The Department of the Treasury’s announcement on the new securitization regulation shouldn’t come as a surprise. Although most ABS players believe the market will return to some level of normalcy, it's widely understood that the game would be played according to new standards.

The core of the new regulation revolves around the 5% retention rule that forces financial institutions to increase their capital cushions to absorb losses when times are tough as well as to make themselves more liquid. This would also allow these institutions to quickly move in and out of various holdings "with more stringent requirements for the largest and most interconnected firms," said sources.

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