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“Measured at origination” in EU and UK securitisations
EU and UK securitisation rules require the originator, sponsor or original lender of a securitisation to retain on an ongoing basis a material net economic interest in the securitisation of not less than 5%, "measured at origination". This rule is a fundamental principle of the EU and UK risk detention rules, designed to ensure the retainer has "skin in the game" from the start and throughout the life of securitisation.
The meaning of “measured at origination” has given rise to a number of issues, primarily concerning measurement methodologies, ongoing compliance, and a lack of clarity in relation to certain structures. Regulatory guidance and market practice have provided various clarifications and technical standards, but a number of issues and ambiguities remain, and the EU and UK rules diverge in certain respects.
