Transitional Safe Harbor Protection for Treatment by the Federal Deposit Insurance Corporation as Conservator or Receiver of Financial Assets Transferred by an Insured Depository Institution in Connection With a Securitization or Participation, 12962-12965 [2010-5707]

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Download as PDF 12962 Federal Register / Vol. 75, No. 52 / Thursday, March 18, 2010 / Rules and Regulations in this document for a link to Regulations.gov) or by contacting the person listed under FOR FURTHER INFORMATION CONTACT. As described in the economic analysis, the majority of producers, importers, and merchants that may be affected by this rule are small entities. The number of producers that may be affected in the future is not known, since we do not have data on production of smooth-skinned lemons harvested for packing by commercial packinghouses. Nonetheless, the costs of any pre-harvest or post-harvest treatments of smooth-skinned lemons required by this rule are negligible. In addition, removal of the regulatory exemption for smooth-skinned lemons harvested for packing by commercial packinghouses will reduce the risk of Medfly spreading from a quarantined area to a non-quarantined area, thereby potentially saving producers control and eradication costs. Under these circumstances, the Administrator of the Animal and Plant Health Inspection Service has determined that this action will not have a significant economic impact on a substantial number of small entities. Executive Order 12372 This program/activity is listed in the Catalog of Federal Domestic Assistance under No. 10.025 and is subject to Executive Order 12372, which requires intergovernmental consultation with State and local officials. (See 7 CFR part 3015, subpart V.) Executive Order 12988 This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule: (1) Preempts all State and local laws and regulations that are inconsistent with this rule; (2) has no retroactive effect; and (3) does not require administrative proceedings before parties may file suit in court challenging this rule. Paperwork Reduction Act This final rule contains no information collection or recordkeeping requirements under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.). List of Subjects in 7 CFR Part 301 Agricultural commodities, Plant diseases and pests, Quarantine, Reporting and recordkeeping requirements, Transportation. Botanical name * * Lycopersicon esculentum * * * 4 Only Authority: 7 U.S.C. 7701-7772 and 77817786; 7 CFR 2.22, 2.80, and 371.3. Section 301.75-15 issued under Sec. 204, Title II, Public Law 106-113, 113 Stat. 1501A-293; sections 301.75-15 and 301.75-16 issued under Sec. 203, Title II, Public Law 106-224, 114 Stat. 400 (7 U.S.C. 1421 note). § 301.32-2 [Amended] 2. In § 301.32-2, paragraph (a), the table is amended as follows: ■ a. In footnote 2, by removing the words ‘‘Smooth-skinned lemons harvested for packing by commercial packinghouses are not’’ and adding the words ‘‘Only yellow lemons are’’ in their place. ■ b. By revising the entry for Lycopersicon esculentum, including footnote 4, to read as set forth below. ■ * Regulated articles. * Fruit fly * * * * Mediterranean,4 Melon, Oriental, Peach. * * * * * * * * pink and red ripe tomatoes are regulated articles for Mediterranean fruit fly. * * * * * Done in Washington, DC, this 11th day of March 2010. FEDERAL DEPOSIT INSURANCE CORPORATION Kevin Shea Acting Administrator, Animal and Plant Health Inspection Service. RIN 3064–AD55 [FR Doc. 2010–5945 Filed 3–17–10: 11:25 am] BILLING CODE 3410–34–S 12 CFR Part 360 Transitional Safe Harbor Protection for Treatment by the Federal Deposit Insurance Corporation as Conservator or Receiver of Financial Assets Transferred by an Insured Depository Institution in Connection With a Securitization or Participation AGENCY: Federal Deposit Insurance Corporation (FDIC). ACTION: Final rule. mstockstill on DSKH9S0YB1PROD with RULES 1. The authority citation for part 301 continues to read as follows: ■ (a) * Tomato * PART 301—DOMESTIC QUARANTINE NOTICES § 301.32-2 Common name(s) * Accordingly, we are amending 7 CFR part 301 as follows: ■ SUMMARY: The Federal Deposit Insurance Corporation (‘‘FDIC’’) is amending its regulation, Defining Transitional Safe Harbor Protection for Treatment By The Federal Deposit Insurance Corporation As Conservator Or Receiver Of Financial Assets VerDate Nov<24>2008 17:27 Mar 17, 2010 Jkt 220001 PO 00000 Frm 00002 Fmt 4700 Sfmt 4700 Transferred In Connection With A Securitization Or Participation. The amendment adds a new provision in order to continue for a limited time the safe harbor provision for securitizations that would be affected by recent changes to generally accepted accounting principles. In effect, the Final Rule permanently ‘‘grandfathers’’ all securitizations for which financial assets were transferred or, for revolving trusts, for which securities were issued prior to September 30, 2010 so long as those securitizations complied with the preexisting requirements under generally accepted accounting principles in effect prior to November 15, 2009. The transitional safe harbor will apply irrespective of whether or not the securitization satisfies all of the conditions for sale accounting treatment under generally accepted accounting principles as effective for reporting periods after November 15, 2009. In E:\FR\FM\18MRR1.SGM 18MRR1 Federal Register / Vol. 75, No. 52 / Thursday, March 18, 2010 / Rules and Regulations mstockstill on DSKH9S0YB1PROD with RULES addition, the Final Rule confirms that section 360.6 will continue to protect participations. DATES: Effective March 18, 2010, the Board of Directors of the Federal Deposit Insurance Corporation confirms as final with changes, the interim rule published on November 17, 2010 (74 FR 59066) . FOR FURTHER INFORMATION CONTACT: Michael Krimminger, Office of the Chairman, 202–898–8950; George Alexander, Division of Resolutions and Receiverships, 202 898–3718; or R. Penfield Starke, Legal Division, 703– 562–2422, Federal Deposit Insurance Corporation, 550 17th Street, NW., Washington, DC 20429. SUPPLEMENTARY INFORMATION: I. Background In 2000, the FDIC clarified the scope of its statutory authority as conservator or receiver to disaffirm or repudiate contracts of an insured depository institution (‘‘IDI’’) with respect to transfers of financial assets by an IDI in connection with a securitization or participation when it adopted a regulation codified at 12 CFR section 360.6 (‘‘the Securitization Rule’’). This rule provides that the FDIC as conservator or receiver will not use its statutory authority to disaffirm or repudiate contracts to reclaim, recover, or recharacterize as property of the institution or