March 12, 2014 Newsletter
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March 12, 2014
 
Happy Birthday to Us

2013 in Review

2014 in Review

SFIG News

SFIG Calendar

Advocacy Outlook

Recent Developments

Upcoming Events in Washington

 
HAPPY BIRTHDAY TO US
Dear Friends and Colleagues,

This last week marked a notable milestone in SFIG’s history – on Saturday March 8th, we had our one-year anniversary. While we, both members and staff, certainly have our hands full with the likes of Volcker, Risk Retention, Regulation AB II, LCR, NSFR, Basel Securitization Framework, GSE reform and RMBS 3.0, it would be inappropriate and perhaps unfair not to take a breath at this point and congratulate ourselves on the triumphs we have enjoyed to date.

Back in March 2012, SFIG had no staff – what we did have, was an incredible group of individuals who were and remain absolutely dedicated to the cause of furthering the interests of the “securitization industry”, recognizing it’s integral role in the funding of the real economy and working together as an industry towards the goals of consensus driven advocacy and education via transparency, inclusion, and strong governance. The founding members of SFIG, led by an interim board of 18, realized incredible early accomplishments, and as our membership grew and our board expanded we continued to exceed even the most audacious of goals.

As your Executive Director, I look at a list including thirteen comment letters, too many regulatory and legislative meetings to count, testimony in front of both Senate and the House, symposiums, roundtables and a hugely successful conference with 5,700 registered participants, and I simply marvel at the successes that this membership has been able to obtain.

Thank you all for your efforts over this last year. There is not a day goes by that I, and the rest of the SFIG team, are not filled with pride at the opportunity to represent and serve such a dedicated and supportive group of individuals. Please take a moment to look at the timeline of achievements and applaud yourselves for a job well done. I look forward to serving you over the next year and many years to come.

Thank you and HAPPY BIRTHDAY!

cake
Richard
 
 
2013 IN REVIEW
March 8th SFIG created to provide a representative and transparent, member driven platform for industry advocacy. With an interim board of 18 industry leaders backed by over 100 founding members, SFIG was created with the intent of improving and strengthening the broader structured finance and securitization market to its members and the industry. We strive to promote an inclusive environment for our members, and are guided by the principles of transparency and good governance.

Interim Board Members:

1st Financial Bank Amherst Securities Andrew Davidson & Co. Bank of America
       
Cadwalader, Wickersham & Taft LLP Citi Credit Agricole Discover Financial Services
       
Deloitte & Touche LLP Ernst & Young LLP Fitch Ratings Ford Credit
       
GM Financial Morgan Stanley PNC Capital Markets Société Générale
       
Wells Fargo Wilmington Trust    
   
 
April 10th SFIG announced its first annual industry conference, ABS Vegas, for
January 22-24, 2014, in partnership with IMN.
 
 
April 30th SFIG passed the 100 Member Mark.
 
May 8th Richard Johns appointed as SFIG Executive Director.
Richard Johns, speaking at SFIG Spring Symposium
 
Through his career, Mr. Johns has led advocacy programs related to major legislative initiatives and has worked closely with major regulatory bodies.
 
 
May 14th
reggie
SFIG Chairman,
Reggie Imamura (PNC)
SFIG Chairman, Reggie Imamura, participated in the Securities and Exchange Commission Credit Ratings Roundtable. At the invitation of the Securities and Exchange Commission, Mr. Imamura participated in the first, and most comprehensive, panel focused on the credit ratings assignment system.
 
 
May 22nd SFIG released its first newsletter. The organization continues to provide weekly updates on SFIG news and industry related events to our members.
 
 
June 3rd SFIG submitted its first comment letter to the Securities and Exchange Commission in connection with the Credit Ratings Roundtable.
 
 
June 11th Kristi Leo and Armando Falcon joined SFIG as Senior Advisors. Ms. Leo serves as Senior Advisor and manages SFIG’s investor relations. Mr. Falcon works on regulatory efforts for SFIG, particularly with respect to the mortgage sector.

 

"Let me congratulate… SFIG for building this organization in such a short time into one whose voice and position command industry attention by participants and public decision makers alike."

