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Regulators Jointly Approve New Risk Retention Rules

Joe Mont | October 22, 2014

The Securities and Exchange Commission on Wednesday adopted final rules for the asset-backed securities market that will require securitizers to keep “skin in the game.” By a 3-2 vote the Commission, in joint-rulemaking with other regulators, will require them to retain no less than five percent of the credit risk of the assets they securitize.

Asset-backed securities (ABS) are created by buying and bundling loans to create investment products backed by those assets for sale to investors. Loan bundles are typically divided into separate securities with different levels of risk and returns.

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