Today the FDIC approved an extension of safe harbor protections for certain transactions involving the transfer of financial assets by a depository institution performing the transfer in a connection with a securitization or participation. The move directly relates to changes made by the Financial Accounting Standards Board that went into effect on November 12, 2009. Today's extension creates a safe harbor for certain types of transactions through September 30, 2010.
Further details from the FDIC:
The Board of Directors of the Federal Deposit Insurance Corporation (FDIC) today approved by notational vote an extension through September 30, 2010 of the Safe Harbor Protection for Treatment by the FDIC as Conservator or Receiver of Financial Assets Transferred by an Insured Depository Institution in Connection With a Securitization or Participation. Under this safe harbor, all securitizations or participations in process through September 30, 2010 are permanently grandfathered under the existing terms of 12 C.F.R. Part 360.6.
When a safe harbor was initially adopted in 2000 for securitizations and participations, the FDIC provided important protections for securitizations and participations by confirming that in the event of a bank failure, the FDIC would not try to reclaim loans transferred into such transactions so long as an accounting sale had occurred. However, on June 12, 2009, the Financial Accounting Standards Board ("FASB") finalized modifications to the accounting treatment for such transactions through Statement of Financial Accounting Standards No. 166, Accounting for Transfers of Financial Assets, an Amendment of FASB Statement No. 140 ("FAS 166") and Statement of Financial Accounting Standards No. 167, Amendments to FASB Interpretation No. 46(R) ("FAS 167"). Following the November 15, 2009 effective date of these changes, most securitizations no longer meet the off-balance sheet standards for sale accounting treatment and, as a result, no longer comply with the preconditions for the application of the original FDIC safe harbor.
On November 12, 2009, the FDIC Board approved a transitional safe harbor that permanently grandfathered securitizations or participations in process through March 31, 2010 that would have previously qualified for the 360.6 safe harbor, but for the changes to accounting standards. On December 15, 2009, the FDIC Board approved an Advanced Notice of Proposed Rulemaking (ANPR) to seek stakeholder feedback on questions and sample regulatory text regarding the treatment of securitizations and participations issued after March 31, 2010. The FDIC Board's approval of an extension of that safe harbor will provide a transitional period for adoption and implementation of final standards for a safe harbor for securitizations initiated after September 30th.