BIS opposes mandating risk-retention mechanisms for securitisation

09/21/2009 | EuroWeek

In its quarterly review, the Bank for International Settlements said originators of securitisations should not be forced into any certain risk-retention mechanism. In the paper "The Future of Securitisation: How to Align Incentives?", the authors support risk retention in concept but say different models create different incentives for originators. "In particular, while increasing effort relative to the case of nonretention, having the originator or arranger retain the equity tranche of a securitisation may lead to lower screening effort than other retention schemes," the paper says.

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