ASF Submits Interpretive Request re Regulatory Capital Treatment of FFELP ABS
August 22, 2012
On August 22, ASF submitted an interpretive request to the bank regulators seeking interpretive guidance/technical corrections to the Market Risk Rules to help provide appropriate clarity regarding their impact on student loan ABS transactions. We will follow-up with the bank regulators to inquire about a follow-up discussion to help push a formal response from them to address the issue. Given regulator vacation schedules in late August, material feedback may not be available until after Labor Day.
The issue at bar is that if forbearances and deferments are included for FFELP loans as “contractually deferred interest payments for at least 90 days,” negative ‘unintended’ capital requirements may result for these deals. Our initial thinking, which has been supported by some initial dialogue with some of the bank regulators, is that this was an unintended outcome or reading of the rules.
Tim Mohan from Chapman and Cutler LLP has been serving as outside counsel to the ASF Ratings Alternatives Taskforce and the follow-up implementation efforts.
ASF Interpretive Request: Risk-Based Capital Guidelines: Market Risk: FFELP Loans - August 22, 2012
FRB, FDIC, OCC Final Rule: Risk-Based Capital Guidelines: Market Risk - June 7, 2012