the receivership any financial assets transferred by an IDI in connection with a securitization or participation or in the form of a participation, provided that such transfer meets all conditions for sale accounting treatment under generally accepted accounting principles (‘‘GAAP’’). The rule was a clarification, rather than a limitation, of the repudiation power because such power authorizes the conservator or receiver to breach a contract or lease entered into by an IDI and be legally excused from further performance but it is not an avoiding power enabling the conservator or receiver to recover assets that were previously transferred by the IDI in connection with the contract. The Securitization Rule provided a ‘‘safe harbor’’ to permit transfers of financial assets by IDIs to an issuing entity in connection with a securitization or in the form of a participation to satisfy the ‘‘legal isolation’’ condition of GAAP as it applies to institutions for which the FDIC may be appointed as conservator or receiver. To satisfy the legal isolation condition, the transferred financial asset must have been presumptively placed beyond the reach of the transferor, its creditors, a bankruptcy trustee, or in the VerDate Nov<24>2008 17:27 Mar 17, 2010 Jkt 220001 case of an IDI, the FDIC as conservator or receiver. Since its adoption, the Securitization Rule has been relied on by securitization participants, including rating agencies, as assurance that investors could look to securitized financial assets for payment without concern that the financial assets would be interfered with by the FDIC as conservator or receiver. Recently, the implementation of new accounting rules has created uncertainty for securitization participants. On June 12, 2009, the Financial Accounting Standards Board (‘‘FASB’’) finalized modifications to GAAP through Statement of Financial Accounting Standards No. 166, Accounting for Transfers of Financial Assets, an Amendment of FASB Statement No. 140 (‘‘FAS 166’’) and Statement of Financial Accounting Standards No. 167, Amendments to FASB Interpretation No. 46(R) (‘‘FAS 167’’) (the ‘‘2009 GAAP Modifications’’). The 2009 GAAP Modifications are effective for annual financial statement reporting periods that begin after November 15, 2009. For most IDIs, the 2009 GAAP Modifications were effective for reporting periods beginning after January 1, 2010. The 2009 GAAP Modifications made changes that affect whether a special purpose entity (‘‘SPE’’) must be consolidated for financial reporting purposes, thereby subjecting many SPEs to GAAP consolidation requirements. These accounting changes will require some IDIs to consolidate an issuing entity to which financial assets have been transferred for securitization on to their balance sheets for financial reporting purposes. Given the likely accounting treatment, securitizations could be considered to be an alternative form of secured borrowing. As a result, the safe harbor provision of the Securitization Rule may not apply to the transfer. FAS 166 also affects the treatment of participations issued by an IDI, in that it defines a participating interest essentially as a pari-passu pro-rata interest in a financial asset and subjects the sale of a participation interest to the same conditions that are imposed on the sale of a financial asset. FAS 166 provides that a transfer of a participation interest that does not qualify for sale treatment will be viewed as a secured borrowing. While the GAAP modifications have some effect on participations, most participations are likely to continue to meet the conditions for sale accounting treatment under GAAP. The 2009 GAAP Modifications affect the way securitizations are viewed by the rating agencies and whether they PO 00000 Frm 00003 Fmt 4700 Sfmt 4700 12963 can achieve ratings that are based solely on the credit quality of the financial assets, independent from the rating of the IDI. Rating agencies are concerned with several issues, including the ability of a securitization transaction to pay timely principal and interest in the event the FDIC is appointed receiver or conservator of the IDI. Moody’s, Standard & Poor’s, and Fitch have expressed the view that because of the 2009 GAAP modifications and the extent of the FDIC’s rights and powers as conservator or receiver, bank securitization transactions are unlikely to receive AAA ratings and would have to be linked to the rating of the IDI. Because of these uncertainties, securitization practitioners asked the FDIC to provide assurances regarding the position of the conservator or receiver as to the treatment of both existing and future securitization transactions. In response to industry concerns, the FDIC published an Interim Final Rule on November 17, 2010 (74 FR 59066) that addressed securitizations (and participations) issued before March 31, 2010. II. The Interim Rule The Interim Rule amended the Securitization Rule by renumbering existing paragraph (b) as clause (b)(1) of paragraph (b). The Interim Rule inserted a new clause (b)(2) of the Securitization Rule that addresses any securitization (i) for which transfers of financial assets were made or (ii), for revolving trusts, for which beneficial interests were issued on or before March 31, 2010. The interim rule provided that, for these securitizations, the FDIC as conservator or receiver shall not, in the exercise of its statutory authority to disaffirm or repudiate contracts, reclaim, recover, or recharacterize as property of the institution or the receivership any such transferred financial assets notwithstanding that such transfer does not satisfy all conditions for sale accounting treatment under generally accepted accounting principles as effective for reporting periods after November 15, 2009, if such transfer satisfied the conditions for sale accounting treatment set forth by generally accepted accounting principles in effect for reporting periods before November 15, 2009, except for the ‘‘legal isolation’’ condition that is addressed by the rule. III. Summary of Comments Received The FDIC requested comments on all aspects of the Interim Final Rule. The FDIC specifically requested that commenters respond to the following: E:\FR\FM\18MRR1.SGM 18MRR1 mstockstill on DSKH9S0YB1PROD with RULES 12964 Federal Register / Vol. 75, No. 52 / Thursday, March 18, 2010 / Rules and Regulations 1. Do the changes to the accounting rules affect the application of the Securitization Rule to participations? If so, are there changes to the Interim Rule that are needed to protect different types of participations issued by IDIs more broadly? 2. Does the Interim Rule adequately encompass all transactions that should be included within its transitional safe harbor? 