Pub. 6 2011-2012 Issue 3

www.nebankers.org 20 Extraordinary Service for Extraordinary Members. Q Capital Confusion? — continued 5 As a result, the Final Rule eliminates the three-year transitional floors under the advanced approach. 6 The Proposed Rule defines “sponsor” as “a person who organizes and initiates a securitization transaction by selling or transferring assets, either directly or indirectly, including through an affiliate, to the issuing entity.” This definition corresponds with the second prong of the definition of “securitizer” in Dodd-Frank. 7 Other exemptions include, but are not limited to, (i) any residential, multifamily, or health care facility mortgage loan asset, or securitization based directly or indirectly on such an asset, that is insured or guaranteed by the U.S. or an agency of the U.S. (Fannie Mae, Freddie Mac and the Federal Home Loan Banks are not agencies of the U.S. for these purposes) and (ii) loans or other assets made, insured, guaranteed, or purchased by any institution that is subject to the supervision of the Farm Credit Administration. 8 When the bank is also the sponsor (or securitizer), it would retain the full amount of risk retention. 9 OCC Bulletin 2008–20 or FDIC FIL–71–2008, Supervisory Guidance: Supervisory Review Process of Capital Adequacy (Pillar 2) Related to the Implementation of the Basel II Advanced Capital Framework. 10 In October 2010, the Conference of State Bank Supervisors released a white paper urging community banks to consider using stress tests to evaluate the potential impact of an economic crisis as part of their risk management framework. Conference of State Bank Supervisors, The Case for Stress Testing at Community Banks - Enhancing the risk management framework to ensure economic viability (October 2010). Recently, Gilbert Barker, the Office of the Comptroller of the Currency’s (“OCC”) deputy comptroller for the Southern District, testified in front of a congressional subcommittee about OCC examination policies and procedures. In his prepared testimony, Barker said he expects community “bankers to assess how borrowers, and their industries, may perform in stressed economic environments to ensure they will continue to have the capacity to perform under the terms of their loan obligations.” For more information, contact Jeff Makovicka at Husch Blackwell LLP at (402) 964-5168 or jeff.makovicka@ huschblackwell.com. Makovicka is a member of Husch Blackwell LLP’s Banking & Finance practice, where he concentrates on banking matters and has represented banks and other financial institutions in a wide range of matters.