Prudential Regulation Authority Rulebook

1

The retention of not less than 5% of the nominal value of each of the tranches sold or transferred to the investors as referred to in Article 6(3)(a) of Chapter 2 may be complied with through any of the following methods:

1. (a) the retention of not less than 5% of the nominal value of each of the securitised exposures, provided that the retained credit risk ranks pari passu with or is subordinated to the credit risk securitised in relation to the same exposures;
2. (b) the provision, in the context of an ABCP programme, of a liquidity facility, where the following conditions are met:
   1. (i) the liquidity facility covers 100% of the share of the credit risk of the securitised exposures of the relevant securitisation transaction that is being funded by the respective ABCP programme;
   2. (ii) the liquidity facility covers the credit risk for as long as the retainer has to retain the material net economic interest by means of such liquidity facility for the relevant securitisation transaction;
   3. (iii) the liquidity facility is provided by the originator, sponsor or original lender in the securitisation transaction; and
   4. (iv) the investors becoming exposed to such securitisation have been given access to appropriate information with the initial disclosure to enable them to verify that points (i), (ii) and (iii) are complied with; or
3. (c) the retention of an exposure which exposes its holder to the credit risk of each issued tranche of a securitisation transaction on a pro-rata basis (vertical tranche) of not less than 5% of the total nominal value of each of the issued tranches.