3. Is the transition period to March 31, 2010 sufficient to implement changes required by the Proposed Rule and to structure transactions to comply with the new generally accepted accounting principles? In response to the request, the FDIC received two (2) comments from industry associations. A summary of the comments received follows. The American Bankers Association (ABA) and the American Bankers Association Securities Association (ABASA) provided a joint comment letter to the FDIC and one other comment letter was received from the American Securitization Forum (ASF). Both comment letters stressed that loan securitization and participations are important mechanisms that facilitate financial intermediation and the provision of credit and therefore, market participants need to have certainty regarding the treatment of these transactions in a conservatorship or receivership of the issuer. In specific reference to the first question posed in the interim rule, the ABA/ABASA commented that FAS 166 would prospectively affect the application of the Securitization Rule to participations. Therefore, it is important that the FDIC include participations in the protections afforded by the Interim rule. In addition, the ABA/ABASA suggested that the accounting treatment of a participation should not control its treatment by the FDIC in a receivership or conservatorship of the originating lender. In response to question #2, the ABA/ ABASA responded that it is possible that the changes to GAAP might impact other types of variable interest entities and other entities, such as pooled funds and joint ventures. Participations or securities held by these entities may be consolidated and recorded on bank balance sheets under certain circumstances and therefore, such entities should also be protected under the final rule. Participations are protected under the final rule’s transitional safe harbor until September 30, 2010 to the extent that they would have received sale accounting treatment but for the GAAP Modifications. The FDIC will be addressing whether other VerDate Nov<24>2008 17:27 Mar 17, 2010 Jkt 220001 types of entities should receive protection under the safe harbor in a separate rulemaking (see Advanced Notice of Proposed Rulemaking Treatment by the Federal Deposit Insurance Corporation as Conservator or Receiver of Financial Assets Transferred by an Insured Depository Institution in Connection With a Securitization or Participation After March 31, 2010, 75 FR 934, January 7, 2010). In response to question #3, both the ABA/ABASA and ASF commented that the permanent grandfathering of securitization and participation issuances in process through March 31, 2010 does not provide an adequate period of time for issuers to adapt to new regulatory requirements relating to the securitization process, particularly if changes to the terms of the transactions are necessary. The ASF suggested that the grandfathering period be extended for another 12–18 months after March 31, 2010. In light of the comments received, the FDIC has decided to extend the transitional safe harbor until September 30, 2010, so long as those securitizations and participations issued would have complied with the preexisting section 360.6 under generally accepted accounting principles in effect prior to November 15, 2009. IV. The Final Rule The Final Rule amends the Securitization Rule by renumbering existing paragraph (b) as clause (b)(1) of paragraph (b). The Final Rule inserts a new clause (b)(2) of the Securitization Rule that addresses any securitization (i) for which transfers of financial assets were made or (ii), for revolving trusts, for which beneficial interests were issued on or before September 30, 2010. The rule provides that, for these securitizations, the FDIC as conservator or receiver shall not, in the exercise of its statutory authority to disaffirm or repudiate contracts, reclaim, recover, or recharacterize as property of the institution or the receivership any such transferred financial assets notwithstanding that such transfer does not satisfy all conditions for sale accounting treatment under generally accepted accounting principles as effective for reporting periods after November 15, 2009, if such transfer satisfied the conditions for sale accounting treatment set forth by generally accepted accounting principles in effect for reporting periods before November 15, 2009, except for the ‘‘legal isolation’’ condition that is addressed by the rule. PO 00000 Frm 00004 Fmt 4700 Sfmt 4700 V. Regulatory Procedure A. Administrative Procedure Act The Administrative Procedure Act (‘‘APA’’) provides that general notice of a proposed rulemaking shall be published and that interested persons shall have an opportunity to participate in the rulemaking by submitting written data, views, or arguments, except where the agency finds for good cause that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest. The FDIC has previously solicited and received comments regarding the Interim Final Rule. The FDIC for good cause finds that notice and public procedure with respect to this Final Rule would be impracticable, unnecessary, or contrary to the public interest because the 2009 GAAP Modifications become effective as of the financial reporting period starting on or after November 15, 2009 and retroactively apply to existing securitizations. The FDIC believes that it is in the best interest of the U.S. banking industry and economic for the FDIC to provide assurances with respect to the treatment of existing securitizations that will be affected by the 2009 GAAP Modifications. The APA also provides that publication of a substantive rule shall be made not less than 30 days before its effective date except as otherwise provided by the agency for good cause found and published with the rule. Because of the retroactive application of the 2009 GAAP Modifications and the immediate need for assurances for securitization participants and the banking industry with respect to existing securitizations and participations, the FDIC invokes this good cause exception to make this Final Rule effective as of March 18, 2010. B. Community Development and Regulatory Improvement Act The Riegle Community Development and Regulatory Improvement Act (CDRIA) requires that any new rule prescribed by a Federal banking agency that imposes additional reporting, disclosures, or other new requirements on insured depository institutions take effect on the first day of a calendar quarter. 