Structured Finance Association Logo

Menu
  • SFA on the Issues
    • Back
    • Overview
    • Committees and Task Forces
    • COVID-19: Supporting Consumers & Businesses
    • Capital & Other Bank Regulations
    • Disclosure & Reporting
    • ESG Institute
    • Global Initiatives
    • Housing Finance
    • LIBOR Transition
    • Market Structure & Dynamics
    • Research Corner
    • Structured Finance in the Courts
  • About Securitization
  • News
    • Back
    • Overview
    • Press Releases
    • Industry News
    • SFA News
    • Newsletter Sign Up
  • Events
  • Diversity, Equity, and Inclusion Hub
  • Women in Securitization
  • Structured Finance Coalition
  • Structured Finance Foundation
  • About Us
    • Back
    • Overview
    • Board of Directors
    • Our Team
    • Our Members
    • Committees and Task Forces
  • Join Membership
    • About Membership
    • Join
  • Blog
  • Multimedia Library
  • Make a Payment
  • Careers

    The Volcker Rule Must Not Limit or Restrict Securitization

    Download Summary Download Full Response Letter

    Main Takeaway

    SFA’s recent comments to the U.S. government agencies charged with implementing the Dodd-Frank Act’s “Volcker rule” stress that the rule must accurately capture the intention of the statute without impeding securitization transactions.

    Background

    The Dodd-Frank Act’s “Volcker rule,” finalized in 2013, aimed to prohibit proprietary trading by regulated banks and rein in banks investing in private equity firms and hedge funds. But the regulations as written have had unintended consequences on the securitization market. That reality flies in the face of the statute’s stated intention not to limit or restrict the ability of banking entities to sell or securitize loans.

    Recognizing the need to fine tune some aspects of the initial regulations mandated by Volcker, the regulatory agencies charged with its implementation have requested public input over the past few years and issued a re-proposal.

    SFA’s Key Points

    • While the Volcker rule specifically states its intention is not to limit or restrict the ability of banking entities to sell or securitize loans, the loan securitization exclusion (LSE) definition of loans is drafted so narrowly that it fails to facilitate many common asset securitization structures.

    SFA’s Recommendation: Modify the LSE definition so that it:

    • Clearly permits issuers relying on the LSE to hold leases and other assets that are not securitized in the form of securities.
    • Does not require issuance of an asset-backed security.
    • Tests whether a securitization is primarily backed by qualifying assets that are not impermissible securities or derivatives.
    • The definition of “ownership interest” is so broad and ambiguous that the legal community has difficulty opining that even the most senior classes of debt instruments commonly issued by securitization issuers are exempt.

    SFA’s Recommendation: Redefine ownership interests to remove “other similar interest” or modify the scope of “other similar interest” to make it more workable in practice

    • In either case outlined above, there should be a safe harbor exclusion for ordinary debt instruments used by banking entities to sell or securitize loans.
    • The Volcker rule also provided a qualifying asset-backed commercial paper (ABCP) conduit exclusion intended to be of use to most bank-sponsored ABCP programs in existence at the time of the rule’s adoption. However, the exclusion was written so narrowly that it has been of very little practical use.

    SFA’s Recommendation: Modify the qualifying ABCP conduit exclusion so that it:

    • Does not require the advising banking entity to assume all risks associated with the securities issued.
    • Is useful to more customer-facing bank-sponsored ABCP issuers.

    Related

    SFA Comment Letter on Volcker Rule

    Dodd-Frank Wall Street Reform and Consumer Protection Act

    Securitization Alliance logo
    • Resources
    • Membership
    • Make a Payment
    • Join
    • Newsletter Sign Up
    • About Securitization
    • Careers
    • Contact Us
    • SFA on the Issues
    • About Securitization
    • News
    • Events
    • Diversity, Equity, and Inclusion Hub
    • Women in Securitization
    • Structured Finance Coalition
    • Structured Finance Foundation
    • About Us

    Structured Finance Association

    1776 I Street NW Suite 501

    Washington, DC 20006

    Privacy Policy Terms of Use
    We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept All”, you consent to the use of ALL the cookies. However, you may visit "Cookie Settings" to provide a controlled consent.
    Cookie SettingsAccept All
    Manage consent

    Privacy Overview

    This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
    Necessary
    Always Enabled
    Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
    CookieDurationDescription
    cookielawinfo-checkbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
    cookielawinfo-checkbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
    cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
    cookielawinfo-checkbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
    cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
    viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
    Functional
    Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
    Performance
    Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
    Analytics
    Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
    Advertisement
    Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
    Others
    Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
    SAVE & ACCEPT