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Implications of the Final Risk Retention Requirements for ABCP Conduit Sponsors — Part I

July 2015

Originally appeared in the July issue of The Banking Law Journal.

— by Karsten Giesecke, Eric P. Marcus, Henry G. Morriello, Kurt Skonberg, Gary B. Bernstein and George M. Williams Jr. 

The final Dodd-Frank risk retention regulations provide challenges for asset-backed commercial paper (“ABCP”) sponsors. A special rule tailored to “eligible ABCP conduits” is included in the regulations, but it may not always be feasible to comply with requirements for qualification as an eligible ABCP conduit or to meet the other requirements of that rule. In this first part of a two-part article, the authors review the basic principle of risk retention, explain the exception for eligible ABCP conduits under the regulations, and discuss utilizing the ABCP exemption, which would permit assignment of risk retention to participating originator-sellers. The second part of this article, which will appear in an upcoming issue of The Banking Law Journal, will discuss the availability of an exemption by limiting assets, risk retention by the ABCP conduit sponsor as they assess the alternative ways to comply with the new regulations, and issues faced by ABCP conduit sponsors.

Read part I of the The Banking Law Journal article in the attached PDF. 

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