Article 7 | Delegated Regulation 2023/2175

Updated 05/02/2025

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Article 7 - Delegated Regulation 2023/2175

Article 7

Retention of the first loss tranche

1. The retention of the first loss tranche referred to in Article 6(3), point (d), of Regulation (EU) 2017/2402 shall be fulfilled by any of the following methods:

(a)	holding either on-balance sheet or off-balance sheet positions;

(b)

holding an exposure by means of a provision of a contingent form of retention or of a liquidity facility in the context of an ABCP programme, which fulfils all of the following criteria:

(i)	the exposure covers at least 5 % of the nominal value of the securitised exposures;

(ii)	the exposure constitutes a first loss position in relation to the securitisation;

(iii)

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

(iv)	the exposure is provided by the retainer;

(v)	the investors have been given access within the initial disclosure to all information necessary to verify that points (i) to (iv) are complied with;

(c)	overcollateralisation, as defined in Article 242, point (9), of Regulation (EU) No 575/2013, if that overcollateralisation operates as a ‘first loss’ position of not less than 5 % of the nominal value of the securitised exposures.

2. Where the first loss tranche exceeds 5 % of the nominal value of the securitised exposures, the retainer may choose to retain a pro-rata portion of such first loss tranche only, provided that that portion is equivalent to at least 5 % of the nominal value of the securitised exposures.

Recitals Article 1 - Definitions Article 2 - Retainers of a material net economic interest Article 3 - Fulfilment of the retention requirement through a synthetic or contingent form of retention Article 4 - Retention equivalent to not less than 5 % of the nominal value of each of the tranches sold or transferred to investors Article 5 - Retention of the originator’s interest in a revolving securitisation or securitisation of revolving exposures Article 6 - Retention of randomly selected exposures equivalent to no less than 5 % of the nominal value of the securitised exposures Article 7 - Retention of the first loss tranche Article 8 - Retention of a first loss exposure of not less than 5 % of every securitised exposure Article 9 - Application of the retention options on traditional NPE securitisations Article 10 - Measurement of the level of retention Article 11 - Measurement of the material net economic interest to be retained for exposures in the form of drawn and undrawn amounts of credit facilities Article 12 - Prohibition of hedging or selling the retained interest Q&A Article 13 - Transactions for which the retention requirement does not apply, as referred to Article 6(6) of Regulation (EU) 2017/2402 Article 14 - Retention on a consolidated basis Article 15 - Requirements on the allocation of cash flows and losses to the retained interest and on fees payable to the retainer Article 16 - Fulfilment of the retention requirement in securitisations of own issued debt instruments Article 17 - Retention requirement in resecuritisations Article 18 - Assets transferred to the SSPE Article 19 - Expertise requirement on the servicer of traditional NPE securitisations Article 20 - Repeal Article 21 - Entry into force

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Article 7 - Delegated Regulation 2023/2175

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