CLO managers have been lobbying hard to shape rules requiring them to keep ‘skin in the game.’ Now they are getting support from an unlikely source – European central bankers.

Dodd-Frank calls for issuers of all asset-backed securities to retain not less than 5% of the credit risk in these deals. The idea is to better align the incentives of issuers and investors, so as to improve the quality of the underlying assets and avoid the kind of meltdown that occurred in mortgage backed securities during the 2007-2008 financial crisis.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.