The most noteworthy developments from the standpoint of financial regulation

The most noteworthy developments from the standpoint of financial regulation are as follows:
SECURITISATION.- Law 6/2011 makes it compulsory for credit institutions and investment firms to meet certain requirements to allow them to assume exposures to securitisation positions and to
initiate such securitisation.
Under these requirements, which are set out in Royal Decree 771/2011, a credit institution,
other than when acting as an originator, a sponsor or original lender, shall be exposed to
the credit risk of a securitisation position in its trading book or non-trading book only if the
originator, sponsor or original lender has explicitly disclosed to the credit institution that it
will retain, on an ongoing basis, a material net economic interest.
For these purposes, “retention of net economic interest” means: a) retention of no less
than 5% of the nominal value of each of the tranches sold or transferred to the investors;
b) in the case of securitisations of revolving exposures, retention of the originator’s interest
of no less than 5% of the nominal value of the securitised exposures;7 c) retention of
randomly selected exposures, equivalent to no less than 5% of the nominal amount of
the securitised exposures, provided that the number of potentially securitised exposures
is no less than 100 at origination; or d) retention of the first loss tranche and, if necessary,
other tranches having the same or a more severe risk profile than those transferred
or sold to investors and not maturing any earlier than those transferred or sold to investors,
so that the retention equals in total no less than 5% of the nominal value of the
securitised exposures.
The Banco de España may specify the conditions of application of this Law and how those
institutions will communicate the retention requirement to investors. This communication
must allow them ready access to all pertinent data on exposures. Also, the Banco de España
may opt to suspend temporarily the aforementioned requirements during periods of
general market liquidity crisis.