The Federal Deposit Insurance Corp. (FDIC) extended its temporary protection for securitized assets from failed-bank seizures or the safe harbor to Sept. 30.

The move, announced late yesterday, allows the agency more time to consider long-term restrictions on the protection.

Before this year, securitizers enjoyed a safe harbor from asset seizures as long as a securitization met the criteria of being an off-balance sheet sale.

But a June rule by the Financial Accounting Standards Board (FASB) that required on-balance sheet reporting for securitized assets invalidated the safe harbor.

In November, the agency said it would continue to exempt securitization until the end of this month while it considered a rule to rein a securitization industry that helped contribute to the crisis.

Early Signs of Extension

At the American Securitization Forum conference held in early February, FDIC Deputy to the Chariman for Policy Michael Krimminger said that the interim rule to extend the securitization safe harbor announced in November last year will most likely be extended beyond the March 31 end date.

The remarks were made at the panel called FDIC Securitization Safe Harbor Reform Proposals at the conference held in Washington, D.C. 

This would allow time, Krimminger said in separate interview with ASR at the ASF gathering, for the FDIC to come up with a final rule on the safe harbor provision after the comment period expires for the Advance Notice of Proposed Rulemaking (ANPR).

In this ANPR released on Dec. 15, the FDIC solicited comments from the industry regarding proposed amendments to the legal isolation safe harbor for off-balance sheet securitizations created after March 31.

After the comment period ended on Feb. 22, the FDIC had to revise the safe harbor rule taking into consideration the industry’s feedback, and allow for another round of comments, which typically lasts another 60 days.

Industry Reaction

Meanwhile, ASF Executive Director Tom Deutsch released the following statement in response to the FDIC’s decision to extend transitional Safe Harbor.

 “We appreciate the Board’s decision to extend the existing Safe Harbor protection to Sept. 30, while it considers the industry’s response to the proposed new rules," Deutsch said. "As our members indicated in our letter to the FDIC last month, the ASF strongly believes the proposals, which include significant preconditions for safe harbor protec-tion, will create substantial uncertainty for investors, thus harming the drive to reopen securitization markets and get credit flowing to Main Street." 

Deutsche added that the ASF is urging the FDIC to carefully consider the consequences and act to ensure that investors continue to receive enough safe harbor protection.


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