FDIC Asset Sale Safe Harbor Proposal and Regulatory Capital Rule
On December 15, 2009 FDIC undertook a couple of rulemaking matters of importance to securitizations by regulated institutions.
1. FDIC Safe Harbor for Sales of Assets in Securitizations. In 2000, the FDIC adopted a legal isolation safe harbor providing that the FDIC would not use its contract repudiation powers to “unwind” or otherwise challenge the integrity of securitizations satisfying the criteria for treatment as sales under generally accepted accounting principles in the event of the insolvency or receivership of the sponsoring bank. Earlier this year, the Financial Standards Accounting Board adopted revised criteria for sales under GAAP (FAS 166 and 167), under which most securitizations would not qualify as sales for GAAP accounting purposes. If the FDIC were not to respect the integrity of such securitizations, the rating agencies would not be able to provide the requisite ratings that make securitizations by banks viable.
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