Article 12U.K.Prohibition of hedging or selling the retained interest

1.The obligation in the third subparagraph of Article 405(1) of Regulation (EU) No 575/2013 not to subject the retained net                        economic interest to any credit risk mitigation, short positions, other hedge or sale shall be applied having regard to the                        purpose of the retention requirement and taking account of the economic substance of the transaction. Hedges of the net economic                        interest shall not be considered to be a hedge for the purposes of the third subparagraph of Article 405(1) of Regulation                        (EU) No 575/2013 and may accordingly be permitted only where they do not hedge the retainer against the credit risk of either                        the retained securitisation positions or the retained exposures.                  

2.The retainer may use any retained exposures or securitisation positions as collateral for secured funding purposes, as long                        as such use does not transfer the credit risk of these retained exposures or securitisation positions to a third party.                  

### Article 13U.K.Exemptions to Article 405(1) of Regulation (EU) No 575/2013

The transactions referred to in Article 405(4) of Regulation (EU) No 575/2013 shall include securitisation positions in the                     correlation trading portfolio which are reference instruments satisfying the criterion in Article 338(1)(b) of Regulation                     (EU) No 575/2013 or are eligible for inclusion in the correlation trading portfolio.                  

### Article 14U.K.Retention on a consolidated basis

An institution satisfying the retention requirement on the basis of the consolidated situation of the related EU parent credit                     institution, EU financial holding company, or EU mixed financial holding company in accordance with Article 405(2) of Regulation                     (EU) No 575/2013 shall, in the case the retainer is no longer included in the scope of supervision on a consolidated basis,                     ensure that one or more of the remaining entities included in the scope of supervision on a consolidated basis assumes exposure                     to the securitisation so as to ensure ongoing fulfilment of the requirement.                  

## CHAPTER IVU.K.**DUE DILIGENCE REQUIREMENTS FOR INSTITUTIONS BECOMING EXPOSED TO A SECURITISATION POSITION**

### Article 15U.K.Outsourcing and other general considerations

1.Where there is no available information on the specific exposures to be securitised, including where exposures accumulate                        before their securitisation or whether they may be substituted into an existing revolving securitisation, an institution is                        deemed to fulfil its due diligence obligations referred to in Article 406 of Regulation (EU) No 575/2013, for each of its                        individual securitisation positions on the basis of the relevant eligibility criteria for such exposures.                  

2.When outsourcing certain tasks of the process for the fulfilment of the obligations set out in Article 406 of Regulation (EU)                        No 575/2013, including record keeping, institutions becoming exposed to the risks of a securitisation shall retain full control                        of that process.                  

### Article 16U.K.Specification of risk characteristics and structural features

1.The risk characteristics of the individual securitisation position referred to in Article 406(1)(b) of Regulation (EU) No                        575/2013 shall include the following most appropriate and material characteristics, such as:                  

(a)tranche seniority level;                  

(b)cash flow profile;                  

(c)any existing rating;                  

(d)historical performance of similar tranches;                  

(e)obligations related to the tranches included in the documentation relating to the securitisation;                  

(f)credit enhancement.                  

2.The risk characteristics of the exposures underlying the securitisation position referred to in Article 406(1)(c) of Regulation                        (EU) No 575/2013 shall include the most appropriate and material characteristics, including the performance information referred                        to in Article 406(2) of Regulation (EU) No 575/2013 in relation to residential mortgage exposures. Institutions shall identify                        appropriate and comparable metrics for analysing the risk characteristics of other asset classes.                  

3.Additional structural features as referred to in Article 406(1)(g) of Regulation (EU) No 575/2013 shall include derivative                        instruments, guarantees, letter of credits and other similar forms of credit support.                  

