A Challenge for the Future: Issuing ABCP in the New Regulatory Environment

Abstract

Asset-backed commercial paper (ABCP) programs fully supported by bank sponsors have been used to finance a myriad of asset classes. In recent years, offerings of many different types of partially supported structured short-term notes also have come to be considered ABCP. The rapidly changing regulatory landscape for asset-backed securities, including ABCP, poses a threat to even the most traditional multiseller ABCP conduits. This article explains the most significant issues facing the traditional ABCP market, including accounting consolidation, enhanced capital requirements, removal of rating requirements from regulations, proposed liquidity coverage requirements, FDIC assessments, changes in money market fund regulation, proposed changes in disclosure requirements (Regulation AB II and repurchase activity), disclosure of due diligence reports, the Volcker Rule, changes to the Federal Reserve Act, risk retention rules, conflicts of interest, investment adviser registration, and other regulatory changes.

TOPICS: Asset-backed securities (ABS), legal and regulatory issues for structured finance