PORTUGAL Law and Practice Contributed by: Benedita Aires and Orlando Vogler Guiné, VdA
Such investors are not allowed to invest in secu - ritisations without such a retention obligation being ensured, or are heavily restricted when doing so. The retention obligation can be ful - filled in different ways, but the end result is the holding of no less than 5% of the risk position of the securitisation (ie, no less than 5% of a net economic interest in the securitisation). In most cases, the originator will hold 5% of the securi - ties issued, starting from the more junior class, but it is also possible, for instance, to hold a similar position outside the securitisation (ie, an originator securitises 100 loans and commits to retaining five similar loans until the securitisation notes have been redeemed – this is the typi - cal way for the originator to retain in NPL deals, when the originator has agreed to a retention obligation). The originator will be required not to hedge, sell or in any other way mitigate its credit risk in relation to such retained exposure. As mentioned above, where the originator, spon - sor and original lender have not agreed who will retain the material net economic interest, the originator shall do so. Multiple applications of the retention requirements for any given secu - ritisation are not allowed, and the material net economic interest may not be split among dif - ferent types of retainers (nor, likewise, subject to credit risk mitigation or hedging). The retention obligation and the related disclo - sures are described in the prospectus (or oth - er information memorandum), including in the risk factors section, and are then contractually undertaken by (typically) the originator and ser - vicer, and by any other relevant parties (such as the transaction manager, who would typically report this information in the periodical investor report) in the transaction agreements, notably the receivables sale agreement, the servicing
agreement and the transaction management agreement. In addition to the consequences from a risk- weighted assets (RWA) or capital ratios perspec - tive, non-compliance may lead to fines, among other penalties. Supervision The retention legal requirements are typically supervised by the relevant banking, securities or insurance supervisor of the originator/inves - tors. In Portugal, this would be the Bank of Por - tugal, the CMVM or the Financial Supervisory Authority (ASF), respectively. Foreign investors should look to the laws of their own jurisdiction to assess whether similar rules apply and wheth - er it is possible to comply with those rules if the issuer or originator is subject to and complies with substantially similar rules. 4.4 Periodic Reporting SPEs are regularly required to report information to the CMVM, including monthly information on the underlying receivables portfolio, when appli - cable. Accordingly, the servicing agreements should contractually require the servicers to pro - vide monthly servicing reports, in addition to the quarterly or semi-annual reports that serve as a basis for the investor report from the transaction manager, seeing as the interest payment dates do not tend to be monthly. The most relevant reporting requirements are set out under Article 7 of the Securitisation Regu - lation, which is commonly applied across the EU. According to Article 7(2) of the Securitisa - tion Regulation, the mechanisms for disclosure depend on the type of transaction, as follows: • for public transactions (ie, where a prospec - tus is required to be published under the
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