Prudential Regulation Authority Rulebook

1

The retention of the first loss tranche referred to in point (d) of Article 6(3) of Chapter 2 may be fulfilled by holding either on-balance sheet or off-balance sheet positions and by any of the following methods:

1. (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:
   1. (i) the exposure covers at least 5% of the nominal value of the securitised exposures
   2. (ii) the exposure constitutes a first loss position in relation to the securitisation;
   3. (iii) the exposure covers the credit risk for the entire duration of the retention commitment;
   4. (iv) the exposure is provided by the retainer; and
   5. (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; or
2. (b) overcollateralisation, as defined to in point (9) of Article 242 of CRR, 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 chose 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.