SIFMA has filed a comment letter in response to the FDIC’s advance notice of proposed rulemaking, which would amend the current safe harbor treatment. According to SIFMA, the proposed safe harbor is not an appropriate mean to regulate the securitization market.
SIFMA said that the regulation of the securitization market must be undertaken on a coordinated basis in consideration of on-going legislative reform efforts in Congress and in consultation with other relevant regulators. The unilateral imposition of broad-based conditions on insured depository institutions (IDIs) by the FDIC is premature. It poses an undue burden on IDIs and would front-run the large-scale, coordinated financial regulatory reform initiative currently being undertaken by Congress and other relevant regulators.
SIFMA added that an insolvency safe harbor should be based on insolvency principles and should not impose requirements unrelated to insolvency. Well-developed legal principles govern the treatment of securitized assets in insolvency. The ANPR eclipses those principles, first, by using the Proposed Safe Harbor to introduce market regulation unrelated to insolvency, and second, by suggesting that the treatment of assets under GAAP determines the treatment of assets in insolvency.
However, SIFMA stressed the need for regulation to be coordinated within the broader context of regulatory reform, and to base criteria for a safe harbor on the legal principles of isolation of assets in insolvency.
SIFMA also requested that the FDIC extend the interim period for the effectiveness of the 2000 Safe Harbor for at least six months beyond March 31, 2010 and that it work with industry participants during that time to outline safe harbor criteria that are based on the legal principles of isolation of assets in insolvency.
Chris Killian, vice president of SIFMA, said: “We support reasonable efforts to restore and reshape the securitization market, but we do not believe the proposed safe harbor is an appropriate means of regulation. Securitization is a key component to ensuring credit availability to consumers and businesses, and therefore plays a critically important role in the economic recovery.
“Changes to regulation of the securitization market must be done in a coordinated manner which incorporates the views of various market participants, regulators and policymakers, and is mindful of the impact of the sum total of the changes on the ability of institutions to utilize securitization to fund credit creation.”
