Citation

Discussion Paper Details

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Title: Skin-in-the-Game in ABS Transactions: A Critical Review of Policy Options

Author(s): Jan Pieter Krahnen and Christian Wilde

Publication Date: January 2018

Keyword(s): ABS, and standardized securitizations), Dodd-Frank Act, regulation, retention, Structured finance, STS (simple and transparent

Programme Area(s): Financial Economics

Abstract: In response to the financial crisis, as a way to align incentives of originators and investors, new regulation in the US (Dodd-Frank) and the EU (CRR) requires issuers of asset backed securities to hold some skin-in-the-game, offering a set of options for risk retention. We propose an intuitive metric exposing effective risk retention and demonstrate that it varies widely across the available retention options. Requiring open disclosure of the metric, rather than demanding choice among arbitrarily specified and dissimilar retention options, would allow markets to price retention properly, and issuers to choose their desired retention level freely.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12619

Bibliographic Reference

Krahnen, J and Wilde, C. 2018. 'Skin-in-the-Game in ABS Transactions: A Critical Review of Policy Options'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12619