### Article 17U.K.Frequency of review

Institutions shall review their compliance with Article 406 of Regulation (EU) No 575/2013 after becoming exposed to a securitisation                     positions at least annually and more frequently, as soon as institutions become aware of a breach of the obligations included                     in the documentation relating to the securitisation or of a material change in any of the following:                  

structural features that can materially impact on the performance of the securitisation position;

the risk characteristics of the securitisation positions and of the underlying exposures.

### Article 18U.K.Stress Tests

1.The stress tests referred to in the second subparagraph of Article 406(1) of Regulation (EU) No 575/2013, shall include all                        relevant securitisation positions and shall be incorporated into the stress testing strategies and processes that the institutions                        carry out in accordance with the internal capital adequacy assessment process specified in Article 73 of the Directive 2013/36/EU                        of the European Parliament and of the Council(4).                  

2.In order to fulfil the stress testing requirements referred to in the second subparagraph of Article 406(1) of Regulation                        (EU) No 575/2013, institutions may make use of comparable financial models developed by third parties, in addition to those                        developed by ECAIs, provided that they can demonstrate, when requested that they took due care, prior to investing to validate                        the relevant assumptions in and structuring of the models and to understand methodology, assumptions and results.                  

3.When conducting the stress tests referred to in Article 406(1) of Regulation (EU) No 575/2013 within an ABCP programme as                        referred to in Article 242(9) of Regulation (EU) No 575/2013, which is supported by a liquidity facility which fully covers                        the credit risk of the securitised exposures, institutions may carry out a stress test on the creditworthiness of the liquidity                        facility provider rather than on the securitised exposures.                  

### Article 19U.K.Exposures in the trading book and non-trading book

1.The holding of a securitisation position in the trading or non-trading book respectively shall not represent a sufficient                        justification in itself for the application of different policies and procedures or a different intensity of review to fulfil                        the due diligence obligations referred to in Article 406 of Regulation (EU) No 575/2013. In determining whether different                        policies and procedures or a different intensity of review shall be applied, all relevant factors materially impacting the                        risk profile of each of the books and of the relevant securitisation positions shall be considered, including the size of                        the positions, the impact on the institution's capital base during a period of stress, and the concentration of risk in one                        specific transaction, issuer, or asset class.                  

2.Institutions shall ensure that any material change increasing the risk profile of the securitisation positions in their trading                        book and non-trading book is reflected by an appropriate change in their due diligence procedures as regards those securitisation                        positions. In this regard, institutions shall identify in their formal trading book and non-trading book policies and procedures                        the circumstances which would trigger a review of the due diligence obligations.                  

### Article 20U.K.Positions in the correlation trading portfolio

Article 406 of the Regulation (EU) No 575/2013 shall be deemed to be complied with where the following conditions are fulfilled:

securitisation positions are either held in the correlation trading portfolio and are reference instruments as referred to                              in Article 338(1)(b) of that Regulation or are eligible for inclusion in the correlation trading portfolio;                           

the institution complies with Article 377 of that Regulation with regard to calculating the own funds requirements in relation                              to its correlation trading portfolio;                           

the institution's approach to calculating own funds in relation to its trading portfolio results in a comprehensive and thorough                              understanding of the risk profile of its investment in the securitisation positions;                           

the institution has implemented formal policies and procedures appropriate to its correlation trading portfolio and commensurate                              with the risk profile of its investments in the corresponding securitised positions, for analysing and recording the relevant                              information referred to in Article 406(1) of Regulation (EU) No 575/2013.                           

## CHAPTER VU.K.**REQUIREMENTS FOR ORIGINATORS, SPONSORS AND ORIGINAL LENDERS**

### Article 21U.K.Policies for credit granting

1.The fulfilment of the obligation referred to in Article 408 of Regulation (EU) No 575/2013 by originator or sponsor institutions                        shall not imply that borrower types and loan products must be the same for securitised and non-securitised exposures.                  

2.Where sponsor and originator institutions have not been engaged in the original credit-granting of exposures to be securitised,                        or are not active in the credit-granting of the specific types of exposures to be securitised, those institutions shall obtain                        all the necessary information to assess whether the criteria applied in the credit-granting for those exposures are as sound                        and well-defined as the criteria applied to non-securitised exposures.                  

