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.
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
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