April 30, 2014 Newsletter
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April 30, 2014
 

SFIG News

Issue Spotlight

SFIG Calendar

Advocacy Outlook

Recent Developments

Upcoming Events in Washington

 
SFIG NEWS
SFIG SUBMITS REGULATION AB II COMMENT LETTER
On April 28, 2014, SFIG submitted its response to the Securities and Exchange Commission’s (SEC) reproposal on asset level disclosure. The letter focused on the privacy aspects of the proposal, including concerns regarding reputational risks and potential liabilities related to the Fair Credit Reporting Act. SFIG also requested a partial re-proposal of the revisions to Regulation AB indicating what the final required data fields will be and requesting comment on a complete set of proposed rules regarding the issuer website proposal and related privacy issues.

The SEC released the reproposal on February 25, 2014 to permit comment on an approach, discussed in a staff memorandum, for the dissemination of potentially sensitive asset-level data to address privacy issues with an original comment period deadline of March 28th. Ultimately, the deadline was extended to April 28th following an extension request by SFIG and many of our members.

Led by both investor and issuer task force co-chairs, the SFIG comment letter was built from views across all membership groups to deliver one broad-based consensus viewpoint. While this process, designed to create an organization that truly speaks for the industry, has become routine for our members we felt it was important to offer further detail on this particular letter after misleading media reports were published prior to the letter’s completion.

As with every letter SFIG publishes, our work here was carefully considered, thoroughly discussed and broadly socialized for feedback. Specifically the Task Force clearly defined the scope of comment, allowed each individual participant committee an opportunity to build their own view, brought educational resources to the entire Task Force to dive into some of the more complex considerations around privacy law, and ultimately allowed ample process for the aforesaid views to be socialized within a cross-industry task force environment. SFIG was able to build its position based on input from over 275 distinct task force participants.

Taken a step further, this broad cross-industry approach was underscored when both investors and issuers (two of each) came with the SFIG team to meet with the SEC earlier this month. This allowed for approaches from multiple angles to be discussed directly with the SEC. The result is a clear effort as “one industry” pursuing a common cause, notably to protect both providers and users of publicized data from the risk of privacy law recriminations.

 
 
SFIG ATTENDS SENATE COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS HEARING; MARKUP ON JOHNSON-CRAPO DELAYED
On April 29th, SFIG staff attended a scheduled markup of the Senate Committee on Banking, Housing and Urban Affairs (Committee). The Committee had scheduled a markup of the housing finance reform legislation proposed by the Committee’s Chairman Senator Tim Johnson (D-SD) and its Ranking Member Senator Mike Crapo (R-ID). However, the markup was recessed without a vote on the proposal. Chairman Johnson did not announce a time to resume the markup. A statement released by the Chairman indicated the recess was “for a short period.” The Chairman stated that the delay occurred to offer Senators an opportunity to engage in “important discussions to build a larger coalition supporting the bill.” While the Committee has the requisite 12 votes necessary to pass the legislation, supporters of the legislation are attempting to secure additional votes so the bill passes the Committee by a wider margin and therefore increase the chance that the full Senate would consider the proposal.

Last week SFIG published its briefing book on the Johnson-Crapo legislation. On April 28th, in anticipation of the markup, SFIG reviewed 21 proposed amendments to the bill with the GSE Reform Task Force, including the manager’s amendment proposed by the sponsors of the legislation. For a further description of the legislative process, including a description of a markup and a manager’s amendment, please see this week’s issue spotlight.

 
 
SFIG MEETS WITH CFPB ON FAIR CREDIT REPORTING ACT IMPLICATIONS OF REGULATION AB II PROPOSAL
On April 24, 2014, SFIG staff and members met with representatives from the Consumer Financial Protection Bureau’s (CFPB) rule writing division. SFIG highlighted for the CFPB our concerns regarding the potential Fair Credit Reporting Act (FCRA) impact of the Securities and Exchange Commission’s (SEC) Regulation AB II asset level disclosure reproposal. SFIG asked the CFPB to consider issuing some form of interpretive guidance that providing asset-level data required by the SEC would not subject issuers and investors to the obligations and attendant liabilities of the FCRA.
 
