In a Bank of America Merrill Lynch conference call held yesterday, Theresa O’Neill, an asset-backed strategist from the firm, said that participants in the consumer ABS market need to keep a careful eye on certain regulatory developments related to securitization, namely the bank capital rules, risk retention, as well as any new rules from the Consumer Financial Protection Bureau (CFPB).
O’Neill discussed how the new capital rules do not favor higher quality assets. She said that asset classes, including autos, mid-ticket equipment, and rate reduction bonds, that have an attachment point below or at the 12.5 level at issuance would generally incur higher capital charges.
As a response to the implementation of these new rules, O’Neill does not anticipate any significant changes in deal structures. Although sponsors can certainly “tweak a few points here and there,” she said.
Meanwhile, the CFPB is expected to issue its report on the current common practices in the private student loan market. O’Neill anticipates that the CFPB will release proposals for new rules for student loans. At a minimum, she thinks there will be headline risks in this sector as a result.