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Risk retention rule: Difference between revisions
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{{a|repack|{{us disclaimer small}} }}{{quote| | {{a|repack|{{us disclaimer small}} }}{{quote| | ||
'''Base risk retention requirement'''. Except as otherwise provided in this part, the sponsor of a securitization transaction [...] shall retain an economic interest in the [[credit risk]] of the securitized assets in accordance with any one of §§ 246.4 through 246.10. Credit risk in securitized assets required to be retained and held by any person for purposes of compliance with this part, whether a sponsor, an originator, an originator-seller, or a third-party purchaser, except as otherwise provided in this part, may be acquired and held by any of such person's majority-owned affiliates (other than an issuing entity).<ref>[https://www.law.cornell.edu/cfr/text/17/part-246/subpart-B Cornell legislation resource].</ref> | '''Base risk retention requirement'''. Except as otherwise provided in this part, the sponsor of a securitization transaction [...] shall retain an economic interest in the [[credit risk]] of the securitized assets in accordance with any one of §§ 246.4 through 246.10. Credit risk in securitized assets required to be retained and held by any person for purposes of compliance with this part, whether a sponsor, an originator, an originator-seller, or a third-party purchaser, except as otherwise provided in this part, may be acquired and held by any of such person's majority-owned affiliates (other than an issuing entity).<ref>[https://www.law.cornell.edu/cfr/text/17/part-246/subpart-B Cornell legislation resource].</ref><br> | ||
[...]<br> | |||
Asset means a [[self-liquidating financial asset]] (including but not limited to a [[loan]], [[lease]], [[mortgage]], or [[receivable]])}} | “'''Asset'''” means a [[self-liquidating financial asset]] (including but not limited to a [[loan]], [[lease]], [[mortgage]], or [[receivable]])}} | ||
The risk retention rule requires that those who sponsor an [[asset-backed security]] to “retain an economic interest in a portion of the credit risk for any asset that the securitizer, through the issuance of an [[asset-backed security]], transfers, sells, or conveys to a third party”. | The risk retention rule requires that those who sponsor an [[asset-backed security]] to “retain an economic interest in a portion of the credit risk for any asset that the securitizer, through the issuance of an [[asset-backed security]], transfers, sells, or conveys to a third party”. | ||
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If you do your repack in non-securities format — such as a loan — then the risk retention rules don’t seem to apply. Which — if true — is nice. We think it has something to do with the definition of “[[asset-backed security]]” which must be — you know — a ''security''. A bilateral, non-negotiable loan isn’t. Now it is not beyond the great wall of credibility that [[U.S. Attorney]]s and their regulators might confect a disposition that a loan ''is'' in fact a security — many of them seem to think of a [[swap]] as a security, so why not — so be extra careful, young fool, when galloping into this terrain, sparsely-troubled with angelic footsteps as it appears to be. | If you do your repack in non-securities format — such as a loan — then the risk retention rules don’t seem to apply. Which — if true — is nice. We think it has something to do with the definition of “[[asset-backed security]]” which must be — you know — a ''security''. A bilateral, non-negotiable loan isn’t. Now it is not beyond the great wall of credibility that [[U.S. Attorney]]s and their regulators might confect a disposition that a loan ''is'' in fact a security — many of them seem to think of a [[swap]] as a security, so why not — so be extra careful, young fool, when galloping into this terrain, sparsely-troubled with angelic footsteps as it appears to be. | ||
{{sa}} | {{sa}} | ||
[[Securitisation directive]] | |||
*[https://www.law.cornell.edu/cfr/text/17/part-246/subpart-B Cornell legislation resource] | *[https://www.law.cornell.edu/cfr/text/17/part-246/subpart-B Cornell legislation resource] | ||
{{ref}} | {{ref}} | ||