Commercial banks will have to do more than just look at the credit rating on a security before deciding it qualifies as a potential investment under a proposed rule issued by the Office of the Comptroller of the Currency this week. The Federal Deposit Insurance Corp. is scheduled to consider a similar proposal next week. Under marching orders from the Dodd-Frank Act, bank regulators have been removing references to external credit ratings from a variety of regulations – even though banks themselves don’t agree with the change. Most commenters on earlier proposals from...

As the Securities and Exchange Commission considers updating its oversight of asset-backed securities issuers, such as enhancing investor protections and changing the use of credit rating agencies, major players in the securitization market are split on whether – and how – it should do so. The SEC is considering whether to revise Rule 3a-7, which excludes qualified ABS issuers from being classified as investment companies under the Investment Company Act of 1940. The rule now includes several conditions that refer to credit ratings by nationally recognized statistical...

Four years after the credit crisis, analysts at Fitch Ratings expect eventual losses from structured finance transactions to soar from current levels, about $94 billion, or 2.7 percent of the original balance of rated transactions, to $376 billion, or 10.6 percent, by the time the dust settles. And the primary culprit, of course, is residential MBS. “Fitch expects a further 9,754 tranches to not recover their full principal, representing 33 percent of all tranches and increasing the proportion of tranches with realized or expected losses to 63 percent of the total...