Topic
Regulation AB
About: Regulation AB is a research topic. Over the lifetime, 11 publications have been published within this topic receiving 25 citations.
Papers
Posted Content•
TL;DR: In this article, the authors argue that the reason why major financial institutions lost trust in each other was not so much because they were badly regulated, but because they held trillions of dollars in nominal value of securities that, despite their investment grade ratings, were worthless, or could not be valued at all.
Abstract: This article analyzes the current global financial crisis not, as the Treasury and others would have it, as a failure in institutional regulation, but as a failure in securities regulation. The reason why major financial institutions lost trust in each other was not so much because they were badly regulated, but because they were holding trillions of dollars in nominal value of securities that, despite their investment grade ratings, were worthless, or could not be valued at all. The reason for this is that the collateralized debt obligations in this class were based on asset-backed securities that, under inadequate SEC rules such as Regulation AB and preceding rules, were not subject to the kind of due diligence concerning their underlying assets as more conventional debt. The problem was compounded when the asset-backed securities were used to construct complex derivatives, which relied solely on ratings by credit rating agencies such as Standard & Poor's and Moody's, which were not required to review the documentation of the securities that they rated and which were in fact subject to severe conflicts of interest, since they were paid by the issuers for investment-grade ratings. Their ratings therefore did not accurately reflect the ability of CDOs to pay principal and interest, and in fact the agencies went into an orgy of rerating asset-backed securities when the housing bubble began to break with the collapse of the subprime mortgage market in 2006. This article proposes several responses to these problems, centered on broadening the application of the securities laws to included the rating process. It analyzes why the Credit Rating Agency Reform Act of 2006 ("CRARA") failed to meaningfully reform the rating system, and in fact proved counterproductive. New regulations proposed by the SEC, because they are limited by provisions in CRARA that bar the SEC from interfering with the rating process, are foredoomed to failure. Only legislation that brings the rating agencies fully within the due diligence requirements of securities law, along lines similar to those which brought underwriters under the aegis of the Securities Act of 1933, will assure that ratings will convey accurate, timely, and meaningful information to the markets, permitting more realistic valuation of complex securities in the future.
31 citations
TL;DR: In this paper, the authors explain the background of proposals for rules on risk retention, or so-called "skin in the game", and recent efforts at risk retention legislation and regulations, including SEC Regulation AB II and European Union Article 122A.
Abstract: In late March 2011, the Department of the Treasury, Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation (“FDIC”), the Securities and Exchange Commission (“SEC”), the Federal Housing Finance Agency (“FHFA”) and the Department of Housing and Urban Development (collectively, the “U.S.Regulatory Agencies”) issued a notice of proposed rulemaking (“NPR”) with respect to the risk retention rules required to be promulgated under Section 941 of the Dodd-FrankWall Street Reform and Consumer Protection Act. To appreciate the significance of the NPR, it is important to understand the risk retention regulatory landscape into which the NPR has been cast. This article explains the background of proposals for rules on risk retention, or so-called “skin in the game,” and recent efforts at risk retention legislation and regulations, including SEC Regulation AB II and European Union Article 122A. The authors conclude although the U.S.Regulatory Agencies have come a long way since their initial Regulation AB II risk retention proposal, they and securitization sponsors still have a difficult journey ahead of them in order to achieve the balance between a risk retention regime that aligns incentives and one that encourages the formation of capital.
3 citations
TL;DR: In this paper, the authors identify provisions in SEC Regulation AB that will change the way public offerings of auto asset-backed securities are conducted, and analyze various approaches that transaction parties may adopt to comply with these rules.
Abstract: The purpose of this article is to identify provisions in SEC Regulation AB that will change the way public offerings of auto asset-backed securities are conducted, and to analyze various approaches that transaction parties may adopt to comply with these rules. Auto securitization sponsors and servicers should begin the process of reviewing their underwriting, servicing, and compliance procedures in order to comply with this regulation. Most auto securitization issuers will need to re-write much of their standard disclosure in order to tailor it to the new requirements of Regulation AB. In addition, a greater degree of cooperation in developing disclosure will be required from non-affiliates of the securitization sponsor such as trustees, non-affiliated originators, third-party credit enhancement providers, and derivate counterparties.
2 citations
TL;DR: The authors summarizes the presentation made at the ABS East 2016 panel session on auto finance and discusses the issuance programs of several major auto ABS issuers and examines recent performance issues in the sector.
Abstract: This article summarizes the presentation made at the ABS East 2016 panel session on auto finance. The article discusses the issuance programs of several major auto ABS issuers and examines recent performance issues in the sector. It also explores key regulatory developments, such as SEC Regulation AB II and discusses the issue of whether there is a bubble in the subprime auto sector.
2 citations
TL;DR: In this paper, the authors discuss the implications of the "high-quality securitization" (HQS) standard proposed by European regulators, possible amendment of Regulation AB II to require asset-level disclosure for additional asset types, shelf-eligibility requirements in Reg AB II, dispute-resolution provisions in RAB II concerning breaches of warranty and other matters, and third-party due diligence reporting requirements in the new NRSRO (nationally recognized statistical rating organization) rules.
Abstract: This panel was held on February 10 at the ABS Vegas 2015 Conference. This article summarizes topics discussed by the panel including implications of the “high-quality securitization” (HQS) standard proposed by European regulators, possible amendment of Regulation AB II to require asset-level disclosure for additional asset types, shelf-eligibility requirements in Reg AB II, dispute-resolution provisions in Reg AB II concerning breaches of warranty and other matters, and third-party due diligence reporting requirements in the new NRSRO (nationally recognized statistical rating organization) rules. Policy makers in Europe are hoping that developing a HQS label can mitigate some of the financial crisis stigma associated with securitization and allow for greater confidence in the market. But a key concern in the United States regarding a HQS framework is its potential “Scarlet Letter” effect, whereby deals that don’t receive the HQS label would, regardless of their actual quality or liquidity, necessarily become far less liquid. Another concern is that different regulatory treatment of HQS across jurisdictions could make it far more difficult to carry out simultaneous offerings of HQS in multiple jurisdictions. In the asset-level disclosure requirements in Reg AB II, regulators have attempted to balance investors9 need for granular borrower and asset-level data with privacy concerns of issuers and obligors. Open questions related to the implementation of Reg AB II include whether dispute-resolution procedures should be pre-agreed and disclosed in the prospectus and the role of the asset representations reviewer for both mortgage and non-mortgage asset classes. Questions concerning the due diligence reporting requirements in the new NRSRO rules include the definition of “due diligence services,” who would be considered due diligence providers, and the scope of applicability.
1 citations
Related Topics (5)
Performance Metrics
| Year | Papers |
|---|---|
| 2017 | 1 |
| 2015 | 1 |
| 2014 | 2 |
| 2011 | 3 |
| 2009 | 1 |
| 2007 | 1 |