12 U.S.C. section 4802. This requirement does not apply because the Final Rule does not impose additional reporting, disclosures, or other new requirements on insured depository institution. C. Regulatory Flexibility Act Pursuant to section 605(b) of the Regulatory Flexibility Act (5 U.S.C. section 601 et seq.), it is certified that E:\FR\FM\18MRR1.SGM 18MRR1 Federal Register / Vol. 75, No. 52 / Thursday, March 18, 2010 / Rules and Regulations the Interim Rule will not have a significant economic impact on a substantial number of small business entities. The Final Rule merely extends the safe harbor of section 360.6(b) to securitizations issued before September 30, 2010 and does not represent a change in the law. E. Small Business Regulatory Enforcement Fairness Act The Office of Management and Budget has determined that the rule is not a ‘‘major rule’’ within the meaning of the relevant sections of the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) (5 U.S.C. 801 et seq.). As required by SBREFA, the FDIC will file the appropriate reports with Congress and the General Accounting Office so that the final rule may be reviewed. F. Paperwork Reduction Act No collection of information pursuant to section 3504(h) of the Paperwork Reduction Act (44 U.S.C. section 3501 et seq.) is contained in the final rule. Consequently, no information was submitted to the Office of Management and Budget for review. on or before September 30, 2010, the FDIC as conservator or receiver shall not, in the exercise of its statutory authority to disaffirm or repudiate contracts, reclaim, recover, or recharacterize as property of the institution or the receivership any such transferred financial assets notwithstanding that such transfer does not satisfy all conditions for sale accounting treatment under generally accepted accounting principles as effective for reporting periods after November 15, 2009, provided that such transfer satisfied the conditions for sale accounting treatment set forth by generally accepted accounting principles in effect for reporting periods before November 15, 2009, except for the ‘‘legal isolation’’ condition that is addressed by this rule. * * * * * Dated at Washington, DC, this 10th day of March 2010. By Order of the Board of Directors. Federal Deposit Insurance Corporation. Robert E. Feldman, Executive Secretary. [FR Doc. 2010–5707 Filed 3–18–10; 8:45 am] List of Subjects in 12 CFR Part 360 Banks, Banking, Bank deposit insurance, Holding companies, National banks, Participations, Reporting and recordkeeping requirements, Savings associations, Securitizations. ■ For the reasons stated above, the Board of Directors of the Federal Deposit Insurance Corporation confirms as final, the interim rule amending chapter III of title 12 of the Code of Federal Regulations by amending Part 360 published on November 17, 2010 (74 FR 59066) with the following changes: BILLING CODE P PART 360—RESOLUTION AND RECEIVERSHIP RULES AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Final special conditions; request for comments. 1. The authority citation for part 360 continues to read as follows: ■ Authority: 12 U.S.C. 1821(d)(1), 1821(d)(10)(C), 1821(d)(11), 1821(e)(1), 1821(e)(8)(D)(i), 1823(c)(4), 1823(e)(2); Sec. 401(h), Pub.L. 101–73, 103 Stat. 357. 2. Amend § 360.6 by revising paragraph (b)(2) to read as follows: mstockstill on DSKH9S0YB1PROD with RULES ■ § 360.6 Treatment by the Federal Deposit Insurance Corporation as conservator or receiver of financial assets transferred in connection with a securitization or participation. * * * * * (b) * * * (2) With respect to any securitization for which transfers of financial assets were made, or for revolving trusts for which beneficial interests were issued, VerDate Nov<24>2008 17:27 Mar 17, 2010 Jkt 220001 DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 25 [Docket No. NM425; Special Conditions No. 25–403–SC] Special Conditions: Airbus Model A318, A319, A320, and A321 Series Airplanes; Seats With Non-Traditional, Large, Non-Metallic Panels SUMMARY: These special conditions are issued for the Airbus Model A318, A319, A320, and A321 series airplanes. These airplanes will have a novel or unusual design feature(s) associated with seats that include non-traditional, large, non-metallic panels that would affect survivability during a post-crash fire event. The applicable airworthiness regulations do not contain adequate or appropriate safety standards for this design feature. These special conditions contain the additional safety standards that the Administrator considers necessary to establish a level of safety equivalent to that established by the existing airworthiness standards. PO 00000 Frm 00005 Fmt 4700 Sfmt 4700 12965 DATES: The effective date of these special conditions is March 9, 2010. We must receive your comments by May 3, 2010. ADDRESSES: You must mail two copies of your comments to: Federal Aviation Administration, Transport Airplane Directorate, Attn: Rules Docket (ANM– 113), Docket No. NM425, 1601 Lind Avenue SW., Renton, Washington 98057–3356. You may deliver two copies to the Transport Airplane Directorate at the above address. You must mark your comments: Docket No. NM425. You can inspect comments in the Rules Docket weekdays, except Federal holidays, between 7:30 a.m. and 4 p.m. FOR FURTHER INFORMATION CONTACT: Alan Sinclair, FAA, Airframe/Cabin Safety Branch, ANM–115, Transport Airplane Directorate, Aircraft Certification Service, 1601 Lind Avenue SW., Renton, Washington 98057–3356; telephone (425) 227–2785; facsimile (425) 227–2195; electronic mail alan.sinclair@faa.gov. SUPPLEMENTARY INFORMATION: The FAA has determined that notice and opportunity for prior public comment hereon are impracticable because these procedures would significantly delay issuance of the design approval and thus delivery of the affected aircraft. In addition, the substance of these special conditions has been subject to the public comment process in several prior instances with no substantive comments received. The FAA therefore finds that good cause exists for making these special conditions effective upon issuance. Comments Invited We invite interested people to take part in this rulemaking by sending written comments, data, or views. The most helpful comments reference a specific portion of the special conditions, explain the reason for any recommended change, and include supporting data. We ask that you send us two copies of written comments. We will file in the docket all comments we receive, as well as a report summarizing each substantive public contact with FAA personnel about these special conditions. You can inspect the docket before and after the comment closing date. If you wish to review the docket in person, go to the address in the ADDRESSES section of this preamble between 7:30 a.m. and 4 p.m., Monday through Friday, except Federal holidays. We will consider all comments we receive by the closing date for comments. We will consider comments E:\FR\FM\18MRR1.SGM 18MRR1

