[Federal Register Volume 80, Number 20 (Friday, January 30, 2015)]
[Proposed Rules]
[Pages 5076-5079]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-01444]
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FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR 360
RIN 3064-AE32
Notice of Proposed Rulemaking To Revise a Section Relating to the
Treatment of Financial Assets Transferred in Connection With a
Securitization or Participation
AGENCY: Federal Deposit Insurance Corporation (``FDIC'').
ACTION: Notice of Proposed Rulemaking.
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SUMMARY: The FDIC is proposing a rulemaking that would revise certain
provisions of its securitization safe harbor rule, which relates to the
treatment of financial assets transferred in connection with a
securitization or participation, in order to clarify the requirements
of the Securitization Safe Harbor as to the retention of an economic
interest in the credit risk of securitized financial assets upon and
following the effective date of the credit risk retention regulations
adopted under Section 15G of the Securities Exchange Act.
DATES: Comments on the Proposed Rule must be received by March 31,
2015.
You may submit comments, identified by RIN number, by any of the
following methods:
Agency Web site: http://www.FDIC.gov/regulations/laws/federal_. Follow instructions for submitting comments on the agency Web
site.
Email: [email protected]. Include RIN 3064-AE32 in the
subject line of the message.
Mail: Robert E. Feldman, Executive Secretary, Attention:
Comments, Federal Deposit Insurance Corporation, 550 17th Street NW.,
Washington, DC 20429.
Hand Delivery/Courier: Guard station at the rear of the
550 17th Street Building (located on F Street) on business days between
7:00 a.m. and 5:00 p.m.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Instructions: All comments will be posted without change to http://www.fdic.gov/regulations/laws/federal/_, including any personal
information provided. Paper copies of public comments may be ordered
from the Public Information Center by telephone at (877) 275-3342 or
(703) 562-2200.
FOR FURTHER INFORMATION CONTACT: George H. Williamson, Manager,
Division of Resolutions and
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Receiverships, (571) 858-8199. Phillip E. Sloan, Counsel, Legal
Division, (703) 562-6137.
SUPPLEMENTARY INFORMATION:
I. Background
The Federal Deposit Insurance Corporation (FDIC), in regulations
codified at 12 CFR 360.6 (the Securitization Safe Harbor Rule), set
forth criteria under which in its capacity as receiver or conservator
of an insured depository institution the FDIC will not, in the exercise
of its authority to repudiate contracts, recover or reclaim financial
assets transferred in connection with securitization transactions.
Asset transfers that, under the Securitization Safe Harbor Rule, are
not subject to recovery or reclamation through the exercise of the
FDIC's repudiation authority include those that pertain to certain
grandfathered transactions, such as, for example, asset transfers made
prior to December 31, 2010 which satisfied the conditions (except for
the legal isolation condition addressed by the Securitization Safe
Harbor Rule) for sale accounting treatment under generally accepted
accounting principles (GAAP) in effect for reporting periods prior to
November 15, 2009 and which pertain to a securitization transaction
that satisfied certain other requirements. In addition, the
Securitization Safe Harbor Rule provides that asset transfers that are
not grandfathered, but that satisfy the conditions (except for the
legal isolation condition addressed by the Securitization Safe Harbor
Rule) for sale accounting treatment under GAAP in effect for reporting
periods after November 15, 2009 and that pertain to a securitization
transaction that satisfies all other conditions of the Securitization
Safe Harbor Rule (such asset transfers, together with grandfathered
asset transfers, are referred to collectively as Safe Harbor Transfers)
will not be subject to FDIC recovery or reclamation actions through the
exercise of the FDIC's repudiation authority. For any securitization
transaction in respect of which transfers of financial assets do not
qualify as Safe Harbor Transfers but which transaction satisfies all of
its other requirements, the Securitization Safe Harbor Rule provides
that, in the event the FDIC as receiver or conservator remains in
monetary default for a specified period under a securitization due to
its failure to pay or apply collections or repudiates the
securitization asset transfer agreement and does not pay damages within
a specified period, certain remedies can be exercised on an expedited
basis.
Paragraph (b)(5)(i) of the Securitization Safe Harbor Rule sets
forth the conditions relating to credit risk retention that apply to
transfers of financial assets in connection with securitizations that
are not grandfathered by the Securitization Safe Harbor Rule. Under
paragraph (b)(5)(i)(A) of the Securitization Safe Harbor Rule, prior to
the effective date of regulations required under Section 15G of the
Securities Exchange Act, 15 U.S.C. 78a et seq. (``Section 15G''), the
documents governing such securitization must require that the sponsor
retain an economic interest in not less than five (5) percent of the
credit risk of the financial assets relating to the securitization. The
requirement in paragraph (b)(5)(i)(A) of the Securitization Safe Harbor
Rule, that the documents require retention of an economic interest is
consistent with many other provisions of the Securitization Safe Harbor
Rule, which are similarly expressed as requirements for the
securitization documentation, rather than as conditions requiring
actual compliance with the provision that is required to be included in
the documentation. Paragraph (b)(5)(i)(B) of the Securitization Safe
Harbor Rule does not explicitly refer to the securitization
documentation, but provides that, upon the effective date of the
regulations required under Section 15G (the Section 15G Regulations),
such regulations shall exclusively govern the requirement to retain an
economic interest in the credit risk of the financial assets.
