US agencies seek feedback on structured finance guidelines

Five US federal agencies have issued a statement describing internal controls and risk management procedures designed to help financial institutions identify and address risks associated with complex structured finance activities.

The comment period for the proposed statement - jointly issued by the Securities and Exchange Commission (SEC), the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS) - is expected to end in June.

The guidelines seek to help institutions avoid the reputational and legal risks that can arise when banks and dealers enter into certain types of transaction with the purpose of allowing clients to effect regulatory, tax or accounting arbitrage, or improper or illegal behaviour.

The statement says financial institutions engaged in complex structured finance activities should have effective policies and procedures in place to: identify complex transactions that may involve heightened reputational and legal risk; ensure such transactions receive enhanced scrutiny by the institution; and safeguard against participation in illegal or inappropriate transactions.