Securitization

By: Heath Tarbert & Alex Radetsky

On January 11, 2011, the Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System, and Federal Deposit Insurance Corporation issued a notice of proposed rulemaking with request for public comment regarding the revision of their market risk capital rules. These regulatory agencies are seeking to modify the scope of the market risk capital rules to better reflect appropriate levels of risk, as well as other changes to better capture new risk management issues affecting banks in light of the recent financial crisis. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) limits reliance on credit ratings, and as a result this proposal does not include the methodologies adopted by the Basel Committee on Banking Supervision for calculating the specific risk capital requirements for debt and securitization positions.  These agencies will develop alternative standards of creditworthiness, as required by Dodd-Frank in the future, but for now will continue to rely on the current specific risk treatment already in place for debt and securitization positions.

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On October 13, 2010, the US Securities and Exchange Commission (the “SEC”) issued proposals intended to enhance disclosure to investors in the asset backed securities (“ABS”) market.  Specifically,  the SEC’s proposed rules would implement Sections 945 and 932 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) as follows:

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Totalsecuritization.com has published a short introduction to the Dodd-Frank provisions dealing with securitization and asset-backed securities written by Working Group members Heath Tarbert and Nancy Lynch. The article was among the materials distributed during ABS East 2010, held last week in Miami.

Click here for a full-text PDF of the article.

On October 13, 2010, the US Securities and Exchange Commission (SEC) will hold an open meeting to consider whether to adopt an interim final temporary rule promulgated under Section 766 of the Dodd-Frank Act, and whether to propose regulation MC pursuant to Section 765 and rules that would implement Sections 932 and 945 of the Dodd-Frank Act, respectively.

The adoption of an interim final temporary rule under Section 766 would provide for the reporting of certain security-based swap transactions.  This possible proposal may include an interpretive note regarding retention and recordkeeping requirements for certain security-based swap transactions.

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The US Securities and Exchange Commission (SEC) has proposed rules to implement Section 943 of the Dodd-Frank Act , which requires the SEC to prescribe regulations on the use of representations and warranties in the market for asset-backed securities.

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