Agencies

[Federal Register Volume 75, Number 52 (Thursday, March 18, 2010)]
[Rules and Regulations]
[Pages 12962-12965]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-5707]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 360

RIN 3064-AD55


Transitional Safe Harbor Protection for Treatment by the Federal 
Deposit Insurance Corporation as Conservator or Receiver of Financial 
Assets Transferred by an Insured Depository Institution in Connection 
With a Securitization or Participation

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Final rule.

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SUMMARY: The Federal Deposit Insurance Corporation (``FDIC'') is 
amending its regulation, Defining Transitional Safe Harbor Protection 
for Treatment By The Federal Deposit Insurance Corporation As 
Conservator Or Receiver Of Financial Assets Transferred In Connection 
With A Securitization Or Participation. The amendment adds a new 
provision in order to continue for a limited time the safe harbor 
provision for securitizations that would be affected by recent changes 
to generally accepted accounting principles. In effect, the Final Rule 
permanently ``grandfathers'' all securitizations for which financial 
assets were transferred or, for revolving trusts, for which securities 
were issued prior to September 30, 2010 so long as those 
securitizations complied with the preexisting requirements under 
generally accepted accounting principles in effect prior to November 
15, 2009. The transitional safe harbor will apply irrespective of 
whether or not the securitization satisfies all of the conditions for 
sale accounting treatment under generally accepted accounting 
principles as effective for reporting periods after November 15, 2009. 
In

[[Page 12963]]

addition, the Final Rule confirms that section 360.6 will continue to 
protect participations.

DATES: Effective March 18, 2010, the Board of Directors of the Federal 
Deposit Insurance Corporation confirms as final with changes, the 
interim rule published on November 17, 2010 (74 FR 59066) .

FOR FURTHER INFORMATION CONTACT: Michael Krimminger, Office of the 
Chairman, 202-898-8950; George Alexander, Division of Resolutions and 
Receiverships, 202 898-3718; or R. Penfield Starke, Legal Division, 
703-562-2422, Federal Deposit Insurance Corporation, 550 17th Street, 
NW., Washington, DC 20429.

SUPPLEMENTARY INFORMATION:

I. Background

    In 2000, the FDIC clarified the scope of its statutory authority as 
conservator or receiver to disaffirm or repudiate contracts of an 
insured depository institution (``IDI'') with respect to transfers of 
financial assets by an IDI in connection with a securitization or 
participation when it adopted a regulation codified at 12 CFR section 
360.6 (``the Securitization Rule''). This rule provides that the FDIC 
as conservator or receiver will not use its statutory authority to 
disaffirm or repudiate contracts to reclaim, recover, or recharacterize 
as property of the institution or the receivership any financial assets 
transferred by an IDI in connection with a securitization or 
participation or in the form of a participation, provided that such 
transfer meets all conditions for sale accounting treatment under 
generally accepted accounting principles (``GAAP''). The rule was a 
clarification, rather than a limitation, of the repudiation power 
because such power authorizes the conservator or receiver to breach a 
contract or lease entered into by an IDI and be legally excused from 
further performance but it is not an avoiding power enabling the 
conservator or receiver to recover assets that were previously 
transferred by the IDI in connection with the contract. The 
Securitization Rule provided a ``safe harbor'' to permit transfers of 
financial assets by IDIs to an issuing entity in connection with a 
securitization or in the form of a participation to satisfy the ``legal 
isolation'' condition of GAAP as it applies to institutions for which 
the FDIC may be appointed as conservator or receiver. To satisfy the 
legal isolation condition, the transferred financial asset must have 
been presumptively placed beyond the reach of the transferor, its 
creditors, a bankruptcy trustee, or in the case of an IDI, the FDIC as 
conservator or receiver. Since its adoption, the Securitization Rule 
has been relied on by securitization participants, including rating 
agencies, as assurance that investors could look to securitized 
financial assets for payment without concern that the financial assets 
would be interfered with by the FDIC as conservator or receiver.
    Recently, the implementation of new accounting rules has created 
uncertainty for securitization participants. On June 12, 2009, the 
Financial Accounting Standards Board (``FASB'') finalized modifications 
to GAAP through Statement of Financial Accounting Standards No. 166, 
Accounting for Transfers of Financial Assets, an Amendment of FASB 
Statement No. 140 (``FAS 166'') and Statement of Financial Accounting 
Standards No. 167, Amendments to FASB Interpretation No. 46(R) (``FAS 
167'') (the ``2009 GAAP Modifications''). The 2009 GAAP Modifications 
are effective for annual financial statement reporting periods that 
begin after November 15, 2009. For most IDIs, the 2009 GAAP 
Modifications were effective for reporting periods beginning after 
January 1, 2010. The 2009 GAAP Modifications made changes that affect 
whether a special purpose entity (``SPE'') must be consolidated for 
financial reporting purposes, thereby subjecting many SPEs to GAAP 
consolidation requirements. These accounting changes will require some 
IDIs to consolidate an issuing entity to which financial assets have 
been transferred for securitization on to their balance sheets for 
financial reporting purposes. Given the likely accounting treatment, 
securitizations could be considered to be an alternative form of 
secured borrowing. As a result, the safe harbor provision of the 
Securitization Rule may not apply to the transfer.
    FAS 166 also affects the treatment of participations issued by an 
IDI, in that it defines a participating interest essentially as a pari-
passu pro-rata interest in a financial asset and subjects the sale of a 
participation interest to the same conditions that are imposed on the 
sale of a financial asset. FAS 166 provides that a transfer of a 
participation interest that does not qualify for sale treatment will be 
viewed as a secured borrowing. While the GAAP modifications have some 
effect on participations, most participations are likely to continue to 
meet the conditions for sale accounting treatment under GAAP.
    The 2009 GAAP Modifications affect the way securitizations are 
viewed by the rating agencies and whether they can achieve ratings that 
are based solely on the credit quality of the financial assets, 
independent from the rating of the IDI. Rating agencies are concerned 
with several issues, including the ability of a securitization 
transaction to pay timely principal and interest in the event the FDIC 
is appointed receiver or conservator of the IDI. Moody's, Standard & 
Poor's, and Fitch have expressed the view that because of the 2009 GAAP 
modifications and the extent of the FDIC's rights and powers as 
conservator or receiver, bank securitization transactions are unlikely 
to receive AAA ratings and would have to be linked to the rating of the 
IDI. Because of these uncertainties, securitization practitioners asked 
the FDIC to provide assurances regarding the position of the 
conservator or receiver as to the treatment of both existing and future 
securitization transactions. In response to industry concerns, the FDIC 
published an Interim Final Rule on November 17, 2010 (74 FR 59066) that 
addressed securitizations (and participations) issued before March 31, 
2010.

II. The Interim Rule

    The Interim Rule amended the Securitization Rule by renumbering 
existing paragraph (b) as clause (b)(1) of paragraph (b). The Interim 
Rule inserted a new clause (b)(2) of the Securitization Rule that 
addresses any securitization (i) for which transfers of financial 
assets were made or (ii), for revolving trusts, for which beneficial 
interests were issued on or before March 31, 2010. The interim rule 
provided that, for these securitizations, the FDIC as conservator or 
receiver shall not, in the exercise of its statutory authority to 
disaffirm or repudiate contracts, reclaim, recover, or recharacterize 
as property of the institution or the receivership any such transferred 
financial assets notwithstanding that such transfer does not satisfy 
all conditions for sale accounting treatment under generally accepted 
accounting principles as effective for reporting periods after November 
15, 2009, if such transfer satisfied the conditions for sale accounting 
treatment set forth by generally accepted accounting principles in 
effect for reporting periods before November 15, 2009, except for the 
``legal isolation'' condition that is addressed by the rule.

III. Summary of Comments Received

    The FDIC requested comments on all aspects of the Interim Final 
Rule. The FDIC specifically requested that commenters respond to the 
following:

[[Page 12964]]

    1. Do the changes to the accounting rules affect the application of 
the Securitization Rule to participations? If so, are there changes to 
the Interim Rule that are needed to protect different types of 
participations issued by IDIs more broadly?
    2. Does the Interim Rule adequately encompass all transactions that 
should be included within its transitional safe harbor?
    3. Is the transition period to March 31, 2010 sufficient to 
implement changes required by the Proposed Rule and to structure 
transactions to comply with the new generally accepted accounting 
principles?
    In response to the request, the FDIC received two (2) comments from 
industry associations. A summary of the comments received follows.
    The American Bankers Association (ABA) and the American Bankers 
Association Securities Association (ABASA) provided a joint comment 
letter to the FDIC and one other comment letter was received from the 
American Securitization Forum (ASF). Both comment letters stressed that 
loan securitization and participations are important mechanisms that 
facilitate financial intermediation and the provision of credit and 
therefore, market participants need to have certainty regarding the 
treatment of these transactions in a conservatorship or receivership of 
the issuer.
    In specific reference to the first question posed in the interim 
rule, the ABA/ABASA commented that FAS 166 would prospectively affect 
the application of the Securitization Rule to participations. 
Therefore, it is important that the FDIC include participations in the 
protections afforded by the Interim rule. In addition, the ABA/ABASA 
suggested that the accounting treatment of a participation should not 
control its treatment by the FDIC in a receivership or conservatorship 
of the originating lender.
    In response to question 2, the ABA/ABASA responded that it 
is possible that the changes to GAAP might impact other types of 
variable interest entities and other entities, such as pooled funds and 
joint ventures. Participations or securities held by these entities may 
be consolidated and recorded on bank balance sheets under certain 
circumstances and therefore, such entities should also be protected 
under the final rule. Participations are protected under the final 
rule's transitional safe harbor until September 30, 2010 to the extent 
that they would have received sale accounting treatment but for the 
GAAP Modifications. The FDIC will be addressing whether other types of 
entities should receive protection under the safe harbor in a separate 
rulemaking (see Advanced Notice of Proposed Rulemaking Treatment by the 
Federal Deposit Insurance Corporation as Conservator or Receiver of 
Financial Assets Transferred by an Insured Depository Institution in 
Connection With a Securitization or Participation After March 31, 2010, 
75 FR 934, January 7, 2010).
    In response to question 3, both the ABA/ABASA and ASF 
commented that the permanent grandfathering of securitization and 
participation issuances in process through March 31, 2010 does not 
provide an adequate period of time for issuers to adapt to new 
regulatory requirements relating to the securitization process, 
particularly if changes to the terms of the transactions are necessary. 
The ASF suggested that the grandfathering period be extended for 
another 12-18 months after March 31, 2010.
    In light of the comments received, the FDIC has decided to extend 
the transitional safe harbor until September 30, 2010, so long as those 
securitizations and participations issued would have complied with the 
preexisting section 360.6 under generally accepted accounting 
principles in effect prior to November 15, 2009.

IV. The Final Rule

    The Final Rule amends the Securitization Rule by renumbering 
existing paragraph (b) as clause (b)(1) of paragraph (b). The Final 
Rule inserts a new clause (b)(2) of the Securitization Rule that 
addresses any securitization (i) for which transfers of financial 
assets were made or (ii), for revolving trusts, for which beneficial 
interests were issued on or before September 30, 2010. The rule 
provides that, for these securitizations, the FDIC as conservator or 
receiver shall not, in the exercise of its statutory authority to 
disaffirm or repudiate contracts, reclaim, recover, or recharacterize 
as property of the institution or the receivership any such transferred 
financial assets notwithstanding that such transfer does not satisfy 
all conditions for sale accounting treatment under generally accepted 
accounting principles as effective for reporting periods after November 
15, 2009, if such transfer satisfied the conditions for sale accounting 
treatment set forth by generally accepted accounting principles in 
effect for reporting periods before November 15, 2009, except for the 
``legal isolation'' condition that is addressed by the rule.

