Alert April 15, 2008

Senior Supervisors Group Issues Report Concerning Disclosure Practices

Senior financial supervisors including the FRB, OCC, SEC, FRB-NY and regulators from France, Germany, Switzerland, and the United Kingdom (collectively, the “Supervisors”) issued a report entitled Leading Practice Disclosures for Selected Exposures (the “Report”)  that provides examples of disclosures regarding exposures to types of financial instruments that are now considered high risk.  Specifically, the Report provides examples of disclosures concerning collateralized debt obligations, residential mortgage-backed securities, commercial mortgage-backed securities, other special purpose entities (“SPEs”, and each an “SPE”) and leveraged finance loans.  The Report states that “the disclosures represent leading practices across a variety of risks and exposures, and some disclosures [provided in the Report] may not be relevant for firms that do not have significant exposure to the activity.”

As an example, the Report stated that leading disclosure practices regarding SPEs generally provide information concerning:

  • Size of SPE versus firm’s total exposure
  • Activities of SPE
  • Reason for consolidation (if applicable)
  • Nature of exposure (sponsor, liquidity and/or credit enhancement provider)
  • Collateral type
  • Geographic distribution of collateral
  • Average maturity of collateral
  • Credit ratings of underlying collateral