-Michael Stegman,
Counselor to the Treasury for Housing Finance Policy

 
   
June 26th SFIG held Inaugural Summer Symposium. The first of SFIG quarterly symposiums, these events target timely areas of industry concern.

summer symposium
SFIG Summer Symposium, June 26, 2013
 
 
September 12th Executive Director, Richard Johns, testified on behalf of SFIG before the Senate Committee on Banking, Housing, and Urban Affairs. Johns emphasized that a central focus of any reform effort must be the preservation of the “To Be Announced” market and proposed a phased-in approach to satisfy that goal.

 
September 24th SFIG announced the election of a permanent Board of Directors and elected chairpersons for its approximately 30 committees and task force working groups.
board comp
The Board of Directors, led by Chairman Reggie Imamura, consists of representatives from 40 member organizations. Driven by a commitment to represent all member constituencies’ viewpoints, the Board of Directors has a balanced allocation from key member groups including eight directors each from investors, banks and issuers. Other groups represented include accounting firms, rating agencies, law firms, servicers, research firms, trustees and one at-large representative.

  Sairah Burki and Sonny Abbasi joined SFIG as Policy Directors. Ms. Burki serves as Director of ABS Policy and Mr. Abbasi is the Director of MBS Policy.

 

"Congratulations to the Board...Their work, along with the membership, really illustrates what an extraordinary organization SFIG is and the benefit that it provides to everyone"

-Vernon Wright,
Co-founder and Inaugural Chairman of the ASF

 
   
October 6th-8th SFIG participated in ABS East. In support of our members, SFIG staff provided information on the organization and engaged in industry outreach. Executive Director, Richard Johns also participated on a regulatory panel, helping to establish SFIG’s position as a leading voice for the industry.

 
October
16th
SFIG hosted first roundtable focusing on the various approaches to representations, warranties, and enforcement mechanisms that have arisen in the post-crisis RMBS world. The roundtable was open to SFIG members and non-member investors.

SFIG signed lease on Washington, DC office.
SFIG's Washington Headquarters, 1775 Pennsylvania Ave.
SFIG's headquarters sits only two blocks from the White House and very near the regulators and the Treasury Department, while maintaining easy access to Capitol Hill. Maintaining a real, physical presence in DC ensures that SFIG can engage on the industry's behalf on a continual basis with key policy makers.

 
October
24th
SFIG passed the 200 Member Mark.SFIG has since grown to include 239 industry members.
 
 
December 20th Mike Flood announced as SFIG’s Director of Advocacy. Mr. Flood joined SFIG to lead our interactions with regulators and legislators in Washington, DC and beyond.

 
2014 IN REVIEW
January
13th
SFIG fully staffed. In addition to the SFIG Directors, SFIG welcomed aboard Mary Robinson, Senior Policy Analyst; Jennifer Serpas, Office Manager; Alyssa Acevedo, Policy Analyst; Amanda Bateman, Policy Analyst; and Allison Creswell, Executive Administration.

sfig staff
 SFIG Staff
Top Row (L-R) Sonny Abbasi, Amanda Bateman, Mike Flood, Mary Robinson, Richard Johns
Bottom Row (L-R): Sairah Burki, Allison Creswell, Alyssa Acevedo, Jennifer Serpas
 
 

"Congratulations to all of the members for your remarkable and unprecedented success in just one year. Your commitment to doing the right thing, adhering to principles of good governance and serving the good of the broader industry has made a tremendous impact. I look forward to our achievements in the coming year."

-Reggie Imamura,
SFIG Chairman of the Board

 
   
January 21-24th SFIG hosted ABS Vegas.
stegman
Keynote Speaker, Michael Stegman, at ABS
Vegas 2014
In partnership with IMN, SFIG welcomed almost 5,000 industry members to the Cosmopolitan in Las Vegas for its first annual industry conference. The conference hosted several productive breakout sessions and keynote addresses from speakers Michael Stegman, Counselor to the Treasury for Housing Finance Policy, and Chris Cox, Former Securities and Exchange Commission Chair. SFIG looks forward to hosting our membership and other industry members at the Aria for ABS Vegas, February 8-11, 2015.

 
February 26th SFIG testified before House Subcommittee on Capital Markets and Government Sponsored Entities. Neil Weidner, partner at Cadwalader, Wickersham & Taft, testified on behalf of SFIG and expressed industry concerns regarding the consequences of the Volcker Rule and Risk Retention reforms.

 
March & beyond SFIG looks forward to continuing to represent our members and serving as a powerful advocate on behalf of the structured finance industry.

