Managers and arrangers of U.S. collateral loan obligations have struggled to satisfy the European Union’s risk retention requirement. However, the final draft rules published by the European Banking Authority (EBA) at the end of last year include a new concession that may assist U.S. managers in accessing an investor base in the region.

The Capital Requirements Regulation provides that certain European Economic Area-regulated investors, including credit institutions and investment firms, shall be exposed to thee credit risk of certain securitizations only if the originator, sponsor or original lender of that securitization has explicitly disclosed that it will retain, on an ongoing basis, a material net economic interest of at least 5%. The only parties to a deal that can satisfy this requirement are the original lender, originator or sponsor.

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