The FDIC and SEC are working hard to enact government-mandated regulatory reform for the US ABS markets as called for in Dodd-Frank. However, the two agencies, along with four other agencies that oversee the ABS markets in some way, each have proposed specific guidelines that interpret how market reform should be implemented.

And those differences in implementation are a cause of concern for issuers, sponsors, and other market stakeholders.

The risk is that without harmonization across the different bodies regulating the market there could be three distinct sets of regulations that market participants must try to interpret.

Although clearly the overriding goals of the US financial regulatory reform are being addressed by all three, there are big enough gaps in interpretation to cause some concern.

For example, Joe Adler at American Banker points to the risk retention rule for issuers under Dodd-Frank. The SEC and FDIC each have proposals out to incorporate that rule into their respective regulatory framework, and they are harmonized on 5 percent risk retention for issuers.

But, Adler notes: “While the three rules would all largely do the same thing—strengthening disclosure and requiring issuers to retain 5 percent of the credit risk from a securitization—they have significant differences.”

The FDIC’s proposal for risk retention would pertain to any insured institution, including private issuers. But the SEC proposes to exempt private issuers in some cases.

Plus, under Dodd-Frank retention requirements are loosened for some asset classes regarded as highly safe, and it allows sponsors to share the 5% retention with other co-sponsors.

As BMO Capital Markets noted in its August US Securitization Report: “The new issuance market continues to grapple with a variety of new regulations.” BMO cited US ABS year-to-date supply at $66.7 billion—down from $86.9 billion for the same period last year.

Although it is fair to say that the different agencies deal with different parts of the market--and thus must have their own specific rules in place with that focus in mind--clearly these discrepancies must be addressed in order for issuers to feel comfortable in launching new ABS transactions.