 
SFIG MEETS WITH AGENCIES TO DISCUSS ADDITIONAL RISK RETENTION OPTIONS
On Monday, SFIG staff and members met with regulators from the Federal Reserve Board, Federal Deposit Insurance Corporation, the Office of the Comptroller and Currency, the Federal Housing Finance Agency, the Securities Exchange Commission and the U.S. Department of the Treasury. The purpose of the meeting was to walk through a proposed matrix approach in regards to risk retention. The matrix approach is intended to replace the single point loss and discount rate assumptions within the original eligible horizontal residual interest's fair value proposal with a reasonable range of loss and discount rate assumptions while remaining aligned with the fair value approach. Ultimately, with this approach, disclosure can be presented in the form of a matrix (showing minimum forecasted risk retention percent over the projected life) or in a monthly matrix format (showing the projected risk retention percent at each cashflow date).
 
 
SFIG TO HOLD SECOND SPRING SYMPOSIUM
SFIG will hold its Spring Symposium, followed by a cocktail reception, on Wednesday, May 14, 2014 at Société Générale’s New York offices. Please click here to register for the event. Please note that seating is limited and agenda details will be forthcoming.
 
 
SFIG OPENS NOMINATION PROCESS FOR BOARD AND FOR COMMITTEE CHAIRS; NOMINATION PERIOD BEGINS TOMORROW, MAY 1st
SFIG will begin accepting nominations for its Board of Directors and for Committee Chairs starting Thursday, May 1st through Monday, May 19th. Eligibility for these positions will be limited to individuals associated with SFIG’s primary members. Members may nominate themselves or another qualified industry participant.

SFIG’s Nominating Committee will review nomination submissions, consult with members, and make recommendations to the current Board of Directors. The Nominating Committee is dedicated to selecting a balanced Board of Directors reflective of the membership and the industry at large, and that is committed to working hard and advancing the principles of SFIG.

Board of Director terms are for two years, and Committee Chair terms are for one year.

 
 
ISSUE SPOTLIGHT
HOUSING FINANCE REFORM – A PROCESS REVIEW
By: Mike Flood, SFIG Director of Advocacy
Mike Flood
In reviewing SFIG’s side-by-side analysis, it is clear that there are many views within Congress for the future of the U.S. housing finance system. Over the past six months, the Senate Committee on Banking, Housing, and Urban Affairs (Committee) has put Johnson-Crapo firmly in its crosshairs as it considers how to re-create the role of government in housing, including an explicit guarantee.

Yesterday, the 22-member Committee – Chaired by Senator Johnson (D-SD) with Ranking Member Crapo (R-ID) managing the minority - delayed its markup (or vote) on the bill in order to attempt to build a larger coalition to support their bill.

The calculation is critical. Currently, the Chair and Ranking Member believe they have 12-13 votes, enough to pass the bill out of committee. However, this is an election year, and Members of Congress are loathe to vote on any controversial bill that could cause a reaction with their constituents. Considering current poll numbers, it is a toss-up as to whether the Senate agenda will be managed by Democrats or Republicans next year.

Therefore, it is believed that Johnson-Crapo needs to be voted favorably out of Committee with a strong bipartisan vote - 15-16 supporters – in order for Senate Majority Leader Harry Reid (D-NV) to put it to a vote on the Senate floor this year.

Considering yesterday’s delay, let’s discuss the markup process, why it matters, and how SFIG plays a role.

What is a Markup and How Does It Work? A markup is the process by which congressional committees and subcommittees debate, amend, and rewrite proposed legislation. At the beginning of a markup, committee members often make opening statements that last no more than five minutes. Next, the bill is read one section at a time, with committee members offering their amendments to each section. Committee members then typically debate amendments under a five-minute rule and conclude with a vote on each amendment.