 

"I'd like to congratulate the Structured Finance Industry Group on its first anniversary! SFIG has rapidly built a respected voice for the structured finance industry amongst policymakers here in Washington, DC. Keep up the good work."

-Congressman Scott Garrett (R-NJ)
Chairman of the Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises

 
SFIG NEWS
SFIG SUBMITS REQUEST TO SECURITIES AND EXCHANGE COMMISSION REQUESTING EXTENTION OF COMMENT FOR REGULATION AB II
SFIG will respond to the proposal on asset-level disclosures issued by the Securities and Exchange Commission (SEC) on February 25, 2014. (For additional details on this approach please see the staff memorandum included in the public comment file.) Given that comments are due on March 28, 2014, SFIG is moving forward as expeditiously as possible. This week, SFIG submitted a request to the SEC to extend the re-proposal comment deadline. The Regulation AB II Task Force held its first call on Tuesday, March 11th. The goal of these calls will be to identify common positions; note differences in opinion; and build consensus where possible across membership. SFIG has engaged with Morrison & Foerster as Privacy Counsel. The firm will be providing an educational presentation to walk through the privacy implications of Regulation AB II and will also remain available during the comment process to provide advice concerning any privacy issues. Please see the SFIG Calendar for additional information on the call and contact Alyssa.Acevedo@sfindustry.org with any questions.

 
SFIG ISSUES STATEMENT IN SUPPORT OF H.R. 4167, THE RESTORING PROVEN FINANCING FOR AMERICAN EMPLOYERS ACT
Today, SFIG released the following statement in response to Congressman Andy Barr’s (R-KY) introduction of H.R. 4167, The Restoring Proven Financing for American Employers Act:

“SFIG applauds Congressman Barr’s bill. It is a natural extension of both the bi-partisan efforts by Congress and the prioritization by the regulators to develop a solution to this unintended consequence of the Volcker Rule,” stated Richard Johns, SFIG’s Executive Director. “Congressman Barr’s bill helps address the ownership issue, and will allow companies across the United States to access affordable financing from local banks that invest in CLOs. We look forward to continuing our work with both Congress and the regulators to find a solution that creates a well regulated and liquid CLO marketplace.”

Background on the Volcker Rule and CLOs
Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly known as the Volcker Rule, issued on December 10, 2013, captures CLOs that contain any securities as “covered funds”. Most CLOs issued prior to the final rule either contain a small number of securities or have the ability to purchase securities, and are thus considered “covered funds”. One of the primary consequences of a CLO being treated as a covered fund under the Volcker Rule is that banks are not permitted to acquire or hold an “ownership interest” in that CLO.

CLOs provide the holders of debt securities - many of which are community and regional banks - with a number of creditor rights designed to protect their interests. The most notable of these rights is the ability to participate in the removal and replacement of the CLO manager “for cause,” such as breach of contract or fraud or criminal activities.

Under the Volcker Rule, however, such a right might be considered an “ownership interest,” which converts CLO debt securities into equity securities. Given that banks are not allowed to have ownership interests in “covered funds” under the Volcker Rule, they would have to divest roughly $80 billion in CLO holdings prior to July, 2015.

Businesses that operate in every state depend upon the funding provided by CLOs. These businesses include a broad range of industries, such as hospitality, healthcare, communications, manufacturing and utilities. Without a change to the Volcker Rule, such financing would be put at risk.

 
SFIG CALENDAR
NSFR WORKING GROUP CALL (WEEKLY)
THURSDAY, March 13, 2014
11:00 a.m. (EST)

PROJECT RMBS 3.0 ROLE OF TRUSTEE/BONDHOLDER COMMUNICATION WORKING GROUP CALL (BI-WEEKLY)
THURSDAY, March 13, 2014
3:00 p.m. (EST)

PROJECT RMBS 3.0 REPS, WARRANTIES, REPURCHASE ENFORECEMENT WORKING GROUP CALL (WEEKLY)
THURSDAY, March 13, 2014
4:00 p.m. (EST)

PRIVACY ISSUES OVERVIEW FOR REGULATION AB II CALL
FRIDAY, March 14, 2014
3:00 p.m. (EST)

BCBS WEEKLY JOINT TRADES CALL (WEEKLY)
MONDAY, March 17, 2014
12:00 p.m. (EST)

REGULATION AB II TASK FORCE CALL (WEEKLY)
TUESDAY, March 18, 2014
3:00 p.m. (EST)

