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European Savings and Retail Banks Group

ESBG does not understand why the same wording under Article 6 retention option of not less than 5% of the nominal value of each of the securitized exposures is also applied under Article 5 retention of not less than 5% of the nominal value of the tranches in 1. (a).

ESBG proposes to allow a combination of 2 retention options for the 5% fulfilment such as retention of for instance a 1% first loss tranche (d) and 4% retention of randomly selected exposures (c).

ESBG proposes to include the fixed excess spread in synthetic securitization transactions under retention option (d): retention of the first loss tranche. As the fixed excess spread in a synthetic securitization fulfils the function of the first loss in the transaction.
ESMA’s consultation paper on disclosure requirements already includes disclosure fields regarding the risk retention method and the risk retention holder.
We agree with the disclosure in the prospectus mentioned in the EBA’s draft technical standard. In any case, disclosing risk retention globally in a universally agreed format would be beneficial.
These provisions seem helpful especially for dynamic and bespoke securitisation programs and should be preserved.
From an investor’s perspective, the retention should only be financed so that the effective risk remains with the ultimate beneficiary of the securitisation. Otherwise incentives would not remain aligned. If the transfer of risk can be avoided, the resolution of the financing arrangement following a retainer default could be a formal matter.

From an originator’s perspective we consider the provisions of Article 12(3) as useful and not harmful.
Yes, the provisions of Article 16 are an adequate complement to the level one text (STS framework Article 6(2)).
ESBG would consider them sufficient, although the question remains on how investors of a securitisation can mitigate the potential loss of the retaining entity during the meantime.
Even with similar characteristics assets performance can differ and thus performance of the securitised assets can be significantly lower compared to assets on the balance sheet. ESBG therefore does not support Article 6(2) of the STS Regulation.
Rémy Moura