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Statement on the Re-Proposal of Rules Related to Risk Retention

Commissioner Kara M. Stein
U.S. Securities and Exchange Commission

Aug. 28, 2013

Today the Commission approved a re-proposal of rules implementing the credit risk retention requirement of Section 941 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).  This is a joint re-proposal of rules among the Commission, federal banking agencies, and federal housing agencies. 

Securitization has been an important tool in efficiently allocating capital to households and businesses.  However, in the aftermath of the financial crisis, we all learned that securitization created risks for both the financial markets and its participants.  Failure to adequately address those risks played an instrumental role in the financial crisis.  Congress sought to improve the securitization process by requiring securitizers to retain some risk in order to better align the interests of securitizers with investors, improve disclosures, and improve the processes for securitization.  

In April 2011, the Commission and other regulatory agencies proposed a rule to implement some of these enhancements to the securitization process.  The Commission received hundreds of comments on the rule proposal and has modified its previous proposal after carefully considering these comments. 

I support the re-proposal of these rules implementing the credit risk retention requirements set forth in the Dodd-Frank Act.  Ensuring the integrity of a robust, fair and transparent securitization market is vitally important to the businesses and families that rely on these markets. 

In addition to the revised proposal on credit risk retention, it is also critically important that the Commission move forward with reforms that would increase the transparency of asset-backed securities (ABS) by providing additional loan-level disclosures and sufficient time for investors to review the information.   New credit risk retention rules, in combination with improvements in transparency, will provide investors with much needed additional protections and all market participants with more clarity and certainty.   I hope that these additional measures can be adopted in a timely manner. 

I appreciate the hard work of the staff and the continued collaboration among the agencies on this rulemaking.

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