1.   An institution, other than when acting as an originator, a sponsor or original lender, shall be exposed to the credit risk of a securitisation position in its trading book or non-trading book only if the originator, sponsor or original lender has explicitly disclosed to the institution that it will retain, on an ongoing basis, a material net economic interest which, in any event, shall not be less than 5 %.

Only any of the following qualifies as retention of a material net economic interest of not less than 5 %:

(a)	retention of no less than 5 % of the nominal value of each of the tranches sold or transferred to the investors;

(b)	in the case of securitisations of revolving exposures, retention of the originator's interest of no less than 5 % of the nominal value of the securitised exposures;

(c)

retention of randomly selected exposures, equivalent to no less than 5 % of the nominal value of the securitised exposures, where such exposures would otherwise have been securitised in the securitisation, provided that the number of potentially securitised exposures is no less than 100 at origination;

(d)

retention of the first loss tranche and, if necessary, other tranches having the same or a more severe risk profile than those transferred or sold to investors and not maturing any earlier than those transferred or sold to investors, so that the retention equals in total no less than 5 % of the nominal value of the securitised exposures;

(e)	retention of a first loss exposure not less than 5 % of every securitised exposure in the securitisation.

Net economic interest is measured at the origination and shall be maintained on an ongoing basis. The net economic interest, including retained positions, interest or exposures, shall not be subject to any credit risk mitigation or any short positions or any other hedge and shall not be sold. The net economic interest shall be determined by the notional value for off-balance sheet items.

There shall be no multiple applications of the retention requirements for any given securitisation.

2.   Where an EU parent credit institution, an EU financial holding company, an EU mixed financial holding company or one of its subsidiaries, as an originator or a sponsor, securitises exposures from several credit institutions, investment firms or other financial institutions which are included in the scope of supervision on a consolidated basis, the requirement referred to in paragraph 1 may be satisfied on the basis of the consolidated situation of the related EU parent credit institution, EU financial holding company, or EU mixed financial holding company.

The first subparagraph shall apply only where credit institutions, investment firms or financial institutions which created the securitised exposures have committed themselves to adhere to the requirements set out in Article 408 and deliver, in a timely manner, to the originator or sponsor and to the EU parent credit institution, EU financial holding company or EU mixed financial holding company the information needed to satisfy the requirements referred to in Article 409.

3.   Paragraph 1 shall not apply where the securitised exposures are exposures on or fully, unconditionally and irrevocably guaranteed by the following entities:

(a)	central governments or central banks;

(b)	regional governments, local authorities and public sector entities of Member States;

(c)	institutions to which a 50 % risk weight or less is assigned under Part Three, Title II, Chapter 2;

(d)	multilateral development banks.

4.   Paragraph 1 shall not apply to transactions based on a clear, transparent and accessible index, where the underlying reference entities are identical to those that make up an index of entities that is widely traded, or are other tradable securities other than securitisation positions.