Why securitisations could worsen under Volcker

Author: Danielle Myles | Published: 31 Jan 2012

Bank counsel fear that the Securities and Exchange Commission’s (SEC) reconsideration of registration exemptions for asset-backed security (ABS) issuers could further worsen securitisation’s plight under the Volcker rule.

In-house lawyers’ experience with regulator-interaction, shared at this week’s American Securitization Forum’s (ASF) conference, suggests the rule’s compliance requirements may not be enforced as strictly as institutions’ suspect.

The proposed Volcker rule explicitly states that it should not be construed to restrict the ability of financial entities to securitise loans. Despite this, securitisation is jeopardised by the rule in many ways.

The exemption is limited to loan securitisation vehicles, and the prohibition of investment in private equity and hedge funds defines ‘fund’...