CFTC Announces Further Extension of Time-Limited No Action Relief

On October 14, the U.S. Commodity Futures Trading Commission's ("CFTC") Division of Market Oversight (the "Division") announced further extension of the time-limited no action relief for swaps executed as part of a package transaction in the categories currently receiving relief under CFTC Letter No. 14-137.  The extension of time-limited relief is meant to enable the Division to continue to assess the appropriate response for applying the trade execution requirement to swaps in certain package transactions.  Press Release.

On October 14, DBRS published its criteria for rating structured finance CDO restructurings.  Report.

On October 14, DBRS published its criteria for rating U.S. rental car ABS transactions.  Report.

On October 14, DBRS published its global methodology for rating finance companies.  Report.

On October 14, Fitch released its criteria for rating debt issued to finance availability-based infrastructure projects.  Report.

On October 13, Fitch published updated criteria for rating aircraft enhanced equipment trust certificates.  Report.

On October 12, DBRS published a report describing its methodology for generation of consistent interest rate stresses across currency markets.  Report.

On October 8, Fitch published a report clarifying the application of its United Kingdom RMBS criteria during the ongoing consultation period.  Report.

PRIVACY POLICIES AND THE SALE OF CORPORATE ASSETS: It pays to plan ahead to preserve the value of your data assets

Personal data is a valuable corporate asset. At times, the personal information collected from customers (such as email address, mailing address, phone number, etc.) can be a company's most valuable asset. Unfortunately, when a company attempts to sell this asset, it can find the value of the data significantly diminished due to promises made in a privacy policy the company implemented years before it ever contemplated such a sale.

A company's privacy policy sets forth the company's promises to its consumers as to how it will collect, store, maintain, and share the consumers' personal data. In an attempt to appeal to customer privacy concerns, it is common for a company to proclaim in such policies:

"We share your personal data only in the ways described in this policy,"

or

"We care about our customers and we will never sell or share your personal data."

Most companies include these statements to highlight their promise not to capitalize on a consumer's data by selling to third party marketers. However, many companies do not realize that statements such as these could also severely restrict the company's ability to sell data as a corporate asset in a company sale, merger, bankruptcy, or similar corporate transaction, unless there is also a clear statement within the policy which permits data to be transferred during the course of such events.

There are steps a company can take leading up to the corporate transaction to smooth the transfer of customer data, such as updating its privacy policy, providing additional notice to consumers, requesting opt-out or opt-in consent to the revised policy and/or the data sale. Companies that fail to take these steps and attempt to transfer data in a manner that conflicts with promises made in its privacy policy may face regulatory scrutiny or litigation, both of which would ultimately diminish the value of their data assets in any eventual sale.  Read More.

New York Appellate Court Allows Repurchase Claims Against Nomura To Proceed

On October 13, 2015, the First Department of the Appellate Division of the Supreme Court for the State of New York decided an appeal in four actions brought by HSBC Bank as Trustee on behalf of four RMBS trusts against Nomura Credit & Capital, Inc. and related entities.  We previously covered Justice Friedman's trial court decision in one of the actions here. In a decision written by Justice John W. Sweeney, the First Department held that the trusts can proceed with claims relating to loans that were not the subject of pre-suit breach notices or where Nomura was not given the contractual 90-days-notice of the alleged breaches before suit was filed.  The First Department distinguished its decision in Ace (previously covered here) on the basis that in Ace there were no timely claims.  The court reasoned that the untimely claims here would have related back in an amended pleading to timely claims in the complaint, and cited the trusts' allegations that Nomura independently discovered the alleged breaches.

Affirming Justice Friedman's decision, the court also held that the trusts are not limited by the contractual "sole remedy" of repurchase of loans breaching representations and warranties if the loans have been liquidated or foreclosed.  Instead, the trusts may seek money damages for breaching loans where specific performance of the repurchase sole remedy is impossible.  The court further affirmed the lower court's decision that the trusts' claims for breach of the implied covenant of good faith and fair dealing were duplicative of their breach of contract claims and affirmed the dismissal of the trusts' claims for rescission or rescissory damages.