BCBS WEEKLY JOINT TRADES CALL (WEEKLY)
WEDNESDAY, March 19, 2014
12:00 p.m. (EST)

PROJECT RMBS 3.0 DUE DILIGENCE, DATA AND DISCLOSURE WORKING GROUP CALL (WEEKLY)
WEDNESDAY, March 19, 2014
4:00 p.m. (EST)

FDIC EDUCATION DAY
MONDAY, April 7, 2014
10:00 a.m. – 4:00 p.m. (EST)
Arlington, VA
Note: Closed Meeting

CANADIAN SYMPOSIUM
TUESDAY, April 15, 2014
4:00 p.m. – 6:00 p.m.
Agenda: Details to follow
McCarthy Tétrault LLP
66 Wellington Street West #5300
Toronto, ON M5K 1E6
Note: Closed to Press

SFIG SPRING SYMPOSIUM
WEDNESDAY, May 14, 2014
Time and Agenda to be announced
Société Générale
245 Park Avenue, New York, NY

2014 GLOBAL ABS CONFERENCE
TUESDAY, June 10, 2014 - THURSDAY, June 12, 2014
Barcelona International Convention Centre
Barcelona, Spain

 
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.

Regulation AB II SFIG is working to respond to the proposal on asset-level disclosures issued by the Securities and Exchange Commission (SEC) on February 25, 2014. (For additional details on this approach please see the staff memorandum included in the public comment file.) Given that comments are due on March 28, 2014, SFIG is moving forward as expeditiously as possible. However, SFIG did submit this week a request to the SEC to extend the re-proposal comment deadline. Additionally, SFIG has engaged Morrison & Foerster as Privacy Counsel. Morrison & Foerster will provide an educational presentation to walk through the privacy implications of Regulation AB II and will also remain available during the comment process to provide advice concerning any privacy issues.

Issuer and investor committees met over the past week to identify key concerns and overarching issues. The Regulation AB II Task Force held its first call on Tuesday, March 11th at 3:00 p.m. (EST) and will continue to meet over the course of the comment period, building consensus positions and identifying differences in opinion. Please see the SFIG Calendar for additional information and contact Alyssa.Acevedo@sfindustry.org with any questions.

Project RMBS 3.0 Working Groups have begun meeting via conference calls. The Working Groups will develop a collection of white papers to provide effective recommendations on issues related to the residential mortgage market. These documents will assist in advocating for the restoration of private capital into the market and represent SFIG member interests on this issue. Information on the Working Group Calls can be found in the SFIG Calendar. Please contact Mary.Robinson@sfindustry.org to join a Working Group or with any additional questions on Project RMBS 3.0.

SFIG’s GSE Reform Subcommittee has formulated policy recommendations that will form the basis for SFIG’s position as Congress moves forward with Housing Finance Reform. SFIG is currently drafting an executive summary that will outline our emerging views and specifically address the following components of GSE reform: the securitization infrastructure, guarantors, co-operatives, TBA market liquidity, credit risk transfer transactions and the transition to a reformed framework. If you would like to learn more about SFIG’s activities with respect to GSE Reform, please contact Amanda.Bateman@sfindustry.org.

SFIG’s 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.

SFIG continues to work with the Global Financial Markets Association, Institute for International Finance, and Commercial Real Estate Finance Council on a comment letter to the Basel Committee on Bank Supervision (BCBS) in response to its Second Consultative Document, Revisions to the Securitization Framework. Weekly conference calls are underway to facilitate this collaborative effort and identify relevant data that will demonstrate the potential impact of BCBS’s recommendations for the industry. SFIG’s work on this project is being undertaken through the Regulatory Capital and Liquidity Committee. Please contact Amanda.Bateman@sfindustry.org for additional information.

SFIG is continuing to engage with regulators and legislators on our concerns regarding the Liquidity Coverage Ratio proposal. Please contact Alyssa.Acevedo@sfindustry.org with your questions or comments.

The Volcker Task Force is working with the asset class committees to determine key issues and the need for interpretative guidance regarding the Volcker Rule. The Task Force is also collaborating with the CLO Committee to develop recommendations regarding a legislative fix for CLOs recently proposed by Congressman Andy Barr (R-KY) and meeting with the regulatory agencies to convey key concerns. Please contact Amanda.Bateman@sfindustry.org for additional information on the Volcker Task Force.

