The Securities and Exchange Commission (SEC) has agreed to a six-month delay for European ABS in the implementation of rating agency requirements under Rule 17g-5 (a)(3).
The rule required disclosure of non-public information to all registered rating agencies (NRSROs) and would have obliged European borrowers to set up a website to publish this information. It requires rating agencies to make data available to other agencies that are not mandated to rate the transaction, and is theoretically designed to increase the number of views on the creditworthiness of a given transaction.
The rule was due to go into effect in June, borrowers no have until the end of the year to comply with the new regulation.
The exemption for European ABS is only temporary. Deutsche Bank analysts said that, "unless a third way can be found — such as an exemption for instruments sold outside the U.S. — it will lead to the highly unusual situation where the SEC will effectively be setting regulations in European jurisdictions and presents a further hurdle to issuers re-engaging with ABS funding markets."
The temporary exemption should cover many non-U.S. transactions but Fitch Ratings analysts said its not likely to expempt any transaction where U.S. investors are targeted
"These safe harbor rules only apply to an 'offshore transaction', which generally is a transaction where offers cannot be made to persons in the U.S. and all buyers of the securities must be outside the U.S. at the time they purchase the security," said analysts.
