FDIC expects FAS 166 and 167 to increase bank capital requirements

Federal Deposit Insurance Corporation (FDIC) directors agreed at their August 26th Board meeting that following implementation of Statements of Financial Accounting Standards Nos. 166 and 167 in January 2010, banking organizations affected by the new accounting standards generally will be subject to higher minimum regulatory capital requirements. In order to “better align regulatory capital requirements with the actual risks of disclosures,” banking regulatory agencies have drafted a proposal for comment on whether a phase-in of the increase in regulatory capital requirements is needed.

 
The new standards require that under certain circumstances banks will be required to account for securitized assets and other financial assets, which are currently not consolidated, on their balance sheets.
 
FDIC Chairman Shelia Bair applauded the action taken by the Financial Accounting Board (FASB) in adopting FAS 166 and 167 as helping to bring an end to “the financial engineering that created so much damage.” At the same time, Bair said, the financial system requires a “sustainable securitization market.”
 
Statement of Financial Accounting Standards No. 166, Transfers of Financial Assets, is an amendment to FASB Statement 140, and Statement of Financial Accounting Standards No. 167 is Amendments to FASB Interpretation 46 (R).  
 
FASB provided an overview of the changes provided for in these amendments in a Webcast on August 24, “Amendments to the Accounting for Securitizations and Special Purpose Entities.”
 
FAS 166, Transfer of Financial Assets
 
  • Removes concept of the qualifying SPE (“QSPE”). All variable interest entities (including former QSPEs) must be evaluated for consolidation under Interpretation 46(R), as revised by SFAS 167.
  • Modifies the financial components approach: 
  • Clarifies application of the conditions for surrender of control over transferred financial assets.
  • Amends the guidance on initial measurement of a transferor’s interest in transferred financial assets
  • Enhances disclosure requirements.
  • Requires that the assets be isolated.
 
SFAS 167, Amendments to Interpretation 46(R)
 
  • Amends certain guidance for determining whether an entity is a variable interest entity (VIE) –Changes nature of kick-out rights held by equity holders for determining whether the entity is a VIE
  • Replaces quantitative approach for determining the primary beneficiary (PB) with a qualitative assessment
  • Requires ongoing assessments as to whether an enterprise is the PB of a VIE
 
 

You may like these other stories...

For the first time since 2006, more than 50 percent of CFOs believe the US economy will show signs of improvement over a six-month span rather than remain the same or worsen, according to a new study from Chicago-based...
By Jason Bramwell, Staff Writer CPAs in New Jersey, New York, and Pennsylvania believe economic conditions in the United States will likely be the same one year from now, and while they predict higher business revenues...
By Jason Bramwell Managers in accounting, finance, and IT are cautiously optimistic about their hiring plans for the fourth quarter of 2013, according to a new hiring outlook survey from staffing firm Brilliant. ...

Already a member? log in here.

Upcoming CPE Webinars

Sep 18
In this course, Amber Setter will shine the light on different types of leadership behavior- an integral part of everyone's career.
Sep 24
In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards. A dashboard condenses large amounts of data into a compact space, yet enables the end user to easily drill down into details when warranted.
Sep 30
This webcast will include discussions of important issues in SSARS No. 19 and the current status of proposed changes by the Accounting and Review Services Committee in these statements.
Oct 23
Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.