Interestingly, committees do not actually change the texts of the bills they mark up. Instead, committees vote on amendments that members want to recommend that the Senate adopt when it considers the bill on the floor. The committee concludes a markup not by voting on the bill as a whole, but by voting on a motion to order the bill reported to the Senate with whatever amendments the committee has approved.

A committee may then report a bill to the Senate without amendment, with several amendments, or with an amendment in the nature of a substitute that proposes an entirely different text for the bill. Alternatively, a committee may report a new or "clean" bill on the same subject as the bill (or other text) that it has marked up.

How Does This Apply to Johnson-Crapo Markup? In the case of Johnson-Crapo, there are currently a “manager’s amendment” and over 100 other filed amendments for the Committee to consider during a future markup.

The manager’s amendment consists of changes to the draft bill that Senators have made between March, when the bill was originally released, and last Friday. The purpose of a manager’s amendment is to improve the bill either through technical or policy changes. The changes in the manager’s amendment are supported by the bill’s twelve original co-sponsors, and therefore have majority approval.

The other amendments have been drafted by Senators sitting on the committee who believe that a particular issue needs to change in order to make the bill work. It is in the purview of the Committee Chair, usually through agreement with the Ranking Member, to decide which amendments – and how many – the Committee will consider during the markup.

Since the markup was delayed in order to negotiate for more votes, Chairman Johnson and Ranking Member Crapo likely have not decided which amendments will be considered. They could also choose to make further changes to the manager’s amendment if they secure more votes. Changes to manager’s amendments are usually completed when the bill’s co-sponsors all agree to the negotiated changes.

What is SFIG’s Role in the Johnson-Crapo Markup Process? SFIG’s role, quite simply, is to educate and advocate positions supported by its membership with Members of Congress, the Administration and federal regulators.

For housing finance reform, SFIG staff analyzed each major bill, and produced side-by-side comparisons for easy SFIG member review. In the case of Johnson-Crapo, SFIG staff analyzed each section of the bill within 24 hours of its release. Once the markup was scheduled, the GSE Reform Task Force held near-daily calls to formulate policy positions on each section of Johnson-Crapo.

The end result was a comprehensive 41-page SFIG briefing book that responded to each section of the bill with the membership’s viewpoints. Some of the responses included technical changes, while others suggested policy changes. In each case, SFIG’s briefing book also contained model “legislative language” that the Committee can adopt in the bill if they support SFIG’s views.

SFIG’s briefing book was then submitted to Committee staff and all 22 Senatorial offices for consideration. Our positions were also shared with member companies’ government relations teams and other associations to align interests on shared policy goals.

SFIG staff also discussed its positions with Committee staff and key Senatorial offices. Positions significant to the membership include:

  • 10 Percent Capital Calculation
  • Credit Risk Sharing Mechanisms
  • Guarantee Structure
  • Securitization Platform Use
  • FMIC Authority

When the manager’s amendment was released, SFIG quickly analyzed the updated changes and worked through the GSE Reform Task Force to create policy positions for all 32 changes, along with responses to over 20 significant amendments.

This process allowed SFIG to sign a letter with 13 other associations, including the American Bankers Association, American Council of Life Insurers, Securities Industry and Financial Markets Association and American Mortgage Investors, to support an amendment offered by Senators Toomey (R-PA) and Coburn (R-OK) to quell the use of Eminent Domain.

So What Comes Next, Considering the Markup has Been Delayed? Both Chairman Johnson and Ranking Member Crapo stated that there would be a brief delay because a few Senators had requested more time to see if they could create a path to support the bill. Senators Johnson and Crapo are likely hoping that such time will yield 15-16 total votes in support. The Senators also stated that, had the markup taken place today, the bill would have passed out of Committee with either 12 or 13 votes.

Remember that Congress has been out of session for the past two weeks. Therefore, Members of Congress flew back into town on Monday night, the night before the markup. They have had little time to talk amongst themselves. Now they are all in the same town and can have face-to-face conversations.

Senator Crapo also stated that the delay would be brief. SFIG assumes that a markup could come as early as this Thursday, or in the next few weeks.

Therefore, SFIG’s next steps will be to (1) continue advocacy for its priority positions, (2) stress the critical importance of both private capital and the private-label security marketplace to the future of housing finance, and (3) craft solutions that align with SFIG’s policy positions and issues important to the Committee’s efforts to improve Johnson-Crapo.

If you would like to learn more about SFIG’s advocacy efforts, contact Mike Flood (Michael.Flood@sfindustry.org). If you would like to get involved in SFIG’s mortgage policy efforts, contact Sonny Abbasi (Sonny.Abbasi@sfindustry.org).

 
 
SFIG CALENDAR
SUPPLEMENTARY LEVERAGE RATIO WORKING GROUP CALL
THURSDAY, May 1, 2014
11:00 a.m. – 12:00 p.m. (EST)
 
 
DERIVATIVES IN SECURITIZATION TASK FORCE CONFERENCE CALL
THURSDAY, May 1, 2014
1:00 p.m. – 1:30 p.m. (EST)
 
 
PROJECT RMBS 3.0 DUE DILIGENCE, DATA, AND LOAN DISCLOSURE WORKING GROUP CONFERENCE CALL (BI-WEEKLY)
WEDNESDAY, May 7, 2014
4:00 p.m. – 5:00 p.m. (EST)
 
 
ABCP COMMITTEE CONFERENCE CALL
WEDNESDAY, May 7, 2014
4:00 p.m. – 5:00 p.m. (EST)
 
 
PROJECT RMBS 3.0 ROLE OF THE TRUSTEE/BONDHOLDER COMMUNICATIONS WORKING GROUP CONFERENCE CALL (BI-WEEKLY)
THURSDAY, MAY 8, 2014
3:00 p.m. – 4:00 p.m. (EST)
 
 
PROJECT RMBS 3.0 REPRESENTATIONS, WARRANTIES, AND REPURCHASE ENFORCEMENT WORKING GROUP CONFERENCE CALL (BI-WEEKLY)
THURSDAY, MAY 8, 2014
4:00 p.m. – 5:00 p.m. (EST)
 
 
SFIG SPRING SYMPOSIUM
WEDNESDAY, May 14, 2014
5:00 p.m. – 8:00 p.m.
Offices of Société Générale
245 Park Avenue
New York, New York 10167

Additional agenda details to follow.

To register for the Spring Symposium please click here. Registration will close at 5:00 p.m. on Friday, May 10th. Please note, we will not be able to accommodate walk-ins.

Government issued ID is required and the event is closed to the press.

 
 
IMN 2014 GLOBAL ABS CONFERENCE
TUESDAY, June 10, 2014 – THURSDAY, June 12, 2014
Barcelona International Convention Centre
Barcelona, Spain
Registration available here
 
 
SFIG BOARD OF DIRECTORS MEETING Q2’14
TUESDAY, June 24, 2014
12:00 p.m. – 5:00 p.m. (EST)
New York, NY
Note: Closed Meeting
 
 
IMN ABS EAST 2014 CONFERENCE
SUNDAY, September 21, 2014 – TUESDAY, September 23, 2014
The Fontainebleau Hotel
Miami Beach, FL
Registration available here
 
 
SFIG & IMN ABS VEGAS 2015
SUNDAY, February 8, 2015 – WEDNESDAY, February 11, 2015
The Aria Resort and Casino
Las Vegas, NV
Registration available here
 
 
ADVOCACY OUTLOOK
If you would like to participate in the work SFIG is undertaking through our committees as highlighted below, please e-mail Committees@sfindustry.org. For specific inquiries on any of SFIG’s advocacy efforts, please contact the staff member listed for the related project.

