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Risk retention rule: Difference between revisions
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{{a|repack|{{us disclaimer small}}}}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”. | {{a|repack|{{us disclaimer small}} }} | ||
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'''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>}} | |||
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 key question is whether the [[ABS]] is collateralised by any type of “[[self-liquidating financial asset]] (including a loan, a lease, a mortgage, or a secured or unsecured receivable)” for which payments “depend primarily on cash flow from the asset”. | The key question is whether the [[ABS]] is collateralised by any type of “[[self-liquidating financial asset]] (including a loan, a lease, a mortgage, or a secured or unsecured receivable)” for which payments “depend primarily on cash flow from the asset”. | ||