May 27, 2015 Newsletter
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May 27, 2015
 

SFIG News

SFIG Calendar

Advocacy Outlook

Industry News Highlights

 
SFIG NEWS
SFIG HOLDS CALL WITH SEC ON REGULATION AB II

Today, May 27th, SFIG staff held a call with the U.S. Securities and Exchange Commission’s (“SEC”) Office of Structured Finance to discuss industry views and progress towards consensus around the proposed rules that remain outstanding within the Regulation AB II final rule. The discussion focused on high-level industry perspectives on loan-level disclosure. SFIG will be submitting a comment letter regarding disclosure requirements to the SEC in the coming weeks.

If you are interested in joining our Regulation AB II Comment Letter work stream, please contact Alyssa.Acevedo@sfindustry.org.

 
 
SFIG'S SYMPOSIUM SPRINGS INTO SUMMER

Please note that SFIG has changed the location and date details for our Spring Symposium. The event, followed by a cocktail reception, will now be held on Tuesday, June 23rd from 5:00 p.m. to 8:00 p.m. (ET). Societe Generale will be hosting the symposium at their New York City office. Please click here to register and agenda details will follow.

 
 
REMINDER: SFIG IS HIRING!

SFIG would like to remind our readers that we currently have several open staff positions. We are seeking talent to fill three open positions:

  1. Director of Mortgage Policy: Responsible for the development and execution of a robust mortgage securitization policy program, including SFIG's RMBS 3.0 and GSE reform initiatives.
  2. Manager of ABS Policy: Provides policy formation support, and at times solely manages activities, across a wide range of proposed regulation and legislation impacting all asset types covered by SFIG's committees.
  3. Media Manager: Manages and develops strategy across all areas of SFIG communication, including website, newsletters, and social media.

For additional information, please contact Jobs@sfindustry.org, or visit our jobs page.

 
 
SFIG AND IMN TO PRESENT WOMEN IN SECURITIZATION PANEL AT ABS EAST

In response to the overwhelming interest in and support for SFIG’s Women in Securitization (“WiS”) initiative, WiS will be hosting a panel at ABS East focused on some of the work-place challenges that women in our profession face. SFIG would like to thank IMN for stepping up to the plate and giving this subject matter importance in their agenda, and we expect to announce additional panel details in the future. We encourage all industry participants, men and women alike, to sign up for WiS and contribute to our efforts in supporting the development and retention of women in our industry. 

For more information on WiS please visit our website, or email WIS@sfindustry.org.  

 
 
SFIG CALENDAR
CREDIT CARD ISSUER COMMITTEE CALL
THURSDAY, May 28, 2015
10:00 a.m. – 11:00 a.m. (ET)
 
 
WEEKLY NRSRO DUE DILIGENCE INDUSTRY GUIDE COMMITTEE CALL
THURSDAY, May 28, 2015
3:00 a.m. – 4:00 p.m. (ET)
 
 
BIWEEKLY EQUIPMENT ISSUER COMMITTEE CALL
MONDAY, June 1, 2015
2:00 p.m. – 3:00 p.m. (ET)
 
 
BIWEEKLY REGULATION AB II COMMENT LETTER CALL
WEDNESDAY, June 3, 2015
2:00 p.m. – 3:00 p.m. (ET)
 
 
BIWEEKLY RISK RETENTION INDUSTRY GUIDE CALL
TUESDAY, June 9, 2015
11:00 a.m. – 12:00 p.m. (ET)
 
 
IMN’s GLOBAL ABS 2015 CONFERENCE
TUESDAY, June 16, 2015 – THURSDAY, June 18, 2015
The Barcelona International Convention Centre
Barcelona, Spain
Registration is available here.
 
 
SFIG SPRING SYMPOSIUM
TUESDAY, June 23, 2015
Societe Generale
245 Park Avenue
5th Floor
New York, NY
Registration is available here.
 
 
SFIG BOARD OF DIRECTORS MEETING

WEDNESDAY, June 24, 2015
12:00 p.m. - 5:00 p.m. (ET)
Deloitte & Touche LLP
30 Rockefeller Plaza
New York, NY 10112
Note: Closed Meeting

 
 
IMN’s ABS EAST CONFERENCE
WEDNESDAY, September 16, 2015 – FRIDAY, September 18, 2015
The Fontainebleau
Miami Beach, FL
Registration is 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.

