(24)Synthetic excess spread is widely present in certain types of transactions and is a helpful mechanism for both investors and originators, in order to reduce the cost of the credit protection and the exposure at risk respectively. In that regard, synthetic excess spread is essential for some specific retail asset classes, such as SMEs and consumer lending, that show both higher yield and credit losses than other asset classes, and for which the securitised exposures generate excess spread to cover those losses. However, where the amount of synthetic excess spread subordinated to the investor position is too high, it is possible that there is no realistic scenario in which the investor in the securitisation positions will experience any losses, resulting in no effective risk transfer. To mitigate supervisory concerns and further standardise that structural feature, it is important to specify strict criteria for STS on-balance-sheet securitisations and to ensure full disclosure on the use of synthetic excess spread.