Impact of Possible Regulatory Changes to European Capital Requirements Directive (CRD) on Originate-to-Distribute Model

August 1, 2008
White & Case Structured Finance Bulletin
Dennis Heuer, Daniel Baierlein

DOWNLOAD COPY: Impact of Possible Regulatory Changes to European Capital Requirements Directive (CRD) on Originate-to-Distribute Model

The European Commission recently proposed changes to the Capital Requirements Directive that will affect both EU and non-EU financial institutions if implemented. The EC wants banks (investors) to ensure that they invest only in credit risk transfer products in which the originators, or alternatively, the distributors, explicitly commit themselves to retain 10% of the credit risks. This proposal raises many questions: How is this 10% floor-requirement calculated?  How will the proposals be implemented? And may European regulations be extended to non-EU banks and originators? Read here for details on the proposed changes and the impact they may have.