V. Regulatory Procedure

A. Administrative Procedure Act

    The Administrative Procedure Act (``APA'') provides that general 
notice of a proposed rulemaking shall be published and that interested 
persons shall have an opportunity to participate in the rulemaking by 
submitting written data, views, or arguments, except where the agency 
finds for good cause that notice and public procedure thereon are 
impracticable, unnecessary, or contrary to the public interest. The 
FDIC has previously solicited and received comments regarding the 
Interim Final Rule. The FDIC for good cause finds that notice and 
public procedure with respect to this Final Rule would be 
impracticable, unnecessary, or contrary to the public interest because 
the 2009 GAAP Modifications become effective as of the financial 
reporting period starting on or after November 15, 2009 and 
retroactively apply to existing securitizations. The FDIC believes that 
it is in the best interest of the U.S. banking industry and economic 
for the FDIC to provide assurances with respect to the treatment of 
existing securitizations that will be affected by the 2009 GAAP 
Modifications.
    The APA also provides that publication of a substantive rule shall 
be made not less than 30 days before its effective date except as 
otherwise provided by the agency for good cause found and published 
with the rule. Because of the retroactive application of the 2009 GAAP 
Modifications and the immediate need for assurances for securitization 
participants and the banking industry with respect to existing 
securitizations and participations, the FDIC invokes this good cause 
exception to make this Final Rule effective as of March 18, 2010.

B. Community Development and Regulatory Improvement Act

    The Riegle Community Development and Regulatory Improvement Act 
(CDRIA) requires that any new rule prescribed by a Federal banking 
agency that imposes additional reporting, disclosures, or other new 
requirements on insured depository institutions take effect on the 
first day of a calendar quarter. 12 U.S.C. section 4802. This 
requirement does not apply because the Final Rule does not impose 
additional reporting, disclosures, or other new requirements on insured 
depository institution.

C. Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act (5 
U.S.C. section 601 et seq.), it is certified that

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the Interim Rule will not have a significant economic impact on a 
substantial number of small business entities. The Final Rule merely 
extends the safe harbor of section 360.6(b) to securitizations issued 
before September 30, 2010 and does not represent a change in the law.

E. Small Business Regulatory Enforcement Fairness Act

    The Office of Management and Budget has determined that the rule is 
not a ``major rule'' within the meaning of the relevant sections of the 
Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) (5 
U.S.C. 801 et seq.). As required by SBREFA, the FDIC will file the 
appropriate reports with Congress and the General Accounting Office so 
that the final rule may be reviewed.

F. Paperwork Reduction Act

    No collection of information pursuant to section 3504(h) of the 
Paperwork Reduction Act (44 U.S.C. section 3501 et seq.) is contained 
in the final rule. Consequently, no information was submitted to the 
Office of Management and Budget for review.

List of Subjects in 12 CFR Part 360

    Banks, Banking, Bank deposit insurance, Holding companies, National 
banks, Participations, Reporting and recordkeeping requirements, 
Savings associations, Securitizations.

0
For the reasons stated above, the Board of Directors of the Federal 
Deposit Insurance Corporation confirms as final, the interim rule 
amending chapter III of title 12 of the Code of Federal Regulations by 
amending Part 360 published on November 17, 2010 (74 FR 59066) with the 
following changes:

PART 360--RESOLUTION AND RECEIVERSHIP RULES

0
1. The authority citation for part 360 continues to read as follows:

    Authority:  12 U.S.C. 1821(d)(1), 1821(d)(10)(C), 1821(d)(11), 
1821(e)(1), 1821(e)(8)(D)(i), 1823(c)(4), 1823(e)(2); Sec. 401(h), 
Pub.L. 101-73, 103 Stat. 357.


0
2. Amend Sec.  360.6 by revising paragraph (b)(2) to read as follows:


Sec.  360.6  Treatment by the Federal Deposit Insurance Corporation as 
conservator or receiver of financial assets transferred in connection 
with a securitization or participation.

* * * * *
    (b) * * *
    (2) With respect to any securitization for which transfers of 
financial assets were made, or for revolving trusts for which 
beneficial interests were issued, on or before September 30, 2010, the 
FDIC as conservator or receiver shall not, in the exercise of its 
statutory authority to disaffirm or repudiate contracts, reclaim, 
recover, or recharacterize as property of the institution or the 
receivership any such transferred financial assets notwithstanding that 
such transfer does not satisfy all conditions for sale accounting 
treatment under generally accepted accounting principles as effective 
for reporting periods after November 15, 2009, provided that such 
transfer satisfied the conditions for sale accounting treatment set 
forth by generally accepted accounting principles in effect for 
reporting periods before November 15, 2009, except for the ``legal 
isolation'' condition that is addressed by this rule.
* * * * *

    Dated at Washington, DC, this 10th day of March 2010.

    By Order of the Board of Directors.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2010-5707 Filed 3-18-10; 8:45 am]
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