The New York Federal Reserve has announced two changes to the procedures for evaluating ABS pledged as collateral to the TALF.

First, a rule has been proposed that would establish criteria to determine the NRSROs whose ratings are accepted for determining the eligibility of ABS. The proposed rule, which would require a certain minimum level of experience in rating deals of any particular type, would likely result in an expansion of TALF-eligible NRSROs for ABS. It is intended to promote competition among rating agencies and ensure appropriate protection against credit risk for the US taxpayer.

Second, starting with the November subscription, in addition to continuing to require collateral for TALF loans to receive two triple-A ratings from TALF-eligible NRSROs, the Fed will conduct a formal risk assessment of all proposed collateral - ABS in addition to CMBS - which are already subject to a formal risk assessment. The change to the collateral review process will enhance the Fed's ability to ensure that TALF collateral complies with its existing high standards for credit quality, transparency and simplicity of structure, it says.

To facilitate the risk assessment, each issuer wishing to bring a TALF-eligible ABS transaction to market will be required to provide - at least three weeks prior to the subscription date - information including all data on the transaction the issuer has provided to any NRSRO. The Fed says issuers of ABS complying with the TALF terms and conditions and the statement of principles may reasonably expect an indication of acceptability based on its risk assessment at least one week before the applicable subscription date.

Meanwhile, US$2.5bn in TALF loans were requested during the 2 October application window. Loans were requested for auto, credit card, equipment dealer floorplan, servicing advances, small business and student loan ABS. No requests were submitted for premium finance ABS.