United States: Public Hearing On EBA Consultation Paper On Draft Regulatory Technical Standards And Implementing Technical Standards On Securitisation Retention Rules (The "RTS/ITS")

James Warbey and John Goldfinch, of Milbank's London office, this morning attended the Public Hearing on the EBA's recently published Consultation Paper on draft Regulatory Technical Standards and Implementing Technical Standards on securitisation retention rules.


The panel was represented by:

  • Isabelle Vaillant, Director of Regulation, EBA
  • Christian Moor, Policy Expert, Securitisation, Covered Bonds and Market Risk, EBA
  • Ashley Kibblewhite, Senior Risk Specialist, Prudential Regulation Authority
  • Benjamin King, Associate, Prudential Regulation Authority
  • Massimo Suardi, European Commission

The "public" were in strong attendance and filled the EBA meeting room at Tower 42 to capacity with around fifty representatives from banks, asset managers and law firms.


The format of the public hearing led with a presentation on the background to the Consultation Paper with an overview of its key provisions. In doing so the EBA confirmed upfront two points that are not explicitly stated in the RTS/ITS, being that:

(i) the EBA had intended for there to be no grandfathering and they were aware that this meant a small number of existing deals would be adversely impacted as a consequence, though investors in current deals deemed noncompliant in future should not be penalised, provided they were not negligent at the time of investment; and

(ii) the prohibition on subjecting the risk retention piece to "any credit risk mitigation or any short positions or any other hedge" did not preclude the use of a "macro-hedging" strategy, suggesting that the restriction in Article 405 of the CRR should be narrowly construed, though no further guidance or elaboration on this point was provided.

The floor was then turned over to questions for approximately an hour.


Questions from the audience were broad-ranging and covered:

  • Clarification requested on Article 19 (Exposures in the trading book and nontrading book) and the breadth of the market-making exemption;
  • Objection that the EBA did not sufficiently communicate that the RTS/ITS would not deviate or supplement the provisions of the Level 1 text in the CRR;
  • Query as to whether the EBA had considered possible conflicts with the Volker rule;
  • Query over meaning of "for its own account" in the definition of "originator" (Milbank);
  • Query over approach to possible split in retention where there is more than one sponsor (Milbank);
  • Level of "management" required in order to qualify as a "sponsor" (Milbank);
  • Request to correct the apparent anomaly in the CRR meaning only MiFID regulated firms could act as "investment firm" sponsors;
  • Request that the RTS/ITS contain the same or similar guidance as was contained in the Guidelines on Article 122a (the "Guidelines") on what will be a new, as opposed to existing, securitisation.

By and large the EBA panel were reluctant to engage in the minutiae of the answers to the above questions and participants were asked instead to put their queries in written form and submit them as part of the consultation process before the deadline on 22 August, 2013. Nothing new therefore came from the responses to the above questions.

Further, it was stressed repeatedly that the EBA had no mandate to deviate from, supplement, or expand upon the text of the CRR itself. This of course contrasts sharply with the approach taken previously by the EBA, then as the CEBS, in respect of the Guidelines and gives a clear indication on how far the EBA will be prepared to go in amending the current draft form.

Interestingly the EBA confirmed that its current Q&A platform on the CRR, available on its website and which has been live for the past couple of weeks, would be extended to also cover the RTS/ITS. However, this will only accept queries following the publication of the final RTS/ITS in the Official Journal, expected to occur by the end of March 2013 following their submission to the Commission by no later than 31 December, 2013. This may be a useful forum to obtain greater clarity on certain issues going forwards in 2014.


Whilst in one sense the Public Hearing was a disappointment, in that no real new ground was covered, equally there was no suggestion that there would be sweeping changes made to the current draft of the RTS/ITS. Whilst the same are sub-optimal in many respects, particularly with respect to the CLO market, market participants might take some comfort from the fact that we will probably see few if any significant further changes and thus we have the "devil-we-know". Please refer to our earlier briefing paper - "Risk Retention Reinvention: Some Questions Answered" - for further details.

As a final point, it was noted by one attendee representing a large European investment bank that the market appeared to be pricing in about a 10-15bps spread on the AAA tranche of non-compliant CLOs. We would be interested to hear if this accords with your experiences.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions