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Wednesday, October 1, 2014

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Asset-Backed Securities and Credit Cards

A discussion forum sponsored by the Payment Cards Center of the Federal Reserve Bank of Philadelphia
December 2 and 3, 2003
Federal Reserve Bank of Philadelphia

In April 2003, Anthony M. Santomero, president of the Federal Reserve Bank of Philadelphia, spoke at the Bank's conference on "Retail Credit Risk Management and Measurement." In his remarks he noted the increased complexity in consumer credit markets and industry efforts to move beyond credit risk scoring techniques to more advanced methods of portfolio risk modeling. He encouraged conference attendees from the industry, academia, and the regulatory community to increase their efforts toward improving retail portfolio risk management practices.

Securitization of consumer credit incorporates some of the most sophisticated developments in portfolio risk management. Even after excluding primary mortgages, the market is large. The Bond Market Association reported in first quarter 2003 more than $750 billion in asset-backed securities (ABS) issued on credit card, automobile, and student loans. The first credit card ABS was issued only 16 years ago, but now this market represents over $400 billion, nearly 60 percent of all outstanding credit card loans.

Despite the success of retail ABS, and especially credit cards, market participants and policymakers face a number of critical challenges. Structural and product innovation continue apace while recent public scrutiny and private litigation have added new market uncertainties. Basel II and other regulatory developments add to the list of changes currently affecting the sector.

The Payment Cards Center at the Philadelphia Fed was established to add insight and communicate on issues relevant to this important sector of the financial services industry. Given the importance of securitization to the industry and its broader role in the ABS marketplace, the December conference is intended to add to the current dialogue and help inform the wide range of interested parties.

This conference brings together an invited group of experts from the industry, academic, and regulatory communities to address current challenges and opportunities.

Conference Agenda

December 2, 2003

6:00 p.m.

Registration

6:30 p.m.

Opening Keynote Address and Reception

The conference will open with a keynote address by Vernon H. C. Wright, chair of the American Securitization Forum, and executive vice chairman and chief corporate finance officer of MBNA America Bank, N.A. Mr. Wright's address, entitled "Securitization: Finally a Mature Market," will be followed by a reception in the Bank's ground floor Eastburn Court along with an informal tour of a new interactive exhibit on the history of the Federal Reserve System.

December 3, 2003

8:00 a.m.

Registration and Continental Breakfast

8:30 a.m.

Welcome

  • Dr. Anthony M. Santomero, President, Federal Reserve Bank of Philadelphia
  • Peter Burns, Vice President and Director, Payment Cards Center, Federal Reserve Bank of Philadelphia

9:00 a.m.

Credit Card ABS: The Investor Perspective

  • Moderator: Karen Weaver, Deutsche Securities Inc.
  • Panelists: Robert Franciscus, Merrill Lynch Investment Management
    Paul Grillo, Delaware Investments
    Sue Troll, T. Rowe Price

Karen Weaver will moderate a panel of institutional investors providing a demand-side view of the market for credit card ABS. Specific issues for the panel discussion include the growth and evolution of investor participation, pricing trends over time, the impact of industry consolidation, the role of rating agencies, and other market structure changes.

10:00 a.m.

Break

10:30 a.m.

What Can Go Wrong? What Have We Learned?

  • Moderator: Mark Adelson, Nomura Securities
  • Panelists: Alexander Dill, Moody's Investor Services
    C. Thomas Kunz, Esq., Skadden, Arps, Slate, Meagher & Flom

Mark Adelson will moderate a panel examining recent events in the ABS market that have highlighted credit and other risks inherent in the asset class. The panel will address "lessons learned" and new developments in risk management practices.

12:00 p.m.

Lunch

1:30 p.m.

Risk-Based Capital and Basel II

  • Moderator: William Lang, Federal Reserve Bank of Philadelphia
  • Panelists: Marc Saidenberg, Federal Reserve Bank of New York
    Randy White, Bank One Corporation
    Hugh Van Deventer, CitiBank

Bill Lang has been actively involved in the interagency analysis of applying Basel II capital standards to retail credit generally and credit card exposures specifically. He will be joined by a Fed colleague, Marc Saidenberg, and along with industry experts, they will discuss the current status and implications of the Basel II capital standards.

3:00 p.m.

Break

3:15 p.m.

The Examiner's View of Credit Card ABS

  • Moderator: Kathryn Dick, OCC
  • Panelists: Kelly Ballard, OCC
    David Kerns, Board of Governors of the Federal Reserve System
    Keith Ligon, FDIC
    Richard Westerkamp, Federal Reserve Bank of Richmond

Kathryn Dick will provide an overview of bank regulators' perspectives on credit card ABS as seen by senior examination staff. Colleagues from the OCC, FDIC, and the Fed will join her in discussing how bank examiners evaluate ABS programs and describe the range of issues considered.

4:30 p.m.

Adjourn