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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 lender and originator institutions relating to exposures to transferred credit risk (Text with EEA relevance)Text with EEA relevance

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 lender and originator institutions relating to exposures to transferred credit risk (Text with EEA relevance)Text with EEA relevance

CHAPTER I DEFINITIONS AND EXPOSURE TO THE RISK OF A SECURITISATION

Article 1 Definitions

For the purposes of this Regulation the following definitions apply:

  1. ‘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;

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

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

  4. ‘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 II EXPOSURE TO THE CREDIT RISK OF A SECURITISATION POSITION

Article 2 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:

  1. 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;

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

  3. 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 III RETENTION OF NET ECONOMIC INTEREST

Article 3 Retainers of material net economic interest

Article 4 Fulfilment of the retention requirement through a synthetic or contingent form of retention

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

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

Article 7 Retention option (c): retention of randomly selected exposures

Article 8 Retention option (d): retention of the first loss tranche

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

Article 10 Measurement of the level of retention

Article 11 Measurement of retention for the undrawn amounts in exposures in the form of credit facilities

Article 12 Prohibition of hedging or selling the retained interest

Article 13 Exemptions to Article 405(1) of Regulation (EU) No 575/2013

Article 14 Retention on a consolidated basis

CHAPTER IV DUE DILIGENCE REQUIREMENTS FOR INSTITUTIONS BECOMING EXPOSED TO A SECURITISATION POSITION

Article 15 Outsourcing and other general considerations

Article 16 Specification of risk characteristics and structural features

Article 17 Frequency of review

Article 18 Stress Tests

Article 19 Exposures in the trading book and non-trading book

Article 20 Positions in the correlation trading portfolio

CHAPTER V REQUIREMENTS FOR ORIGINATORS, SPONSORS AND ORIGINAL LENDERS

Article 21 Policies for credit granting

Article 22 Disclosure of the level of the commitment to maintain a net economic interest

Article 23 Disclosure of materially relevant data

CHAPTER VI FINAL PROVISIONS

Article 24 Entry into force