SFIG is forming a working group to comment on the securitization-related impacts of the notice of proposed rulemaking  (NPR) relating to the Supplementary Leverage Ratio. Comments are due on June 13, 2014, and additional information on the upcoming working group call is on the SFIG Calendar. For additional information or to participate in this working group please email Mary.Robinson@sfindustry.org.

Project RMBS 3.0 continues to work towards bringing private label securities back to the mortgage market. SFIG members and staff are actively engaging government officials to demonstrate the unique position of the organization in re-establishing a robust private label RMBS environment. Working Groups conduct regular meetings via conference call to address issues specific to private label mortgage securities in the following categories: 1) Representations, Warranties and Repurchase Enforcement; 2) Due Diligence/Loan Review, Data and Disclosure; and 3) Role of Trustees and Bondholder Communications. We encourage members to participate in any or all of the Working Groups to contribute towards the mission of Project RMBS 3.0. Please contact Mary.Robinson@sfindustry.org to join a Working Group or with any additional questions on Project RMBS 3.0.

The GSE Reform Task Force recently finalized SFIG’s policy positions as they relate to the proposed Johnson-Crapo legislation for housing finance reform. Please see SFIG news and issue spotlight for additional information on recent GSE advocacy developments. If you would like to learn more about SFIG’s activities with respect to GSE Reform, please contact Amanda.Bateman@sfindustry.org.

The Mortgage Loan-Level Disclosure Subcommittee has reviewed and developed additional data elements for potential disclosure. SFIG will use this work as a basis of discussions and correspondence with the Securities and Exchange Commission on the mortgage aspects of Regulation AB II. SFIG continues to have weekly Mortgage Industry Standards Maintenance Organization calls to go through data elements that lenders should deliver in securitizations. Please contact Alyssa.Acevedo@sfindustry.org for additional information on SFIG’s work on this topic.

The Volcker Task Force is working with the asset class committees to determine key issues and needs for interpretative guidance regarding the Volcker Rule. Please contact Amanda.Bateman@sfindustry.org for additional information on the Volcker Task Force.

The Risk Retention Committee is continuing to follow up with regulators on risk retention questions across asset classes. Topics currently under discussion include participations, representative sample and the alternative to simplified approach. Please contact Alyssa.Acevedo@sfindustry.org with any questions.

SFIG is continuing to build membership for its Chinese Market Committee and is currently looking to establish committee chairs as well. If you would like more information on SFIG’s work with respect to Chinese securitization, please contact Alyssa.Acevedo@sfindustry.org.

SFIG has launched its initiative to provide critically needed input for the Financial Stability Board’s “Shadow Banking” project. For more information on SFIG’s work on Shadow Banking, please contact Amanda.Bateman@sfindustry.org.

The Derivatives in Securitization Task Force will resume work on drafting a No-Action Request of the Commodity Futures Trading Commission regarding enforcement against a registered swap dealer for failing to comply with any Specified Regulations that may become applicable to a Legacy Special Purpose Vehicle Swap pursuant to a credit rating downgrade of the Swap Dealer. As noted in the SFIG Calendar above, the task force will reconvene tomorrow, May 1st at 1:00 p.m. (EST) to discuss the matter. SFIG members who are interested in dialing-in and participating in this initiative should email Amanda.Bateman@sfindustry.org.

 
 
RECENT DEVELOPMENTS
SIZE OF NONBANK FINANCIAL FIRMS SPARKS REGULATORY REASSESMENT OF ASSET MANAGERS
The Financial Stability Oversight Council (FSOC) is reviewing information to further investigate whether BlackRock Inc. and Fidelity are “systemically important” and pose risks to the U.S. financial system. Both asset managers are receiving a heightened level of review due to their sheer size. The FSOC has a three stage review process for evaluating whether a company is “systemically important” and may require additional oversight. The FSOC applies a variety of metrics, including size, to determine what level of review a company falls under. Once a firm passes the $50 billion mark in assets it automatically enters the FSOC Stage 2 review where regulators begin to look more closely at a firm’s business. Representatives from both BlackRock and Fidelity noted that the assets that pushed each asset management firm in to Stage 2 of FSOC review are used for investments rather than the risky trading the increased scrutiny is designed to identify. Furthermore, generally a firm must meet at least two threshold measurements to receive Stage 2 review and Fidelity asserts that it fails to reach any other metric. Other threshold measurements which may lead the FSOC to identity a firm for second level review include assets, debt, and derivatives. When firms move to Stage 3 FSOC review, they are required to provide private financial information and top executives are interviewed before a final decision is made as to whether to designate the firm as “systemically important.”

