Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/278669 
Year of Publication: 
2023
Series/Report no.: 
ECB Working Paper No. 2837
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
We empirically investigated the impact of regulatory risk retention methods on credit ratings and pricing at issuance using a sample of European securitization tranches issued in the period 2011-2021. European regulation is based on the assumption that all risk retention methods homogenously align incentives and interests between originators and investors. We investigated the impact of these methods on the pricing of securitization tranches and found that investors adjust the risk premium at issuance for tranches based on different risk retention methods. We also found that credit ratings (discrepancy) differed depending on the risk retention method used. Finally, we gained a deeper insight into the risk retention methods chosen over time and concluded that originators take deal complexity and capital relief characteristics into consideration when selecting a specific method.
Subjects: 
risk retention rule
primary issuance spread
credit ratings
JEL: 
G12
G21
G24
G28
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-6122-6
Document Type: 
Working Paper

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