The Net Stable Funding Ratio (NSFR) Working Group will hold regular calls beginning Thursday, March 13th, to develop a comment letter in response to the Basel Net Stable Funding Ratio proposal. The proposed NSFR seeks to ensure banks have a fortified balance sheet (in particular, one that is not overly reliant on short-term funding). The Working Group will develop a comment letter to reflect the concerns and positions of SFIG members regarding the proposed revisions to the NSFR. Comments are due April 11, 2014. Please see the SFIG Calendar for additional information the NSFR Working group call, and email Mary.Robinson@sfindustry.org with any questions on the NSFR proposal or Working Group.

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 simplified approach. Please email email Alyssa.Acevedo@sfindustry.org with any questions.

SFIG continues to build membership for its Chinese Market Committee among its members 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.

 
RECENT DEVELOPMENTS
CLO “FIX” SCHEDULED FOR MARKUP ON THURSDAY
On Thursday, March 13, 2014, the House Committee on Financial Services will markup H.R. 4167, the “Restoring Proven Financing for American Employers Act”. The bill was offered by Congressman Barr (R-KY) and provides a fix for certain collateralized loan obligations (CLOs) that would otherwise be subject to the Volcker Rule when it is fully implemented on July 21, 2015 (the “Conformance End Date”). Those CLOs would have to be issued before January 31, 2014 to qualify for the grandfathering provision. H.R. 4167 also clarifies the meaning of “ownership interest” with respect to removal of an investment manager or investment advisor “for cause”.

The legislation comes on the heels of a hearing held by the Capital Markets and Government Sponsored Enterprises Subcommittee entitled “The Dodd-Frank Act’s Impact on Asset-Backed Securities.” Neil Weidner of Cadwalader, Wickersham and Taft LLP testified on behalf of SFIG and addressed the actual and potential impact of the Volcker Rule on the CLO market. That hearing was the third in a series held by the committee to examine the issue. Furthermore, in February, 17 Democratic members of Congress sent a letter to the regulatory agencies responsible for implementing the rule requesting a fix to the ownership interest issue. SFIG will continue to engage with lawmakers and regulators to find a solution that will ensure American companies have access to affordable credit. For additional information on SFIG’s advocacy efforts with respect to the Volcker Rule, please contact Michael.Flood@sfindustry.org or Sairah.Burki@sfindustry.org. If you are an SFIG member that is interested in joining the Volcker Task Force, please contact Amanda.Bateman@sfindustry.org.

 
SENATORS JOHNSON AND CRAPO REACH AGREEMENT ON HOUSING FINANCE REFORM
Chairman Tim Johnson (D-SD) and Ranking Member Mike Crapo (R-ID) of the Senate Committee on Banking, Housing and Urban Affairs (Committee) announced on March 11, 2014 that they have reached an agreement on a housing finance reform proposal and will release the draft legislation in a matter of days. In a statement posted on the Committee website, Chairman Johnson commended Senators Corker (R-TN) and Warner (D-VA) for providing “a strong framework to build on.” The legislative proposal, according to Committee staff, will include the following: wind down and ultimately eliminate Fannie Mae and Freddie Mac; promote a smooth transition period to the new system by providing specific benchmarks and timelines to guide the Federal Mortgage Insurance Corporation (FMIC) and market participants; mandate 10 percent private capital up front and create a mortgage insurance fund to protect taxpayers against future bailouts; create a member-owned securitization platform that will issue a single, standardized security guaranteed by the FMIC; establish a cooperative entity with a cash window to ensure small lenders have access to the secondary mortgage market; retain the 30-year, fixed-rate mortgage; and maintain broad liquidity in the TBA market.

 
LENDERS USE BUDGET DATA TO LOBBY FHA FOR LOWER PREMIUMS
The Community Home Lenders Association is pointing to President Obama’s recently released budget as proof that the Federal Housing Administration (FHA) can lower its insurance premiums. The budget, released March 4, 2014, indicated that FHA would earn a 7.25 percent profit on each single-family loan it insures in fiscal year 2014, and in fiscal year 2014 the profitability is projected to hit 9.00 percent. Scott Olson of the Community Home Lenders Association indicated in comments to the National Mortgage News that one could reduce the fee to 75 basis points and still make a 7.25 percent profit. Many home lenders and realtors view higher loan fees charged by FHA (and Fannie Mae and Freddie Mac) as potentially hindering the recovery of the fragile real estate market.

