POLL: securitisation risk retention: quality and quantity

Author: Olly Jackson | Published: 5 Mar 2018

It has been nearly five years since the skin in the game requirement was implemented. Has it made a difference?

Does the risk retention requirement in securitisations increase asset quality?

The risk retention requirement in securitisations, introduced in the aftermath of the financial crisis, has contributed to improving asset quality specifically and the wider market more generally. But it's also had the effect of mis-aligning the US and EU asset-backed securities regimes, and made it more difficult for US structures to be EU compliant.

The requirement – more commonly known as skin in the game – is said to have made securitisation originators focus on leverage and asset quality, and is seen as a direct response to the most well-publicised and devious market behaviours during the crisis. Various pieces of EU legislation – the Securitisation Regulation, the Capital Requirements Regulation and the Alternative Investment Fund Managers Directive – and the...