A financial institution receives treatment as a systemically important financial institution (SIFI) when regulators find the firm’s activities may pose a risk to the broader financial system. Firms designated as SIFI are subject to increased regulatory scrutiny and oversight under Basel III regulations as well as U.S. regulatory policy. BlackRock and Fidelity both oppose labeling asset managers as SIFI’s because neither the activities of the firms nor the funds they manage pose the risk that SIFI designation is designed to mitigate. A Treasury spokesperson indicated that the FSOC is “conducting a thorough review of the asset-management industry and its various activities” and “welcomes continued engagement with asset managers and other stakeholders.” The FSOC is meeting to discuss its review of asset managers in May; it is unlikely a vote on the designation of asset managers will occur before the meeting.

 
 
HOUSE PASSES CLO-VOLCKER RULE BILL
On Tuesday, the House of Representatives passed H.R. 4167, the Restoring Proven Financing for American Employers Act by voice vote. H.R. 4167 allows banks that hold collateralized loan obligations (CLOs) as assets a two-year extension, until July 21, 2017, to comply with the Volcker Rule, as long as the CLOs were issued prior to January 31, 2014. During the vote, Congressman Scott Garrett (R-NJ) endorsed the bill. “Today we have the opportunity to correct in a strong, bipartisan way an egregious example of regulatory overreach,” said Rep. Scott Garrett. “If the CLO provision goes forward as planned, there will be a heavy price to pay.” Congressman Patrick Murphy (D-FL) also praised the bill as a “narrow, common-sense fix to the Volcker Rule without undermining its core purpose.”

In April, the Federal Reserve Board (Fed) stated its intent to extend the conformance period for CLOs to the Volcker Rule by two years to July, 2017, and applies to CLOs in place as of December 31, 2013. It is SFIG’s understanding that the Fed’s extension was designed to provide banks additional time to restructure or re-finance non-conforming CLOs.

The bill sponsors brought H.R. 4167 to the House floor for a vote in order to maintain pressure on the regulators to find a complete solution to address legacy CLOs as they relate to the Volcker Rule. The bill will now be referred to the Senate, and likely to the Senate Committee on Banking, Housing, and Urban Affairs where it faces an uncertain future.

 
 
MOODY’S RELEASES FOR COMMENT PROPOSED CHANGES TO RATING CREDIT CARD RECEIVABLES-BACKED SECURITIES
On April 28th, Moody’s released a Request for Comment (RFC) to discuss proposed changes to Global Credit Card ABS methodology. The proposed changes will address key risks in credit card securitizations, especially as they relate to sponsor insolvency, and will systematically incorporate Moody's analysis of performance data on charge-offs, payment rate and yield in prior instances of account closures.

The two key changes outlined in Moody’s RFC include: Incorporating the credit quality of the sponsor more explicitly into the analysis and including historical data on early amortization in their modeling assumptions. Overall, “the proposed approach would allow for more differentiation among trusts based on the quality of the collateral pool, the economics of the trust and the structure of the program, particularly in the event of account closures,” according to Moody's Vice President and Senior Credit Officer Luisa De Gaetano.