Section 15G provides that regulations issued thereunder become
effective with respect to residential mortgage securitizations one year
after the date on which the regulations are published in the Federal
Register and, with respect to all other securitizations, two years
after such publication date. The Section 15G Regulations were published
in the Federal Register at 79 FR 77602 on December 24, 2014. The
Federal Register publication of the Section 15G Regulations specifies
``compliance dates'' that correspond to these effective dates. However,
the Federal Register publication also specifies February 23, 2015 as
the ``effective date'' of the Section 15G Regulations in accordance
with Federal Register editorial conventions, which require that a
Federal Register publication specify as the effective date the date on
which a rule affects the current Code of Federal Regulations.\1\ The
Proposed Rule is designed, in part, to eliminate any confusion that
might be created by the use of ``effective date'' in this way and to
clarify when compliance with paragraph (b)(5)(i)(B) of the
Securitization Safe Harbor Rule is required.
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\1\ See 79 FR 77602 (December 24, 2014).
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In connection with the notice of proposed rulemaking relating to
the Section 15G Regulations, FDIC staff received a comment that
suggested that certain points relating to paragraph (b)(5)(i)(B) of the
Securitization Safe Harbor Rule should be clarified, and in following
up on the comment, the FDIC identified two points that are addressed in
the Proposed Rule. The first is a clarification that paragraph
(b)(5)(i)(B) was intended to require that, upon and following the
effective date of the Section 15G Regulations, the Securitization Safe
Harbor Rule requirements as to risk retention are satisfied if the
governing documents of a securitization transaction require retention
of an economic interest in the financial assets in accordance with the
Section 15G Regulations, and that if the documentation satisfies this
condition (and assuming all other conditions of the Securitization Safe
Harbor Rule are satisfied), the transaction will not lose the benefits
of the safe harbor solely on the basis of any non-compliance with the
Section 15G Regulations risk retention requirements.
The second is a clarification that paragraph (b)(5)(i)(B) of the
Securitization Safe Harbor Rule does not require that any action be
taken with respect to issuances of asset-backed securities that close
prior to the effective date of the Section 15G Regulations.
II. Discussion
In the FDIC's view it is important to make clear to securitization
market participants the date upon and after which the Securitization
Safe Harbor will require reference to the Section 15G Regulations. In
addition, the FDIC wants to eliminate possible confusion among market
participants as to whether an asset-backed security issuance that
complies with all requirements of the Securitization Safe Harbor Rule
could forfeit the benefits afforded by the Securitization Safe Harbor
Rule based on the action or inaction of a securitization sponsor or
other party with respect to retention of credit risk following the date
of such issuance. The Proposed Rule would clarify that, if the
documents require compliance with the Section 15G Regulations, the
benefits of the Securitization Safe Harbor Rule are not forfeited based
solely upon non-compliance with these requirements. This is different
from the Section 15G Regulations, under which non-compliance with the
credit risk
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retention requirements will constitute a violation of the Regulations.
Accordingly, the Proposed Rule would revise paragraphs (b)(5)(i)(A)
and (b)(5)(i)(B) of the Securitization Safe Harbor Rule to make the
following three points clear:
(i) In order to qualify for the benefits of the Securitization
Safe Harbor Rule, the documents governing the issuance of asset-
backed securities in a securitization transaction must require
retention of an economic interest in the credit risk of the
financial assets relating to the securitization transaction in
compliance with the Section 15G Regulations if such issuance occurs
upon or following the date on which compliance with Section 15G is
required for such type of securitization transaction;
(ii) The Securitization Safe Harbor Rule does not require
inquiry as to whether the sponsor or other applicable party in fact
complies with the risk retention requirements of the documentation;
and
(iii) The Securitization Safe Harbor Rule requirements as to the
Section 15G Regulations do not require changes to securitization
documents governing asset-backed security issuances that are closed
prior to the date on which compliance with Section 15G is required
for such type of issuances.