The RMBS 3.0 Task Force released its Second Edition RMBS 3.0 Green Paper in November. Following the successful SFIG/IMN Private Label RMBS Symposium, the task force will continue its efforts to address key issues specific to private label mortgage securities through work streams relating to (1) Representations, Warranties, and Repurchase Enforcement; (2) Due Diligence, Data, and Loan-Level Disclosure; and (3) Role of Transaction Parties and Bondholder Communications. Presently, the task force is working on (1) developing a comprehensive compilation of representations and warranties for release in the spring of 2015 and (2) a grid summarizing roles of transaction parties. We encourage members to participate in any or all of the working groups to contribute towards the mission of RMBS 3.0. For additional information on RMBS 3.0, or to join the task force, please contact Mary.Robinson@sfindustry.org.

The GSE Reform Task Force met to discuss the Carney-Delaney-Himes GSE Reform bill and has updated its briefing book on the legislation to support its advocacy efforts. With the release of the bill, SFIG staff also updated its GSE Reform Legislative Comparison, which analyzes key provisions in the five most recent housing finance reform bills including the Johnson-Crapo bill and the PATH Act. SFIG staff previously summarized members’ recommendations on the former in a briefing book, and plan to produce a similar book on the latter in the upcoming months. Additionally, the task force has been actively engaging the Federal Housing Finance Agency on several fronts, with comments submitted on its single security proposal,guarantee fee pricing and Strategic Plan for 2015-2019. To join SFIG’s GSE Reform Task Force and learn more, please contact Amanda.Bateman@sfindustry.org.

The Mortgage Loan-Level Disclosure Task Force is studying the recent Regulation AB II release of Schedule AL and comparing it to SFIG’s Schedule L submission to the Securities and Exchange Commission in February of 2014. SFIG also continues to have weekly Mortgage Industry Standards Maintenance Organization calls to go through data elements that lenders should deliver in securitizations. We will also be conducting an analysis of the data elements included in SFIG’s Schedule L submission in order to determine any privacy concerns. Please contact Alyssa.Acevedo@sfindustry.org for additional information on SFIG’s work on this topic.

The Volcker Task Force has been working with SFIG’s various asset class and legal counsel committees to identify areas within the Volcker Rule in need of clarification, particularly questions regarding covered funds and the loan securitization exemption. Please contact Amanda.Bateman@sfindustry.org to participate on the task force.

The Risk Retention Industry Guide Work stream is creating best practices and developing consensus positions around several areas within the Credit Risk Retention final rule. Please contact Alyssa.Acevedo@sfindustry.org with any questions.

SFIG’s Chinese Market Committee continues to hold discussions with a focus on SFIG’s partnership with the Chinese Securitization Forum, potential upcoming educational discussions and the sharing of recent market developments in China. If you would like more information on SFIG’s work with respect to Chinese securitization, please contact Alyssa.Acevedo@sfindustry.org

SFIG’s Shadow Banking Task Force has established the following agenda:

  • Leverage the predictive powers of the G20’s shadow banking initiative to determine future SFIG advocacy initiatives;
  • Assess the level of regulation to which our members are already subject;
  • Measure the full impact of those regulations on lending decisions and business models; and
  • Provide input into IOSCO, BCBS and IAIS on the revitalization of securitization markets.

The task force will have its first full meeting in the coming weeks, and members from across asset classes are encouraged to participate. To register your interest in SFIG’s Shadow Banking Initiative, please contact Amanda.Bateman@sfindustry.org.

The Regulation AB II Task Force will focus on the disclosure and offering process requirements within the final rule. Two work streams have been formed to develop a comment letter on the proposed rules that remain outstanding and to produce an industry guide for critical elements of the final rule. SFIG members who are interested in joining this task force or asset specific committees should contact Alyssa.Acevedo@sfindustry.org.

The Regulatory Capital and Liquidity Committee is addressing industry concerns related to the Federal Reserve Board’s Final Rule on the Liquidity Coverage Ratio (“LCR”). This committee will also develop a comment letter when U.S. regulators release their proposed Net Stable Funding Ratio (“NSFR”). To become involved in SFIG’s advocacy on the Final LCR rule or NSFR, please contact Alyssa.Acevedo@sfindustry.org.