 
HOUSE SUBCOMMITTEE EXAMINES DUAL ROLE OF THE FEDERAL RESERVE
This morning, the House Financial Services Monetary Policy and Trade Subcommittee (Subcommittee) held a hearing to examine the Federal Reserve’s (Fed) role in credit allocation. In 2008 amid the financial crisis, the Fed reduced the federal funds rate to zero in an effort to stimulate the economy. As the economy remained stagnant, the Fed constructed a program to purchase monthly both long-term government securities and mortgage-backed securities, known as quantitative easing. The Subcommittee is using this hearing to continue its investigation into the Fed’s dual mandate of price stability and maximizing employment. “The Fed’s recent quantitative easing and other unconventional policies give cause to re-examine the independence of our central bank system,” states the Subcommittee memo for the hearing.

“This hearing will explore these issues and consider whether a revision of the 1951 Accord and a reexamination of the Federal Reserve Act may be necessary to address the Federal Reserve’s participation in credit allocation policy.”

Please see the hearing memo for more information.

 
BASEL III MAY FORCE BANKS OUT OF MORTGAGE SERVICING
Basel III rules finalized last summer placed significant restrictions on banks’ ability to hold mortgage servicing rights, particularly for smaller institutions. A provision in the Basel III release would limit mortgage servicing assets to 10 percent of a bank’s Tier 1 common equity, with additional holdings deducted from the Tier 1 Capital account. Assets under the 10 percent cap would also be eventually risk weighted at 250 percent. Accordingly, this could make it expensive for banks to hold mortgage servicing rights on their balance sheet. This regulatory regime may drive further transfers of servicing to non-bank servicers. However, other regulators and legislators have already expressed concerns about the level of mortgage servicing being transferred to non-bank entities. Maxine Waters (D-CA), ranking member of the House Financial Services Committee, sent a letter to banking regulators asking for closer scrutiny of such servicing transfers. Similarly, New York State Department of Financial Services Superintendent Benjamin Lawsky recently questioned servicing transfers from banking institutions to non-bank servicers.
 
ECB BOARD MEMBER MERSCH CALLS FOR SINGLE SOLUTION TO REVIVE SECURITIZATION MARKET
European Central Bank (ECB) Executive Board member Yves Mersch signaled that policy makers are relying on other institutions to rekindle the market for asset-backed securities in a bid to bolster lending to small companies. While the ECB has contributed to the revival of the securitization market by adjusting its collateral rules and increasing transparency, a single European solution to increase the use of ABS to finance the economy may also need efforts by the European Commission and national development banks, Mersch said in a speech in Munich today.

ECB President Mario Draghi has identified Europe’s sluggish ABS market as one reason for lethargic bank lending and raised expectations of a purchase program earlier this year. While he told reporters yesterday that policy makers haven’t shelved plans for such a measure, he said regulatory and legislative changes are needed to bolster the use of ABS across the region. “As necessary and welcome national measures are, for a single market we need single solutions,” Mersch said. “After all, financing conditions of a company, also of a small one, in a single market should depend on its creditworthiness and not on its location within that single market.”

 
SENATE SUBCOMMITEE REVIEWS CAPITAL STANDARDS FOR SIFI DESIGNATED INSURANCE COMPANIES
Yesterday, the Senate Banking Subcommittee on Financial Institutions and Consumer Credit held a hearing to understand how the Federal Reserve (Fed) will craft regulatory capital rules for insurance companies. Under the Collins amendment to Dodd-Frank, the Fed was given the authority to regulate nonbank systemically important financial institutions (SIFIs) that are designated as such by the Financial Stability Oversight Council. Furthermore, the language sets a capital minimum for each designated SIFI. This includes both insurance companies (American International Group and Prudential) as well as all insurance companies which are organized as thrift holding companies (Nationwide, Mutual of Omaha, Hartford).

However, the Federal Reserve has yet to set standards for SIFI’s. Senator Susan Collins (R-ME), the sponsor of the amendment giving the Fed the power to regulate SIFIs, testified at the hearing. She believes that regulations should be tailored for insurers. However, last July, former Fed Chairman Ben Bernanke, in response to a question from Congressman Dennis Ross (R-FL) stated, “we are going to do our best to tailor our consolidated supervision to insurance companies but I agree with you that the Collins Amendment does put some tough restrictions that we are going to have to follow.” He then indicated that a legislative fix may be necessary in order to properly tailor the regulations.

