Proposed rules requiring sponsors to retain 5%
credit risk in securitisations have lawyers concerned about two
things: premium capture reserve accounts, and collateralised
loan obligations (CLOs) becoming prohibitively expensive.
The risk retention proposal, jointly-released by
six US regulators last week, requires sponsors to establish a
premium capture cash reserve account to hold the proceeds of
any excess spread sold by the originator. This does not count
towards the 5% they must retain, but is to cash-collateralise
"People are concerned as it would eliminate a lot of
structures that are out there for fairly standard deals,"