US regulators propose standards to give securitisers skin in the game

Regulators release risk retention rule; publish a specific loan-to-value ratio for those mortgages that will be exempted

US regulators on Tuesday agreed proposals that will require originators and securitisers to hold a portion of their asset-backed securities, in a bid to prevent another crisis with its roots in securitisation.

The measures, which address a decisive part of the Dodd-Frank Act, establish rules that demand banks retain a 5% stake in a portion of the credit risk for any asset that it transfers, sells, or conveys to a third party. The only assets that will escape this 5% retention rule are the safest