The FDIC is proposing the clarifications described in points (ii) and
(iii) above in recognition of the fact that the benefits afforded by
the Securitization Safe Harbor Rule were intended to provide certainty
to investors as to certain matters relating to the course of conduct by
the FDIC as receiver or conservator of an insured depository
institution with respect to financial assets transferred by such
insured depository institution. It would be inconsistent with this goal
if the treatment under the Securitization Safe Harbor Rule by the FDIC
as receiver or conservator of an institution that transferred financial
assets in connection with the issuance of such securities could be
dependent on post-closing actions with respect to credit risk retention
that are beyond the control of investors.
III. Request for Comment
The FDIC invites comment from all members of the public on all
aspects of the Proposed Rule. Comments are specifically requested on
whether the Proposed Rule is consistent with the purposes of section
360.6 and whether the results intended to be achieved by the Proposed
Rule will be and should be achieved as set forth in the Proposed Rule
or by way of different modifications to the Securitization Safe Harbor
Rule. The FDIC will carefully consider all comments that relate to the
Proposed Rule.
IV. Administrative Law Matters
A. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act (44 U.S.C. 3501, et
seq.) (``PRA'') the FDIC may not conduct or sponsor, and a person is
not required to respond to, a collection of information unless it
displays a currently valid Office of Management and Budget (OMB)
control number. The Proposed Rule would not revise the Securitization
Safe Harbor Rule information collection 3064-0177 or create any new
information collection pursuant to the PRA. Consequently, no submission
will be made to the Office of Management and Budget for review. The
FDIC requests comment on its conclusion that this NPR does not revise
the Securitization Safe Harbor Rule information collection, 3064-0177.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act, 5 U.S.C. 601-612, requires an
agency to provide an Initial Regulatory Flexibility Analysis with a
proposed rule, unless the agency certifies that the rule would not have
a significant economic impact on a substantial number of small
entities. 5 U.S.C. 603-605. The FDIC hereby certifies that the Proposed
Rule would not have a significant economic impact on a substantial
number of small entities, as that term applies to insured depository
institutions.
C. Plain Language
Section 722 of the Gramm-Leach-Bliley Act (Pub. L. 106-102, 113
Stat. 1338, 1471) requires the Federal banking agencies to use plain
language in all proposed and final rules published after January 1,
2000. The FDIC has sought to present the Proposed Rule in a simple and
straightforward manner.
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 proposes to amend 12 CFR part 360 as
follows:
PART 360--RESOLUTION AND RECEIVERSHIP RULES
0
1. The authority citation for Part 360 continues to read as follows:
Authority: 12 U.S.C. 1817(b), 1818(a)(2), 1818(t), 1819(a)
Seventh, Ninth and Tenth, 1820(b)(3), (4), 1821(d)(1),
1821(d)(10)(c), 1821(d)(11), 1821(d)(15)(D), 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. Revise Sec. 360.6 paragraph (a) Defiinitions by adding the
definition ``Applicable compliance date'' as (a)(1) and redesignating
the remaining definitions in numerical order to read as follows:
Sec. 360.6 Treatment of financial assets transferred in connection
with a securitization or participation.
(a) * * *
(1) Applicable compliance date means, with respect to a
securitization, the date on which compliance with Section 15G of the
Securities Exchange Act, 15 U.S.C. 78a et seq., added by Section 941(b)
of the Dodd-Frank Wall Street Reform and Consumer Protection Act is
required with respect to that securitization.
* * * * *
0
3. Revise Sec. 360.6 paragraph (b)(5)(i) to read as follows:
(i) Requirements applicable to all securitizations.
(A) Prior to the applicable compliance date for regulations
required under Section 15G of the Securities Exchange Act, 15 U.S.C.
78a et seq., added by Section 941(b) of the Dodd-Frank Wall Street
Reform and Consumer Protection Act, the documents creating the
securitization shall require that the sponsor retain an economic
interest in a material portion, defined as not less than five (5)
percent, of the credit risk of the financial assets. This retained
interest may be either in the form of an interest of not less than five
(5) percent in each of the credit tranches sold or transferred to the
investors or in a representative sample of the securitized financial
assets equal to not less than five (5) percent of the principal amount
of the financial assets at transfer. This retained interest may not be
sold, pledged or hedged, except for the hedging of interest rate or
currency risk, during the term of the securitization.
(B) For any securitization that closes upon or following the
applicable compliance date for regulations required under Section 15G
of the Securities Exchange Act, 15 U.S.C. 78a et seq., added by Section
941(b) of the Dodd-Frank Wall Street Reform and Consumer Protection
Act, the documents creating the securitization shall instead require
retention of an economic interest in the credit risk of the financial
assets in accordance with such regulations, including the restrictions
on sale, pledging and hedging set forth therein.
* * * * *
Dated at Washington, DC, this 21st day of January, 2015.
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By order of the Board of Directors.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2015-01444 Filed 1-29-15; 8:45 am]
BILLING CODE 6714-01-P