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Thursday, March 11, 2010

FDIC Extends Securitization Safe Harbor Through September

By Michael R. Crittenden

Dow Jones Newswires

WASHINGTON -(Dow Jones)- A U.S. bank regulator moved Thursday to extend its safe harbor for securitized assets through September, putting off a decision on a plan to make banks more accountable for asset-backed securities.

The Federal Deposit Insurance Corp.'s board voted to extend its traditional safe harbor from the current March 31 date until the end of September. FDIC Chairman Sheila Bair said in a statement that the extra time will allow industry participants and regulators more time to flesh out government policy in the future.

"We hope to foster a sustainable securitization market that emphasizes transparency, improved clarity in transaction structures and responsibilities, and incentives to support sustainable securitizations," Bair said.

At issue is how the FDIC treats securitized assets when a bank fails. The agency had traditionally provided a safe harbor from such assets, preventing the government from going after the assets backing the securities in the event of a failure.

Recent accounting rule changes, as well as the role securitization has played in the growing number of bank failures, has forced regulators to reconsider the issue. Though industry participants have warned against changes to the current process, the FDIC has suggested it will eventually push forward with some new policy.