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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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
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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
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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
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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
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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:
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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
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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.
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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.
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:
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■
§ 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,
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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.
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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
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]]>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.
-----------------------------------------------------------------------
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
[[Page 12965]]
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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