Regulators Seek Capital Relief for Securitized Assets

Federal regulators are working on providing capital relief for banks that have to bring securitized assets back on their balance sheets due to a change in the accounting rules that goes into effect at yearend. Regulators told a Senate panel that they can't delay the impact of the Financial Accounting Standard 167 on a bank's leverage-capital ratio. When it comes to risk-based capital, "there is some flexibility to phase it in over time," said Comptroller of the Currency John Dugan. The comptroller said he expects the regulators will issue interagency guidance on RBC in a few weeks. Bankers are hoping the guidance will give them one to two years to adjust to FAS 167, which completely changes the securitization business. "The bottom line is this stuff is going back on the balance sheets. Banks are going to have to hold capital against it. It is really a matter of timing and how it is phased in," Mr. Dugan said. Banks and other issuers of securities backed by mortgages, credit cards and auto loans are expected to discuss the impact FAS 167 will have on their companies in their third-quarter securities filings.