The Derivatives in Securitization Task Force recently obtained no-action relief from the CFTC giving swap dealers comfort that the CFTC would not take enforcement action against swap dealers that did not comply with certain CFTC Regulations when taking actions in response to the credit ratings downgrade of a counterparty to a legacy swap. The relief applies to swaps with SPVs that were in existence prior to October 10, 2013. The task force also commented on the CFTC’s proposal on margin requirements for uncleared swaps, as well as the prudential regulators’ proposal regarding margin and capital requirements for covered swap entities. SFIG members who are interested in learning more about this initiative should email Amanda.Bateman@sfindustry.org.

The NRSRO Due Diligence Industry Guide Work stream is continuing to review the due diligence elements of the Final Rules on NRSROs. The working group meets weekly on Thursdays at 3:00 p.m. (ET) until June 11th and members interested in learning more should contact Amanda.Bateman@sfindustry.org.

The Money Market Fund Reform Working Group submitted a comment letter on October 13, 2014 regarding the Securities and Exchange Commission’s July 23, 2014 proposal which includes, among other things, possibly amending rule 2a-7’s issuer diversification provisions to eliminate an exclusion that is currently available for securities subject to a guarantee issued by a non-controlled person. SFIG also submitted a comment letter in September 2013 on Money Market Fund Reform. If you are interested in joining this working group, please contact Alyssa.Acevedo@sfindustry.org.

The High Quality Securitization ("HQS”) Task Force responded to the European Commission’s consultation on an EU framework for simple, transparent and standardized securitization on May 12, 2015. The task force also previously responded to the BCBS-IOSCO consultation on its criteria for identifying simple, transparent and comparable securitizations. SFIG’s comments were built off of those sent to the European Banking Authority on January 14th (available here) regarding its proposed criteria and to the European Central Bank and Bank of England last summer (available here) regarding the development of a sustainable securitization market in Europe. To join the HQS Task Force, please contact Amanda.Bateman@sfindustry.org.

 
 
INDUSTRY NEWS HIGHLIGHTS
BoE SENIOR OFFICIAL COMMENTS ON SECURITIZATION’S BENEFITS FOR SME FUNDING

The Bank of England (“BoE”) and European Central Bank are leading an EU initiative to revitalize securitization markets, but one top official at the BoE warned Friday that these efforts won’t do much to help small and medium enterprises (“SMEs”) access funding for growth. Speaking at a conference on May 22nd, David Rule, Executive Director of Prudential Policy at the BoE, said regulators “should not oversell what this market can do for SMEs,” according to a Reuters article on the topic. The article also quotes Rule as stating that he “suspect[s] it can’t do much but that does not mean it’s not a good thing to be doing.”

Kick starting securitization markets is a top priority for EU regulators and a key element of the European Commission’s (“EC”) plan to develop a capital markets union in Europe. In recent months, proposals on how to accomplish this have been issued by the ECB and BOE, European Banking Authority, Basel Committee on Banking Supervision and International Organization of Securities Commissions, and the EC (see SFIG’s comment letters on these consultations here). While the details in these proposals vary, there is generally consensus that ABS qualifying as “high quality securitization” (“HQS”) could receive preferential regulatory treatment, including reduced capital charges. According to Reuters, “Rule would be keen to see higher capital charges on a rival asset, covered bonds, but he was not sure how realistic a prospect this was.” Instead, he told audiences there was “pretty good consensus” on measures to be taken regarding the treatment of HQS.

 
 
ECB BELIEVES ABS PURCHASE PROGRAM IS “PROCEEDING SMOOTHLY”

The European Central Bank (“ECB”) Governing Council held a meeting last month to review their monetary policy and financial market developments. According to meeting minutes that were released last Thursday, May 21st, the ECB’s Governing Council stressed that “the implementation of asset purchases was proceeding smoothly, with volumes in line with the announced figure of €60 billion [$65.4 billion] of securities per month.”

“There was hence no need to consider any change in the monetary policy stance at present” or to reconsider any of the parameters of the ABS Purchase Program, according to the minutes. “Members generally agreed that a steady hand and the firm implementation of the measures decided in January 2015 would best serve to support the economic recovery and a return of inflation towards 2%.”

