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Recital 8

Recital 8

(8)In order to ensure the ongoing retention of the material net economic interest, retainers should ensure that there is no embedded mechanism in the securitisation structure by which the retained material net economic interest measured at origination declines faster than the interest transferred. For the same reason, the retained material net economic interest should not be prioritised in terms of cash flows to preferentially benefit from being repaid or amortised in a way that would decrease that retained material net economic interest below 5 % of the ongoing nominal value of the tranches sold or transferred to investors or of the exposures securitised, or below the 5 % net value in the case of non-performing exposures of traditional NPE securitisations. Moreover, the credit enhancement provided to the investor assuming exposure to a securitisation position should not decline disproportionately to the rate of repayment on the underlying exposures. That requirement should not prevent the retainer from being remunerated on a priority basis for services rendered to the securitisation’s special purpose entity, provided that the remuneration’s amount is set on an arm’s length basis and that the structure of such remuneration does not undermine the retention requirement.

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