U.S. Financial Industry Developments

Division of Investment Management of the SEC Issues No-Action Letter to SSB

On May 8, 2018, the Chief Counsel's Office of the Division of Investment Management ("IM") of the Securities and Exchange Commission (the "Commission") issued a "no-action" letter to South State Bank ("SSB") with respect to its request that the Staff of IM not recommend enforcement action to the Commission under the anti-fraud provisions of the Investment Advisers Act of 1940, and the rules thereunder, if SSB effected an internal restructuring whereby one of its advisory subsidiaries would be merged into another (the "Surviving Entity"). The merged entity would continue to operate as an operating division of the Surviving Entity (the "Division") and would continue to use its performance track record to the same extent as it could had the restructuring not occurred.

The grant of relief was based upon representations that: (i) the Division would continue to operate as a separate business division of the Surviving Entity operating under its existing brand; and (ii) the same management team that managed the merged entity would manage the Division and the investment committee of the merged entity would continue to have responsibility for the Division's investment decisions and recommendations.

A copy of the request and "no-action" letter response can be found here.

FRB Announces Approval of Final Amendments to its Regulation A

On May 7, 2018, the Federal Reserve Board ("FRB") published its approval "approval of final amendments to its Regulation A, which governs extensions of credit by Federal Reserve Banks, to make certain technical adjustments including to reflect the expiration of the Term Asset Backed Securities Loan Facility program." Release.

European Financial Industry Developments

Framework for Cyber-Attack Testing Published by ECB

On May 2, 2018, the European Central Bank ("ECB") published the "TIBER-EU" framework, a document which outlines the process for European and national authorities to work with financial institutions to put in place a program to test and improve resilience against cyber-attacks.

The TIBER-EU introduces intelligence-led red team tests to mimic the tactics, techniques and procedures of threat-actors, which will allow a financial institution to assess its protection, detection and response capabilities.

The framework, available here, details the key phases, activities, deliverables and interactions involved in a test.

The tests are not mandatory and it is for relevant authorities and institutions to decide if the tests are required, however the ECB has encouraged relevant authorities within jurisdictions to engage with each other in deciding how to adopt the framework, whilst financial institutions are encouraged to work closely with relevant authorities in order to enhance cyber-resilience.

ESMA Publishes First Liquidity Assessment for Bonds

In response to the introduction of pre and post trade transparency requirements under the Markets in Financial Instruments Regulation ("MiFIR"), the European Securities and Markets Authority ("ESMA") on May 2, 2018 published its first liquidity assessment for bonds. This was published on its Financial Instruments Transparency System, found here.

Alongside the assessment was a press release, available here. The press release explained that in the first quarter of 2018, 220 bonds out of 71,000 which were assessed were sufficiently liquid to be subject to the real-time transparency requirements of MiFID II.

The bonds deemed sufficiently liquid following the assessment will need to comply with the transparency requirements under MiFIR and MiFID II from May 16, 2018 to August 15, 2018, when the next quarterly assessment will become applicable.

Interestingly, the press release highlighted that the quality of the data in the review is dependent on the data submitted to ESMA. ESMA stated that due to the lack of completeness and other quality issues in relation to the data, the number of liquid instruments was lower than that produced through previous calculations. 

EMMI Provides Update on EURIBOR Development

The European Money Markets Institute ("EMMI") has provided an update on its development of EURIBOR through a press release, available here.

EMMI previously stated that it was working on the development of a hybrid methodology for EURIBOR which will be composed of a three-level waterfall and which will leverage on market transactions whenever available, in line with regulatory regulations.

EMMI stated that it will conduct an in-depth data analysis under a number of scenarios and assess all methodological parameters. Furthermore, the three-level waterfall with allow EMMI to assess Level 1 and Level 2 submissions, whilst allowing EMMI to develop a deeper understanding of Level 3.

It was announced that following the testing stage, there will be a stakeholder consultation in the second half of 2018.

Rating Agency Developments

On May 4, 2018, DBRS issued a report entitled: Rating U.S. Timeshare Loan Securitizations. Release.

On May 4, 2018, DBRS issued a report entitled: General Corporate Methodology. Release.