In response, Senators Sherrod Brown (D-OH) and Mike Johanns (R-NE) have introduced S. 1369, along with 23 cosponsors, that would require the Fed to tailor capital standards for insurance companies. While the bill is unlikely to become law at this point, as it would re-open Dodd-Frank; it will likely be used as a messaging piece during the hearing to help enable the Fed to create flexible capital rules for insurance companies.

 
REFORMS TO OTC DERIVATIVES POSES CHALLENGES
A lack of standardization and increase in market data costs have been the results of efforts to develop a more transparent Over the Counter (OTC) derivatives market. Regulators currently lack the manpower and expertise to fully comprehend all of the new data, making the value of the whole reform agenda uncertain. Specifically, there is a concern regarding the amount of Legal Entity Identifiers (LEIs) needed (estimated to be around one million) yet only 200,000 have been issued thus far in order to fully track trades in the new European Market. Others have highlighted that LEIs are not necessarily the principal key for every organization. An LEI is a unique ID connected to a single corporate entity. A variety of regulatory initiatives are driving the formation of a universal LEI standard for financial markets because no standard entity ID convention currently exists. The absence of a standard identification system for financial counterparties makes the development of a consistent and incorporated view difficult for firms. Participants within the market argue that it will take years to resolve all of the issues regarding the OTC derivatives reform agenda.
 
STRESS TEST GUIDANCE FOR MEDIUM-SIZE FIRMS RELEASED
Supervisory expectations for stress tests have been issued by several federal bank regulator agencies. The final guidance issued is specific to financial companies with total consolidated assets between $10 and $50 billion. These companies are required to conduct company-ran stress tests each year, the first of which must be performed by March 31, 2014. The final guidance provides examples of best practices as well as allows for flexibility to accommodate for varying sizes, market footprints, complexity, etc. for the medium-size firms. The guidance also confirmed that these particular firms are not subject to $50+ billion asset holding company rules, such as the Federal Reserve’s capital plan rule or annual Comprehensive Capital Analysis.
 
UPCOMING EVENTS IN WASHINGTON
RESCHEDULED COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS NOMINATION HEARING
THURSDAY, March 13, 2014
10:00 a.m. – 12:00 p.m. (EST)
538 Dirksen Senate Office Building – Washington, DC
This is an open session to conduct a hearing on the following nominations: Dr. Stanley Fischer, of New York, to be a Member and Vice Chairman of the Board of Governors of the Federal Reserve System; The Honorable Jerome H. Powell, of Maryland, to be a Member of the Board of Governors of the Federal Reserve System; The Honorable Lael Brainard, of the District of Columbia, to be a Member of the Board of Governors of the Federal Reserve System; Mr. Gustavo Velasquez Aguilar, of the District of Columbia, to be an Assistant Secretary of the U.S. Department of Housing and Urban Development; and Mr. J. Mark McWatters, of Texas, to be a Member of the National Credit Union Administration Board.
 
SUNSHINE ACT NOTICE
THURSDAY, March 13, 2014
2:00 p.m. (EST)
SEC Headquarters – Washington, DC
This is a closed meeting with subject matters that include: institution and settlement of injunctive actions; institution and settlement of administrative proceedings; an adjudicatory matter; and other matters relating to enforcement proceedings.
 
IMPLICATIONS OF GSE REFORM FOR THE FEDERAL BUDGET & NATIONAL DEBT
WEDNESDAY, March 19, 2014
9:00 a.m. – 10:30 a.m. (EST)
Bipartisan Policy Center –Washington, DC
Panelists will discuss how the Congressional Budget Office and Office of Management and Budget currently account for the GSEs impact on the federal budget, and the potential budget implications of provisions in current GSE reform legislation, including the wind-down and elimination of Fannie Mae and Freddie Mac.

Registration for the event is open to the public.

 
CFTC PUBLIC ROUNDTABLE DISCUSSION
THURSDAY, April 3, 2014
CFTC Headquarters – Washington, DC
This roundtable will discuss issues concerning end-users and Dodd-Frank. Panels include: Obligations of end-users concerning recordkeeping for commodity interest and related cash or forward transactions; appropriate regulatory treatment of forward contracts with volumetric optionality; and the appropriate regulatory treatment for purposes of the special entity de minimis threshold for swap dealing to government-owned electric utilities.

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
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Structured Finance Industry Group
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