Recital 8

(8)As pointed out by the European Supervisory Authority (European Banking Authority) (EBA), established by Regulation (EU) No 1093/2010 of the European Parliament and of the Council ⁶ , in its Opinion on the Regulatory Treatment of Non-Performing Exposure Securitisation ⁷ , the risks associated with the assets backing NPE securitisations are economically distinct from those of securitisations of performing assets. NPEs are securitised at a discount on their nominal or outstanding value and reflect the market’s assessment of, inter alia, the likelihood of the debt workout generating sufficient cash flow and asset recovery. The risk for investors is, therefore, that the debt workout for the assets does not generate sufficient cash flow and asset recovery to cover the net value at which the NPEs have been purchased. The actual risk of loss for investors does, therefore, not represent the nominal value of the portfolio, but the discounted value, namely, net of the price discount at which the underlying assets are transferred. It is therefore appropriate, in the case of NPE securitisations, to calculate the amount of the risk retention on the basis of that discounted value.