### Article 22U.K.Disclosure of the level of the commitment to maintain a net economic interest

1.The retainer shall, pursuant to Article 409 of Regulation (EU) No 575/2013, disclose to investors at least the following information                        regarding the level of its commitment to maintain a net economic interest in the securitisation:                  

(a)confirmation of the retainer's identity and of whether it retains as originator, sponsor or original lender;                  

(b)whether the modalities provided for in points (a), (b), (c), (d) or (e) of the second subparagraph of Article 405(1) of Regulation                        (EU) No 575/2013 has been applied to retain a net economic interest;                  

(c)any change to the modality to retain a net economic interest as referred to in point (b) in accordance with Article 10(1)(d);                  

(d)confirmation of the level of retention at origination and of the commitment to retain on an on-going basis, which shall relate                        only to the continuation of fulfilment of the original obligation and shall not require data on the current nominal or market                        value, or on any impairments or write-downs on the retained interest.                  

2.Where the exemptions referred to in paragraph 3 or 4 of Article 405 of Regulation (EU) No 575/2013 apply to a securitisation                        transaction, institutions acting as originator, sponsor or original lender shall disclose information on the applicable exemption                        to investors.                  

3.The disclosure referred to in paragraphs 1 and 2 shall be appropriately documented and made publicly available, except in                        bilateral or private transactions where private disclosure is considered by the parties to be sufficient. The inclusion of                        a statement on the retention commitment in the prospectus for the securities issued under the securitisation programme shall                        be considered an appropriate means of fulfilling the requirement.                  

4.The disclosure shall also be confirmed after origination with the same regularity as the reporting frequency of the transaction,                        at least annually and in any of the following circumstances:                  

(a)where a breach of the retention commitment referred to in Article 405(1) of Regulation (EU) No 575/2013 occurs;                  

(b)where the performance of the securitisation position or the risk characteristics of the securitisation or of the underlying                        exposures materially change;                  

(c)following a breach of the obligations included in the documentation relating to the securitisation.                  

### Article 23U.K.Disclosure of materially relevant data

1.Originators, sponsors and original lenders shall ensure that materially relevant data under Article 409 of Regulation (EU)                        No 575/2013 is readily accessible to investors, without excessive administrative burden.                  

2.The appropriate disclosure referred to in Article 409 of Regulation (EU) No 575/2013 shall be done at least annually and in                        the following circumstances:                  

(a)where the performance of the securitisation position or the risk characteristics of the securitisation or of the underlying                        exposures materially change;                  

(b)following a breach of the obligations included in the documentation relating to the securitisation;                  

(c)In order for data to be considered to be materially relevant with regard to the individual underlying exposures, it shall,                        in general, be provided on a loan-by-loan basis, however there are instances where the data may be provided on an aggregate                        basis. In assessing whether aggregate information is sufficient, factors to be taken into account shall include the granularity                        of the underlying pool and whether the management of the exposures in that pool is based on the pool itself or on a loan-by-loan                        basis.                  

3.The disclosure requirement shall be subject to any other legal or regulatory requirements applicable to the retainer.                  

## CHAPTER VIU.K.**FINAL PROVISIONS**

### Article 24U.K.Entry into force

This Regulation shall enter into force on the twentieth day following that of its publication in *the Official Journal of the European Union*.                  

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 13 March 2014.

*For the Commission*                            

*The President*                            

José Manuel Barroso                            

1

OJ L 176, 27.6.2013, p. 1.                           

2

Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory                              Authority (European Banking Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/78/EC (OJ L 331, 15.12.2010, p. 12).                           

3

Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending                              Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing                              Council Directive 93/22/EEC (OJ L 145, 30.4.2004, p. 1).                           

4

Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions                              and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives                              2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338).