The court reversed Justice Friedman's decision insofar as it dismissed the trusts' claims that Nomura breached its representation that the deal documents did not contain any untrue statements.  The court held that alleged breaches of that provision were not subject to the contract's sole remedy of repurchase.  The court further held that the trusts' claims for damages for the failure to repurchase were properly dismissed, but the lower court erred in dismissing claims for damages for Nomura's failure to give notice of breaches that it allegedly discovered.  Decision.

BCBS FAQs on Basel III Countercyclical Capital Buffer

On October 19, 2015, the Basel Committee on Banking Supervision (BCBS) issued frequently asked questions (FAQs) on the Basel III countercyclical capital buffer (BCBS 339).

In December 2010, the BCBS published its final standards on the buffer in its paper on the Basel III regulatory framework (BCBS 189) and guidance for national authorities operating the countercyclical capital buffer (BCBS 187). The BCBS states that the FAQs provide excerpts from BCBS 187 and BCBS 189, together with clarifications, particularly on the role of jurisdictional reciprocity and the computation of the capital buffer add-on.

The BCBS has also published a dedicated website on the countercyclical capital buffer that sets out details of how member jurisdictions of the BCBS have implemented the buffer to date.

BCBS October 2015 Progress Report on Implementation of Basel Regulatory Framework

On October 15, 2015, BCBS issued its ninth progress report (BCBS 338) on BCBS members' implementation of Basel II, Basel 2.5 and Basel III, as at the end of September 2015.

The report focuses on the status of domestic rule-making processes to ensure that the Basel standards are transformed into national law or regulation according to the internationally agreed timeframes. It includes the status of adoption of the risk-based capital standards, the liquidity standards, the framework for systemically important banks, the leverage ratio, the revised Pillar 3 disclosure requirements and the large exposure framework.

EBA Updates Single Rulebook Q&As

On October 16, 2015, the European Banking Authority (EBA) updated its Q&As on the single rulebook, publishing four new questions. The single rulebook Q&As relate to the CRD IV package of reforms, namely the CRD IV Directive (2013/36/EU), the Capital Requirements Regulation (Regulation 575/2013) and the Bank Recovery and Resolution Directive (2014/59/EU).

EBA Consults on its Benchmark Rate Under the MCD

The Mortgage Credit Directive (2014/17/EU) (MCD) requires that creditors create two illustrative examples for variable rate mortgages on the basis of a benchmark rate specified by the EBA. Consequently, the EBA has developed a draft formula with which creditors are to calculate the rate. By producing a formula instead of a single rate, the EBA aims to ensure that its rate is representative of national circumstances. Annex II to the MCD sets out instructions for creditors when completing the European Standardized Information Sheet, including how to calculate the illustrative example of the annual percentage rate of charge (APR) and the illustration of the installment amount.

On October 12, 2015, the EBA published a consultation paper (EBA/CP/2015/16) on its proposed benchmark rate under the MCD. The consultation is open until November 20, 2015. The EBA intends to publish the final benchmark rate in the first quarter of 2016.

Cybersecurity in Real Estate Finance?

News reports about massive cyberattacks and data breaches are now an everyday occurrence. Nobody is spared the limelight in this increasingly universal reality for all companies. Retailers, banks, healthcare entities, start-ups. Eastern European crime rings, Chinese state-sponsored hackers, North Korea, "anonymous" hacktivists. Credit card data, social security numbers, online credentials, trade secrets.  Regulatory investigations, shareholder derivative actions, consumer (and bank) class actions. SEC, FTC, FCC, DOJ, HHS, State AGs. And . . . this list doesn't even start to scratch the surface!

So, is there cybersecurity risk in the commercial real estate finance industry? No doubt. Join us for an interactive discussion with our panel of experts to explore these and other key issues:

- The threat landscape: Meet the attackers, Their capabilities, Their results
- The costs of a breach: Legal, Business, Reputational
- The strategy: Identify, Protect, Detect, Respond, Recover
- What can we (I personally) do? The core "human element" of cyber risk

Orrick Partner, Mark Mermelstein, will moderate this event on October 28^th in New York. He will be joined by panelists Robert K. Knake, Senior Advisor at Good Harbor Security Risk Management, and Jason Smolanoff, President at CISO Advisory & Investigations LLC.

Please click here to register.