ACB: Press Releases

Contact:	Robert Schmermund (202) 857-3104 Jim Eberle (202) 857-3145	Jim Eberle (202) 857-3145 (work) (703) 893-2593 (home) [email protected]	For Immediate Release October 11, 2005 #05-74
E-mail: [email protected]

ACB URGES FASB TO REVISE IMPLEMENTATION GUIDANCE ON SALE TREATMENT OF LOAN PARTICIPATIONS

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WASHINGTON, D.C. — America’s Community Bankers has urged the Financial Accounting Standards Board to refrain from requiring banks to obtain legal opinions that loan participations are “true sales” and instead require that certain conditions established by case law are met.

ACB said it is “concerned that many smaller banks will lose a vital risk management tool, and face further competitive disadvantages upon losing the ability to diversify credit risk and accommodate larger customer borrowing needs.”

In its comments to FASB, ACB said: “We believe that a less burdensome, more consistent and more practical alternative is available.” The approach recommended by ACB “will also assist the auditor in quickly identifying whether the specific conditions needed for sale treatment are met.”

Specifically, ACB said the conditions outlined by lawyers at the FASB roundtables in 2004 would include: an intent by the lead bank to sell an interest in the proceeds of the loan, no right of recourse by the participant against the lead bank, the right of the participant to repayment only after the lead bank is repaid by the original borrower and durations of the loan participation and the underlying loan that are identical.

“With specific conditions established, the banking industry can develop standard agreements that can be used in loan participation transactions, rather than having to rely on the wasteful, fact-specific review of lawyers in different jurisdictions,” ACB said.

Click here to read the comment letter.

America’s Community Bankers is the national trade association committed to shaping the future of banking by being the innovative industry leader strengthening the competitive position of community banks. To learn more about ACB, visit www.AmericasCommunityBankers.com.

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