SFIG Issues Statement On Final Liquidity Coverage Ratio Rules
WASHINGTON, Sept. 8, 2014 /PRNewswire/ -- The Structured Finance Industry Group, Inc. ("SFIG"), a member-based trade industry group focused on improving and strengthening the broader structured finance and securitization market, released the following statement today in response to the final liquidity coverage ratio rules approved by the Federal Reserve Board ("FRB"), Federal Deposit Insurance Corporation ("FDIC") and the Office of the Comptroller of the Currency ("OCC"):
"SFIG applauds the FRB, FDIC and OCC for implementing a 'look through' approach for unfunded commitments provided by U.S. banks to finance American companies. This approach to regulating direct bank securitized lending will help a critical source of funding for the real economy to remain open for business," stated Richard Johns, SFIG Executive Director.
"However, we are disappointed with the final decision to treat other instruments that affect lending to the U.S. economy, including asset-backed securities ("ABS") and mortgage-backed securities ("MBS"), as illiquid under the definition of high-quality liquid assets ("HQLA"). We strongly believe that:
- Denying liquidity credit for certain ABS classes, such as autos and credit cards, is inconsistent with their credit and liquidity performance during the financial crisis;
- Denying any HQLA benefit for private label MBS runs contrary to the Administration's goal of bringing back private capital to the U.S. housing finance system;
- Designating agency securities as level 2A assets does not reflect actual market liquidity, considering they are the third most liquid market in the world behind U.S. Treasuries and Japanese bonds.
"We are also concerned that the potential for different treatment of ABS and MBS under final U.S. rules versus European Union ("EU") rules may create a relative contraction in the supply of credit to the U.S. economy (e.g. autos, credit cards, housing and small businesses). In fact, EU regulators recently postponed implementation of final LCR rules, in recognition that more needs to be done to improve the securitization market. We strongly encourage the FRB, FDIC and OCC to consider the advantages to the European regulatory approach for ABS and MBS, and to ensure funding for the real economy is not unduly impaired," stated Johns.
About Structured Finance Industry Group, Inc.
Structured Finance Industry Group, Inc. ("SFIG") is a member-based, trade industry group focused on improving and strengthening the broader structured finance and securitization market. SFIG provides an inclusive network for securitization professionals to collaborate and, as industry leaders, drive necessary changes, be an advocate for the securitization community, share best practices and innovative ideas, and educate industry members through conferences and other programs. Members of SFIG represent all sectors of the securitization market including issuers, investors, financial intermediaries, law firms, accounting firms, technology firms, rating agencies, servicers, and trustees. Further information can be found at www.sfindustry.org
SOURCE Structured Finance Industry Group, Inc.
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