Highlights:
The attached Final Statement:
- Focuses on complex structured finance transactions designed to achieve specific legal, tax or accounting objectives of a particular customer in a novel or complex manner that often elevate an institution's exposure to various forms of legal or reputational risk.
- Illustrates the types of complex structured finance transactions that warrant increased review by the institution's senior management and board of directors.
- Describes the types of internal controls and risk- management procedures that the agencies believe should enable a financial institution to identify, monitor and control the heightened legal and reputational risk associated with various types of complex structured finance transactions.
- Generally does not apply to products with well- established track records that are familiar to participants in the financial markets. These include standard public mortgage-backed securities transactions, public securitizations of retail credit cards, asset-backed commercial paper conduit transactions, and hedging transactions involving "plain vanilla" derivatives and collateralized loan obligations.
- Applies primarily to large financial institutions, generally not to smaller institutions.
Distribution:
FDIC-Supervised Banks (Commercial and Savings)
Suggested Routing:
Chief Executive Officer
Chief Financial Officer
Chief Accounting Officer
Chief Risk Officer
Related Topics:
Internal Controls
Risk Management Policies and Procedures
Legal and Reputational Risks
Attachment:
Interagency Statement on Sound Practices Concerning Elevated Risk Complex Structured Finance Activities - PDF 83k (PDF Help)
Contact:
Jason C. Cave, Associate Director, Capital Markets
Branch, at jcave@fdic.gov or (202) 898-3548
Bobby R. Bean, Chief, Policy Section, Capital
Markets Branch, at bbean@fdic.gov or (202) 898-
3575
Printable Format:
FIL-3-2007 - PDF 37k (PDF Help)
Note:
FDIC financial institution letters (FILs) may be
accessed from the FDIC's Web site at
www.fdic.gov/news/news/financial/2007/index.html.
To receive FILs electronically, please visit
http://www.fdic.gov/about/subscriptions/fil.html.
Paper copies of FDIC financial institution letters
may be obtained through the FDIC's Public
Information Center, 3501 North Fairfax Drive,
Room E-1002, Arlington, VA (1-877-275-3342 or
703-562-2200).
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