Well, sort of.
Remember FAS 167? The new accounting standard will eliminate qualified special-purpose entities (QSPEs) and lead to banks putting billions worth of securitised assets — mostly credit card trusts — back onto their balance sheets from 2010.
The proposed rule also caused a bit of consternation among ratings agencies and analysts – with many concerned that the new requirements would mean a loss of so-called ‘safe harbour’ status which to date had protected off-balance sheet securitisations. The concern was that the Federal Deposit Insurance Corp (FDIC), the organisation responsible for insuring US bank deposits, could start seizing the securitisations in the event of a bank’s bankruptcy.
But, it looks like on Thursday the FDIC has decided not to go down that route:
NEW YORK -(Dow Jones)- The U.S. Federal Deposit Insurance Corp. on Thursday extended a rule to help the securitization market, roiled by new accounting regulations.
The banking regulator’s board decided that existing securities backed by consumer loans, mainly credit card debt, as well as new bonds issued before March 31, 2010, won’t lose their so-called “safe harbor” treatment. The FDIC will, in effect, not be able to raid the assets backing these securities even if the lending institution files for bankruptcy.
Saving securitisation via safe harbour status. Try saying that 10 times fast.
Word to the wise though, the FDIC jury is still apparently out on bonds issued after March 31 next year:
The FDIC will issue further guidance on new rules for bonds issued after March 31, 2010 on Dec. 15.
Related links:
FDIC, the `D’ stands for… – FT Alphaville
Bringing it back (on balance sheet) – FT Alphaville
Annals of unintended consequences, FDIC and FAS 166/7 edition – FT Alphaville