Cabela's 2012 Annual Report Download - page 68

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On June 7, 2012, the FDIC and the other federal banking agencies announced they are seeking comment
on proposed rules that would revise and replace the agencies’ current capital rules. Among other things, the
proposed rules would revise the agencies’ prompt corrective action framework by introducing a common equity
tier 1 capital requirement and a higher minimum tier 1 capital requirement. In addition, the proposed rules include
a supplementary leverage ratio for depository institutions subject to the advanced approaches capital rules. It
is not clear how the final rules will differ from the proposed rules, if at all, or the impact of the final rules on
WFB and its ability to comply with a new common equity tier 1 capital requirement and a higher minimum tier 1
capital requirement.
The ability of the Financial Services segment to engage in securitization transactions on favorable terms or at
all could be adversely affected by disruptions in the capital markets or other events, which could materially affect
our business and cause the Financial Services segment to lose an important source of capital. The Reform Act, which
was signed into law in July 2010, will also affect a number of significant changes relating to asset-backed securities,
including additional oversight and regulation of credit rating agencies and additional reporting and disclosure
requirements. In December 2012, the Staff of the Division of Markets and Trading of the SEC issued its Report to
Congress on Assigned Credit Ratings (the “Report”) pursuant to the provisions of the Reform Act. In the Report, the
Staff analyzed the manner in which credit rating agencies are currently compensated in connection with the issuance
of credit ratings of asset-backed securities and various alternative compensation structures. It is unclear if or when
Congress or the SEC will take any further legislative or regulatory action in response to the issues considered in the
Report. If any further legislative or regulatory action is taken in response to these issues, the ability and willingness
of WFB to continue to rely on the securitization market for funding could be adversely affected. The changes
resulting from the Reform Act may impact our profitability, require changes to certain Financial Services segment
business practices, impose upon the Financial Services segment more stringent capital, liquidity, and leverage ratio
requirements, increase FDIC deposit insurance premiums, or otherwise adversely affect the Financial Services
segment’s business. These changes may also require the Financial Services segment to invest significant management
attention and resources to evaluate and make necessary changes. On September 27, 2010, the FDIC approved a final
rule that, subject to certain conditions, preserved the safe-harbor treatment for legal isolation of transferred assets
applicable to certain grandfathered revolving trusts and master trusts that had issued at least one series of asset-backed
securities as of such date, which we believe included the Trust. The final rule imposes significant new conditions on
the availability of the safe-harbor with respect to securitizations that are not grandfathered.
In addition, several rules and regulations have recently been proposed or adopted that may substantially affect
issuers of asset-backed securities. On September 19, 2011, the SEC proposed a new rule under the Securities Act
of 1933, as amended, to implement certain provisions of the Reform Act. Under the proposed rule, an underwriter,
placement agent, initial purchaser, or sponsor of an asset-backed security, or any affiliate of any such person,
shall not at any time within one year after the first closing of the sale of the asset-backed security, engage in
any transaction that would involve or result in any material conflict of interest with respect to any investor in a
transaction arising out of such activity. The proposed rule would exempt certain risk-mitigating hedging activities,
liquidity commitments, and bona fide market-making activity. It is not clear how the final rule will differ from the
proposed rule, if at all. The final rule’s impact on the securitization market and the Financial Services segment is
also unclear at this time.
The JOBS Act was signed into law on April 5, 2012, and will implement extensive changes to the laws
regulating private offerings of securities, including Rule 144A private offerings such as the private offerings of
asset-backed securities of the Trust that WFB sponsors. On August 29, 2012, the SEC issued proposed regulations
to amend Rule 144A to provide that securities may be offered pursuant to Rule 144A by means of general
solicitation or general advertising, including to persons other than qualified institutional buyers, so long as the
issuer reasonably believes that each ultimate purchaser is a qualified institutional buyer. The impact that the JOBS
Act will have on the securitization market and the Financial Services segment is unclear at this time.
The Trust is structured to qualify for the exemption from the Investment Company Act provided by
Investment Company Act Rule 3a-7. On August 31, 2011, the SEC issued an advance notice of proposed rulemaking
regarding possible amendments to Investment Company Act Rule 3a-7. At this time, it is uncertain what form the