It appears likely that the Federal Deposit Insurance Corp. is taking a closer look at what's called an accrued interest receivable', which is a subordinated receivable generated throughout the life of credit card securitizations.
An accrued interest receivable describes yet-to-be-collected interest and finance charges owed to the credit card company by the borrower, which is used as credit enhancement for the senior notes, sources said.
The FDIC suggests that guidelines such as the new residual capital rule might be written to address this receivable down the line.
According to a summary of comments of FDIC Chairman Don Powell, accruing interest that has not been collected is commonplace among credit card securitizing banks. When this interest is used as subordination, the FDIC is considering it a form of recourse; therefore the bank should be required to hold capital against the interest.
"The FDIC and the other banking agencies are currently working together to ensure that the capital rules are properly applied in these situations," the regulator said in a statement.