EU Risk-Rule Snafu Unsettles CMBS Market

Dec 07, 2018

David Quirolo comments on a revision to the European Union’s risk-retention rules for securitizations that has thrown a curveball at the U.S. commercial MBS market.

An excerpt from "EU Risk-Rule Snafu Unsettles CMBS Market," Commercial Mortgage Alert, December 7, 2018:

A new revision to the European Union’s risk-retention rules for securitizations has thrown a curveball at the U.S. commercial MBS market. The revision, which takes effect on Jan. 1, includes a provision that effectively prohibits a B-piece buyer from fulfilling the risk-retention requirement on a U.S. deal if a European lender contributes collateral. The E.U. has said the provision was included inadvertently and has advised the regulators of individual European countries that it will be withdrawn. But that could take up to six months to implement. In the meantime, the provision will be officially on the books.

“Everyone was hoping this amendment would be done by now, but that didn’t happen,” said David Quirolo, a partner at Cadwalader Wickersham. “The joint statement helps, because everybody recognizes that this was a mistake, and we are not aware of any objections to the amendment.”

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