ABS retention tension

A report by the Committee of European Banking Supervisors last month criticised aspects of a proposal to require securitisation originators to retain 5% of exposures from 2011, while practitioners maintain the move will do little to align incentives between issuers and investors. By Christopher Whittall

Nothing is so defective as those laws that correct defects,” a French philosopher once quipped. This maxim nicely sums up the fears of securitisation originators, as regulators in the US and Europe look to eradicate abuses in the asset-backed securities (ABS) market. Several pieces of legislation have already been proposed that will, among other things, require originators to hold a slice of the risk, raise risk weights for resecuritisation transactions and increase disclosure requirements