On Wednesday, the Financial Accounting Standards Board (FASB) will revisit transition, or grandfathering, provisions of FAS 140, as they relate to revolving credit card master trust securitizations by banks.

Under FAS125, banks were not required to have a legal opinion demonstrating that their securitization structures had legally isolated the assets. With FAS140, which will be in full effect as of April 1, banks will be treated the same as non-banks with these regards.

A group of prominent securitization law firms working closely with a task force of the American Institute of Certified Public Accountants (AICPA) are now skeptical that even a securitization-friendly rule issued last summer by the Federal Deposit Insurance Corp. will sufficiently "isolate" assets for purposes of FAS 140, unless a bankruptcy remote SPC is inserted in the middle.

This is because of certain obscure Uniform Commercial Code (UCC) legal concepts known as redemption rights which are inherent in all one-step "debt" transactions.

"It will be terribly disappointing if the ultimate outcome after years of good-faith efforts on the part of the FDIC, the FASB, the AICPA and the legal community is that banks will have to restructure existing transactions and change the way they do new transactions," said Marty Rosenblatt, national director of securitization services for Deloitte & Touche.

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