Securitization Risk Retention Check

EU Securitisation Regulation (EU) 2017/2402 Art.6 and U.S. Credit Risk Retention Rule (Dodd-Frank Sec.941, Reg RR, 12 CFR Part 244) 5% risk-retention checker: verifies the originator/sponsor/original-lender retains at least 5% net economic interest via a recognized method (vertical slice, horizontal first-loss, L-shaped, representative sample, seller's interest), applies the U.S. Qualified Residential Mortgage (QRM) exemption where flagged, and flags EU-specific structural breaches -- retainer sole-purpose-entity prohibition and retained-interest hedging/sale. Deterministic point-in-time structural check from caller-supplied retention method, exposure/retained amounts, and jurisdiction-specific flags for a single reporting date. Not a compute_rbc_action_level (NAIC insurer capital ladder) or calculate_solvency2_scr_ratio (EU insurer capital) check -- this is bank/ABS securitization risk-retention structure, not insurer solvency. QRM is the only exemption modelled. The other U.S. exemptions have no inputs and sit outside scope: the qualifying commercial loan, commercial real estate loan, and automobile loan exemptions of 12 CFR 244.14 through 244.18; the general exemptions of 244.19, covering United States government-backed, agricultural, state and municipal, qualified scholarship funding bond, pass-through resecuritization, FDIC-sponsored, student loan, community-focused lending, and three-to-four unit mortgage transactions; the foreign-related safe harbor of 244.20; and the additional exemptions of 244.21. Separately, 244.3(a) lets a sponsor satisfy the base retention requirement through any one of 244.4 through 244.10, so the routes given to eligible ABCP conduits by 244.6, to open market CLOs by 244.9(b) and (c)(1), where the lead arranger of each CLO-eligible loan tranche retains 5 percent of its face amount, and to qualified tender option bonds by 244.10 are alternative ways to satisfy the requirement rather than exemptions from it. None of them is modelled here. The EU non-performing-exposure derogation of Art 6(3a), which measures retention against the net value of the exposures after the purchase-price discount, is not modelled either. A structure covered by one of these, a CLO for instance, is read as an ordinary securitization: if its retained interest falls below 5 percent the verdict returned is NONCOMPLIANT rather than not-applicable.

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