FDIC Securitization Rule: FDIC Adopts Revised Securitization Rule Substantially as Proposed

Sullivan & Cromwell LLP - October 13, 2010

On September 30, 2010, the Federal Deposit Insurance Corporation adopted an amendment to its Rule 360.6, known as the Securitization Rule, substantially in the form proposed in its May 11, 2010 Notice of Proposed Rulemaking. The amended Securitization Rule, which provides safe harbor protection in a receivership or conservatorship of an insured depository institution in connection with certain securitizations and participations, imposes important new conditions on the availability of the safe harbors and provides more circumscribed protection if the transfer of financial assets under the securitization does not qualify for sale accounting treatment under generally accepted accounting principles. Although the amended Securitization Rule addresses some of the concerns raised in the public comment process, insured depository institutions will likely face significant new challenges in bringing new securitizations to market as a result of the conditions imposed by the final rule, the more limited protections it offers and the relatively brief transition period.