On December 4, the Fed adopted a final rule establishing a process for determining the eligibility of rating agencies to issue ratings on ABS, other than those backed by commercial real estate, to be accepted as collateral for TALF. The criteria include: (i) registration as an NRSRO with the SEC and (ii) experience rating the types of assets accepted as collateral for TALF. The final rule is substantively the same as the proposed rule announced on October 5 and will take effect with the February 2010 TALF subscription. Fed Release. Final Rule.
Month: December 2009
Proposed Delay of FAS 167 for Investment Funds
On December 4, FASB issued an exposure draft that proposes to delay the effective date of FAS 167 for some funds (possibly including mutual funds, hedge funds, private equity funds, and venture capital funds) until late 2010 when the joint IASB/FASB consolidation project is completed. Securitization entities, asset-backed financing entities, or entities which were qualifying special purpose entities (QSPEs) are not affected by the proposal. FASB also similarly deferred the effective date of FAS 167 for money market mutual funds that must comply with Rule 2a-7 of the Investment Act. Comments are requested by January 6, 2010. FASB Exposure Draft. FASB Summary.
Monthly TALF Funding Requests
The graphs below display the monthly progression of TALF funding requests for Newly-Issued CMBS and Legacy CMBS. For individual graphs showing the monthly requests for other asset classes, please click here.
The graph below displays the monthly progression of TALF funding requests for all non-CMBS collateral. For individual graphs showing the monthly requests for each asset class, please click here.
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Rating Agency Developments
On December 2, S&P released its updated methodology and assumptions and new supplemental tests for U.S. structured settlement payment securitizations. S&P Release.
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SEC Rules for Rating Agencies
On November 23, the SEC adopted rule amendments, effective February 2, 2010, imposing additional disclosure and conflict of interest requirements on NRSROs. Final Rule.
Also on November 23, the SEC proposed rule amendments and a new rule that would require NRSROs to furnish new annual reports describing certain compliance measures and provide additional revenue information. The SEC also announced that it is deferring consideration of action with respect to a rule that would have required NRSROs to either: (a) provide a report describing how procedures and methodologies for rating structured finance products differ from those of other rated products when issuing a structured finance credit rating or (b) use different rating symbols for structured finance products. The SEC is also soliciting comments on: (i) alternative ways to differentiate structured finance credit ratings and (ii) whether the rule amendment, which was adopted to make it easier to determine and monitor non-issuer-paid credit ratings for structured finance products, should be applied before the rule became effective. Comments are requested to be received on or before February 2, 2010. Proposed Rules.
Recent Legislative Developments
On December 2, the House Financial Services Committee completed work on the Wall Street Reform and Consumer Protection Act (H.R. 4173), which is intended to modernize financial regulations and address the causes of the economic crisis. The act will be considered by the House of Representatives next week. House Financial Services Committee Release. Bill Summary. H.R. 4173.
Additional Initial PPIF Closing
On November 30, Treasury announced that Marathon Asset Management, L.P. completed an initial closing of a Public-Private Investment Fund under the Legacy Securities Public-Private Investment Program. To date, PPIFs have completed closings on approximately $5.07 billion of private sector equity capital, which, with Treasury’s equity and debt commitments, represents $20.26 billion of purchasing power. Treasury Release.
SEC and CFTC Orders on Volatility Indexes and Security Futures
The SEC and CFTC issued two joint orders related to security-based futures contracts. The first, effective on November 17, clarifies each Commission’s jurisdiction and the second, effective November 19, allows additional products to underlie security futures. SEC Release. November 17 Order. November 19 Order.
Treasury Sale of CPP Warrants
On November 19, Treasury announced its intention to dispose of the warrants in JP Morgan Chase, Capital One Financial Corporation, and TCF Financial that Treasury received as part of the Capital Purchase Program. The sales will be made through registered public offerings using a modified Dutch auction procedure. Treasury Release.
NAIC RMBS Modeling Process
On November 24, the National Association of Insurance Commissioners announced the release of a discussion draft outlining the analytical framework and economic assumptions regulators will use to evaluate RMBS, and indicated that PIMCO was selected as a third party financial modeler to help develop a methodology to determine risk-based capital requirements for RMBS owned by U.S. insurers. NAIC Release. Discussion Draft.