The risk-based capital (RBC) rules put into effect by the Federal Financial Institutions Examinations Council at the start of the year were a long overdue, and the effects after the first six months - while difficult to quantify specifically - are certainly pervasive, industry players agree. On the one hand, smaller home equity issuers are being squeezed out of the market due to the tougher rules on residuals. But the rules have also brought to investors to the ABS market, helping drive down spreads to historical lows.

Yet market sources stressed that demand in 2002 for ABS paper has not been fueled solely by the new RBC rules. The market is the beneficiary of several fortuitous factors piquing investor interest both domestically and internationally, including the often-touted flight to quality, and the need for investment alternatives to agency and U.S. Treasury debt as issuance from those entities dwindles.

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