A survey has revealed the market is frustrated with the Financial Accounting Standards Board (FASB)'s new rules on off-balance sheet financing.
Just two months after the adoption of FIN 46, the survey by ratings agency Standard & Poor's shows securitization professionals are frustrated, sceptical and confused by the new US rulebook.
More than 60% of respondents said they believed the measures would restrict future growth in the US structured finance market and more than two-thirds consider the FASB rules to be more important for the market than rating transitions, the role of servicers or the war in Iraq.
Respondents criticized the rules for adopting a one size fits all solution that is ineffective and particularly damaging for the asset-backed commercial paper (ABCP) market and collateralised debt obligations (CDOs).
Respondents said FIN 46 would increase costs for issuers and force some sellers to avoid CDOs and ABCP deals.
Two-thirds of respondents believe FIN 46 fails to achieve its original aims of improving disclosure and reducing corporate wrongdoing.
S&P quotes one respondent: "Instead of promoting transparency, FIN 46 focuses on delineating ownership. In order to avoid consolidation under FIN 46, concerned parties will focus on the definition of ownership and methods to transfer or obfuscate ownership for accounting purposes."
Suggested alternatives to the requirements for banks to consolidate their participation in structured financings on their balance sheet included a capital requirement on the banks' books.
The overall impression, says S&P, is of confusion over the way the rules were developed, with many practitioners angered at what they feel was a rushed, politicized, knee-jerk reaction to corporate scandal.
The respondents were 39% underwriters, 20% investors, 19% issuers and 22% other securitization professionals.
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