 
 
WAVE OF CMBS MATURITIES IS SET TO PUSH VOLUME HIGHER

Increases in CMBS issuance, has some in the industry concerned over whether investor demand will be able to absorb the growing supply according to an article in National Real Estate Investor. U.S. CMBS issuance is expected to reach $124 billion this year, while $300 billion in CMBS loans are scheduled to mature in 2015, 2016 and 2017. “Even if the maturity wave hits in the way some people think it will, and CMBS volume goes up substantially, I still think there is enough capital out there to support issuance,” said Steven Schwartz of Torchlight Investors. In addition, the B-piece portion of CMBS issuance has grown since the credit crisis and now represents about 8 percent of current transactions. “There does seem to be plenty of investor demand for B-piece CMBS, largely because it offers relatively high yields,” said Huxley Somerville of Fitch Ratings.

 
 
SENATE BANKING COMMITTEE APPROVES SHELBY REGULATORY REFORM BILL

Last Thursday, May 21st, the Senate Committee on Banking, Housing, & Urban Affairs (“Committee”) approved Chairman Richard Shelby’s (R-AL) bill entitled The Financial Regulatory Improvement Act of 2015 on party lines, 12-10.

Senator Sherrod Brown (D-OH), Ranking Member of Committee had proposed an alternative to Shelby’s regulatory reform bill that was defeated down party lines, 10-12.

Both Committee Republicans and Democrats indicated that they plan to continue working on a bipartisan compromise in coming months, with the hope of getting a bill signed into law, according to a recent American Banker article.

 
 
FHFA REQUESTS INPUT ON HPI MEASURE FOR CONFORMING LOAN LIMITS FOR GSEs

On Thursday, May 21st, the Federal Housing Finance Agency (“FHFA”) sent to the Federal Register a Notice and Request for Input on a method for assessing the national average single-family home price for use in setting the conforming loan limits of Fannie Mae and Freddie Mac (“GSEs”). As noted in FHFA’s press release, the Housing and Economic Recovery Act of 2008 requires that FHFA "establish and maintain" a House Price Index ("HPI") for adjusting the conforming loan limits of the Enterprises. FHFA is seeking input on whether its “expanded data” HPI should be used as the basis for adjusting the GSEs’ conforming loan limits.

FHFA is accepting comments until 60 days after the Notice’s publication in the Federal Register (typically, this occurs one to two weeks after submission). FHFA will ultimately issue an additional notice of its determinations after reviewing input received.

 
 
FITCH REPORT: CHINA ASSET SECURITIZATION POTENTIALLY POSITIVE FOR BANKS

The growth and development of China's ABS market is expected to provide greater operational flexibility for banks in terms of liquidity and capital management, according to a report released by Fitch Ratings on Monday, May 25th:

Latest figures from the People's Bank of China show outstanding ABS in China had reached CNY300bn (USD49bn) as of end-April 2015, and Fitch believes there is potential for significant further expansion this year. Chinese financial institution ABS issuance totaled more than CNY350bn (USD57bn) through April 2015 from August 2013.. Fitch expects non-bank financial institutions (NBFI) to play a bigger role in the asset securitisation market, while in the medium term they are not likely to overturn the dominant position held by the banks.. If disclosure over ABS and for the financial sector as a whole improves, market participants may gain a better understanding and greater transparency into the underlying assets and their asset quality.

 
 
BASEL COMMITTEE’S TRADING RISK MODELS FACE OPPOSITION

Earlier this month, several financial trade associations submitted a letter to the Basel Committee on Banking Supervision warning that the proposals within their Fundamental Review of the Trading Book will make financial markets more volatile and unstable, according to a recent Financial Times article. These rules aim to change how banks assess risk in their trading operations and are set to be adopted by the end of this year.

The letter argued that recent bouts of market volatility, such as last October’s flash crash in U.S. Treasury securities and the spike in the value of the Swiss franc in January, reflected a reduction in liquidity due to restrictions on banks’ trading activities. “Investor participation in certain markets is likely to fall further thereby negatively impacting on their depth and efficiency,” stated the letter. “Higher trading book capital requirements in these markets will further increase issuance costs and will negatively impact secondary market liquidity that is already subdued due to the impact of other regulatory initiatives.”

The trade associations are advocating for the Basel Committee to carry out another quantitative impact study this year examine the likely impact of the changes in more detail.

 
 
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

Sairah Burki Director of ABS Policy

Michael Flood Director of Advocacy

Mary Robinson Policy Manager

Alyssa Acevedo Policy Analyst

Amanda Bateman Policy Analyst

Daniel Tees Policy Analyst

Jennifer Serpas Office Manager

Allison Creswell Executive Administration

1775 Pennsylvania Ave. NW
Suite 625
Washington, DC 20006

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