US Bank Regulators Provide Only Transitional Risk-Based Capital Relief for Securitization Accounting Changes

Originally published December 16, 2009

Keywords: bank regulators, risk-based capital relief, securitization, accounting changes

On December 15, 2009, the Federal Deposit Insurance Corporation (FDIC) became the first of the US federal bank regulators to approve final rules responding to recent changes in US accounting standards for securitizations (see our June 22, 2009, Client Update, "Big Changes in Securitization Accounting"). The final rules are essentially identical to the rules proposed by the agencies late last summer.

There are two primary consequences from the accounting changes.

• Banks (among other entities) that have traditionally achieved sale treatment in securitizations of their receivables will no longer be able to do so using many traditional "plain vanilla" structures, especially those that rely on qualifying special purpose entities (SPEs).