Moody’s expects that the revised methodology will have generally little, if any, rating impact on most of the currently outstanding senior notes. For outstanding subordinated notes, the impact of the proposed changes will vary by transaction and structure and in some cases could lead to rating changes of up to three notches, with upgrades more likely than downgrades. For both senior and junior notes with very low levels of credit enhancement and comparatively short amortization periods (defined as the time between the expected maturity and the legal maturity), and whose trust structures do not prescribe the sale of receivables at the legal final maturity of the notes, downgrades of up to three notches could result in some cases.

Comments on the RFC are due June 9, 2014 through the Request for Comment Page.

 
 
CFTC ISSUES TEMPORARY RELIEF ON ORAL RECORDING RULE
On April 25th, the Commodity Futures Trading Commission Division of Swap Dealer and Intermediary Oversight and Division of Market Oversight issued a time-limited no-action letter covering the oral recording requirement set forth in Commission Regulation 1.35(a) in connection with the execution of swaps. The relief applies to commodity trading advisors that are members of designated contract markets or swap execution facilities. It will expire on December 31, 2014.
 
 
CFPB EXPECTED TO EASE RULES ON FEES FOR QM LOANS
Relief may come soon for bankers, mortgage lenders and real estate brokerage firms due to a provision of the qualified mortgage (QM) rule that restricts fees paid to affiliates. Under the current Consumer Financial Protection Bureau’s (CFPB) regulation, all of the above mentioned fees are included in a points and fees test that says they cannot exceed 3 percent of the loan amount and still qualify for QM status. However, the CFPB is expected to ease its interpretation of this regulation and permit transactions that are passed through an affiliate to a third-party provider to be excluded from the test.

This issue arises from a provision of the Dodd-Frank Act that said fees "retained by" affiliates should be part of the points and fees test for QM. But in its rule, the CFPB used language from a previous Federal Reserve Board rule that instead included any fees "paid to" the affiliate as part of the test.

This issue is also important to many integrated firms, which have been forced to drop certain affiliates to avoid the 3 percent limit. Other firms have reduced their fees to avoid the restriction or end up referring homebuyers to nonaffiliated firms.

 
 
FIRST EURO SECURED NOTES TRANSACTION TO SECURITIZE LOANS TO SMALL AND MEDIUM-SIZED ENTERPRISES
The Euro Secured Notes Issuers, a new French banking vehicle established to securitize loans to small and medium-sized enterprises (SMEs) sold $3.5 billion of bonds with maturities up to three years in its premier issuance earlier this month. The program, sponsored by BNP Paribas, BPCE GROUP, Credit Agricole Group, HSBC Finance and Societe Generale, allows for European banks to sell SME collateral that is European Central Bank (ECB) repo-eligible to the new vehicle.

The debut issuance comes as the ECB continues to develop ways to spur bank lending. Low bank lending contributes to a potential €4 trillion gap in funding to European SMEs. The looming SME funding gap is projected to decrease the financial leverage of European banks by 7 percent, or $2.6 billion, over the next five years. While European bank balance sheets reflect a large portion of SME loans, they are underutilized as a source of collateral. European public issuance of asset backed securities (ABS) is approximately 25 percent of what it is in the United States, with ECB figures reporting outstanding ABS of about €1.5. The Euro Secured Notes deal could signal a move to further increase ABS transactions involving SME collateral to facilitate the needed revival in bank lending.

 
 
CREDIT BUREAUS’ ROLE WHEN PROTECTING CONSUMER PRIVACY
Following a couple of credit bureau fraud incidents, Brian Krebs, security expert, explains the implications these incidents have for the way in which credit bureaus manage and store personal data information. He argued for the need to have a national debate about the role of credit bureaus and what their proper part is when it comes to protecting people's identity and privacy. He also states that credit bureaus could be more transparent when it comes to protecting consumer data.

For issues surrounding privacy law, please look at SFIG’s Regulation AB II letter that addresses privacy concerns.

