FED Proposes to Extend Information Collection on Credit Risk Retention
FED is proposing to extend for three years, without revision, the recordkeeping and disclosure requirements associated with Regulation RR on credit risk retention. FED also published the draft supporting statement for the recordkeeping and disclosure requirements associated with Regulation RR. Comments on the proposal must be submitted by November 29, 2019. The estimated number of respondents for this information collection, which is titled FR RR, is 10.
The credit risk retention rule of FED applies to any securitizer of asset-backed securities that is a state member bank or a subsidiary of a state member bank and is codified in the Regulation RR of FED (12 CFR part 244). The SEC rules regarding credit risk retention (17 CFR part 246) apply to any securitizer that is not an insured depository institution or a subsidiary of an insured depository institution. Regulation RR of FED and the credit risk retention rule of SEC include a number of mandatory recordkeeping and disclosure requirements. FR RR information collection (OMB No. 7100-0372) accounts for the reporting associated with the Regulation RR as well as the burden associated with the SEC credit risk retention rule for securitizers that are, or are a subsidiary of, a bank holding company, savings and loan holding company, intermediate holding company, Edge or agreement corporation, foreign banking organization, or non-bank financial company supervised by FED.
The credit risk retention rule generally requires a securitizer to retain not less than 5% of the credit risk of any asset that the securitizer, through the issuance of an asset-backed security (ABS), transfers, sells, or conveys to a third party. The rule also prohibits a securitizer from directly or indirectly hedging or otherwise transferring the credit risk that the securitizer is required to retain under section 15G and the agencies’ implementing rules. The credit risk retention rule exempts certain types of securitization transactions from these risk retention requirements and authorizes the agencies to exempt or establish a lower risk retention requirement for other types of securitization transactions.
In addition, the rule provides that a securitizer may retain less than 5% of the credit risk of commercial mortgages, commercial loans, and automobile loans that are transferred, sold, or conveyed through the issuance of asset-backed security interests by the securitizer if the loans meet underwriting standards established by the Federal banking agencies. The credit risk retention rule sets forth permissible forms of risk retention for securitizations that involve issuance of an asset-backed security as well as exemptions from the risk retention requirements. The agencies believe that the recordkeeping and disclosure requirements associated with the various forms of risk retention enhance market discipline, help ensure the quality of the assets underlying a securitization transaction, and assist investors in evaluating transactions.
Related Links
Comment Due Date: November 29, 2019
Keywords: Americas, US, Banking, Securities, Regulation RR, FR RR, Information Collection, Asset Backed Securities, Disclosures, ABCP, Securitization, Credit Risk Retention, Credit Risk, SEC, FED
Previous Article
RBI Announces Effective Date for NSFR GuidelinesRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
