In an initiative led by the Federal Deposit Insurance Corp., the bank regulators of the Federal Financial Institutions Examination Council (FFIEC) recently distributed new guidelines warning that securitization structures featuring covenants associated with supervisory actions will be considered unsafe and unsound (see ASR 5/27 Whispers).

The implications of safety and soundness considerations are enormous for banking entities, an attorney said. In the extreme case, a bank could lose its FDIC membership, if its practices are considered unsound.

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