 
 
CANADIAN FINANCE MINISTER PRIORITIZES CREATION OF NATIONAL SECURITIES REGULATOR
Canadian Finance Minister, Joe Oliver, who took office in March, will focus efforts on encouraging provincial regulators to participate in a national securities regulatory body. Currently Canada’s securities regulatory system is a patchwork of 13 provincial and territorial regulators who are collectively known as the Canadian Securities Administrators (CSA). Citing the fact that Canada is the only developed economy lacking a national securities regulator Oliver notes that the creation of such a system is a top priority. “As an investment banker and a securities regulator I’ve seen the inefficiency that flows from our current system,” Oliver said. He added, “It leads to not only inefficiency but it leads to an impact on enforcement and on the oversight of economic risk.”

The prospective regulatory scheme would be voluntary and cooperative, as the Canadian Supreme Court ruled against the imposition of a mandatory regulatory system similar to the U.S. Securities and Exchange Commission. Ontario and British Columbia took the first steps towards the effort to create a national regulator in September 2013 when they established a common regulator to oversee the two provinces. Oliver’s hope is that additional provinces will join the system and a full participation and operation will occur by 2015.

On April 23rd, SFIG submitted a comment letter to the Canadian Securities Administrators in response to the proposed amendments to Canadians short term debt prospectus exemptions, particularly with respect to proposed Asset Backed Commercial Paper disclosure requirements. For additional information on SFIG’s work on issues of Canadian securitization please contact Mary.Robinson@sfindustry.org.

 
 
HOUSING MARKET STATISTICAL ROUNDUP
The Census Bureau stated in a press release that the quarterly homeownership rate was down to 64.8 percent in the first quarter of 2014. This is the lowest rate in almost 19 years according to National Mortgage News. The homeownership rate peaked at 69.4 percent in June 2004 according to the Census Bureau. The article cited several factors in the decline including rising property prices and increasing mortgage rates. Housing affordability may reverse, however. Home prices in 20 cities rose at a slower pace in the year that ended in February. According to the S&P/Case-Schiller index, property values increased 12.9 percent from February 2013, the smallest 12 month gain since August. Additionally, the pending home sales index rose 3.4 percent, the most since May 2011 and was the first gain in nine months according to the National Association of Realtors.
 
 
UPCOMING EVENTS IN WASHINGTON
HEARING: “EXAMINING HOW TECHNOLOGY CAN PROMOTE CONSUMER FINANCIAL LITERACY”
WEDNESDAY, April 30, 2014
10:00 a.m. (EST)
House Financial Services Subcommittee on Financial Institutions and Consumer Credit
2128 Rayburn House Office Building
A webcast of the hearing will be available on the House Financial Services Committee website.
 
 
HEARING: “LEGISLATIVE PROPOSALS TO ENHANCE CAPITAL FORMATION FOR SMALL AND EMERGING GROWTH COMPANIES, PART II”
THURSDAY, May 1, 2014
9:30 a.m. (EST)
House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises
2128 Rayburn House Office Building
A webcast of the hearing will be available on the House Financial Services Committee website.
 
 
FDIC WEBINAR ON SENIOR MANAGEMENT’S ROLE IN CYBERSECURITY
WEDNESDAY, May 7, 2014
1:00 p.m. – 2:30 p.m. (EST)
Registration for the webinar available here.
 

SFIG COMMITTEES AND TASK FORCES

SFIG has a number of Committees and Task Forces meeting and working on many topics of interest to the securitization industry. Please email us for more information, including how to join.

SFIG is pleased to share this edition of its newsletter with our members, as well as our supporters in the structured finance community. To ensure that you receive future editions of the newsletter, please visit our website or email us to learn more about membership opportunities.

Contact Information

Richard Johns Executive Director

Kristi Leo Investor Relations

Sonny Abbasi Director of MBS Policy

Sairah Burki Director of ABS Policy

Michael Flood Director of Advocacy

Mary Robinson Senior Policy Analyst

Alyssa Acevedo Policy Analyst

Amanda Bateman Policy Analyst

Jennifer Serpas Office Manager

Allison Creswell Executive Administration


1775 Pennsylvania Ave. NW
Suite 625
Washington, DC 20006

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