Annual report generally confirms EU risk retention rules but fails to provide guidance regarding originator special purpose entities -

On 22 December 2014, the European Banking Authority (EBA) issued its report on securitisation risk retention, due diligence and disclosure. The report was issued pursuant to the requirement of Article 410(1) of the EU Capital Requirements Regulation (CRR) which mandates the EBA to report annually to the European Commission on measures taken by competent authorities to ensure compliance with Articles 405-409 of the CRR. You can access a copy of the report here.

The report will be of interest to all participants in the European collateralized loan obligation (CLO) market. The report concluded that most of the provisions in the EU risk retention rules were working well and should not be modified. The report recommended adopting a “direct” regulatory approach in addition to retaining the “indirect” approach in the current rules, and recommended greater global alignment of the risk retention rules.