US FDIC Extends Rule Helping Securitization Market
By Anusha Shrivastava, Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- The U.S. Federal Deposit Insurance Corp. on Thursday
extended a rule to help the securitization market, roiled by new accounting
regulations.
The banking regulator's board decided that existing securities backed by
consumer loans, mainly credit card debt, as well as new bonds issued before
March 31, 2010, won't lose their so-called "safe harbor" treatment. The FDIC
will, in effect, not be able to raid the assets backing these securities even if
the lending institution files for bankruptcy.
The FDIC will issue further guidance on new rules for bonds issued after March
31, 2010 on Dec. 15.
New accounting rules issued by the Financial Accounting Standards Board, or
FASB, due to go into effect in companies' next fiscal year, would bring these
securities on-balance-sheet, such that if the bank went into receivership, the
FDIC could have had access to the assets backing the bonds.
Because of confusion over these accounting rules, issuance of credit card
bonds plummeted in October. No new credit-card-backed bonds have emerged in the
market since Bank of America issued a $300 million deal on Oct. 2, according to
the trade publication Asset-Backed Alert.
No credit-card securities eligible for funding under the Federal Reserve's
Term Asset-Backed Securities Loan Facility, or TALF, have surfaced since
September.
Year-to-date issuance of securities made up of credit-card loans has fallen
41% to $32.3 billion from $55.2 billion a year ago, according to a Deutsche Bank
note published Nov. 5.
On Thursday, The FDIC board decided to create a "transitional safe harbor,"
but said there would be further discussion on this complex matter and it would
get further comments from industry participants before the end of the year
before it makes another decision.
-By Anusha Shrivastava, Dow Jones Newswires; 212-416-2227; anusha.shrivastava@
dowjones.com
(END) Dow Jones Newswires
11-12-091120ET
Copyright (c) 2009 Dow Jones & Company, Inc.
|