Though not entirely unexpected - given the slant that the Financial Accounting Standards Board has already indicated this year - FASB dropped a bomb on the industry last Tuesday when it released its proposed amendment to FAS 140. This amendment, which would significantly tighten the guidelines governing QSPEs, would present very real challenges to securitization as it currently functions, said some industry professionals.

Essentially, should the final amendment closely resemble the Exposure Draft, it will be more difficult to satisfy the criteria for Qualifying SPEs, the result being that issuers (or transferors of assets) in even the most vanilla ABS may lose off-balance sheet treatment.

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