U.S. Financial Industry Developments

Home Mortgage Disclosure Act: FFIEC's Revised 'A Guide to HMDA Reporting: Getting It Right!'

On March 14, 2018, the Office of the Comptroller of the Currency published an updated resource providing guidance for complying with the Home Mortgage Disclosure Act. Release.

SEC Proposes Targeted Changes to Public Liquidity Risk Management Disclosure

On March 14, 2018, the Securities and Exchange Commission ("SEC") "proposed amendments to public liquidity-related disclosure requirements for certain open-end investment management companies." The proposed amendments, and other related actions, were designed to give investors improved information while providing the companies sufficient time to comply. Release. Proposed Rule.

SEC Proposes Transaction Fee Pilot for NMS Stocks

On March 14, 2018, the Securities and Exchange Commission ("SEC") issued a proposed rule that "subject[s] stock exchange transaction fee pricing … to new temporary pricing restrictions across three test groups, and require the exchanges to prepare and publicly post data." Once published in the Federal Register, the public comment period will last for 60 days. Release. Proposed Rule.

CFPB Issues Request for Information on Adopted Regulations and New Rulemaking Authorities

On March 14, 2018, the Consumer Financial Protection Bureau ("CFPB") announced it was seeking public input regarding whether or not there should be amendments to pre-existing rules or new rules relating to the CFPB's authority under the Dodd-Frank Act. Release.

CFPB Issues Final Rule to Help Mortgage Servicers Communicate With Certain Borrowers Facing Bankruptcy

On March 8, 2018, the Consumer Financial Protection Bureau ("CFPB") announced a final rule designed to aid mortgage servicers in assisting borrowers dealing with bankruptcy issues while complying with the Truth in Lending Act. Release.

European Financial Industry Developments

Joint Committee of ESAs Final Report on Use of Big Data by Financial Institutions

On March 15, 2018, the Joint Committee of the European Supervisory Authorities ("ESA") published its final report, together with a factsheet, on the use of big data by financial institutions (JC/2018/04). The report is available here and the factsheet here.

Chapter 4 of the report contains a feedback statement summarizing the responses received. Among other things, respondents expressed concerns about practices that do not guarantee the accuracy of the data collected and the potential consequences of the increasing level of segmentation of customers enabled by big data. They also warned that consumers may not be fully aware of big data tools being used and that the growing use of big data could increase the risk of harm from cyberattacks.

The ESAs consider that the requirements in sectoral financial legislation and in legislation relating to data protection, cybersecurity and consumer protection mitigate the risks identified by the ESAs. This framework will be further strengthened with the entry into application of several key pieces of legislation in the financial sector and the General Data Protection Regulation ((EU) 2016/679) ("GDPR"). The ESAs intend to monitor the extent to which these requirements contribute to mitigate big data risks.

The ESAs invite financial institutions to develop and implement good practices on the use of big data to promote a fair, transparent and nondiscriminatory treatment of consumers and to ensure that big data strategies are designed in a responsible way and are fully aligned with the interests of consumers. The ESAs suggest an indicative list of arrangements and behaviors concerning:

• Robust big data processes and algorithms relating to the monitoring of the functioning of big data procedures and methodologies.
• Consumer protection. Among other things, the ESAs suggest firms should periodically assess whether big data-based products and services are aligned with consumers' interests.
• Disclosures on the use of big data, relating to firms' transparency toward customers concerning the use of big data technologies to process their data.

Second ECB Consultation on New Euro Unsecured Overnight Interest Rate

On March 15, 2018, the European Central Bank ("ECB") published its second consultation paper on a new euro unsecured overnight interest rate, available here.

The ECB announced in September 2017 that it intended to start providing a euro unsecured overnight interest rate based on data already available to the Eurosystem (that is, the rate will be calculated entirely on transactions in euro that are reported by banks in the ECB's money market statistical reporting ("MMSR")). The ECB aims to produce the new rate before 2020 and plans for it to be consistent with the principles on financial benchmarks developed by the International Organization of Securities Commissions ("IOSCO"). The interest rate will complement existing benchmark rates produced by the private sector and will serve as a backstop reference rate.

EU Covered Bonds Framework: Proposed Legislation

On March 12, 2018, and further to its action plan on building a capital markets union ("CMU"), the European Commission published a draft Directive and Regulation on covered bonds in line with its aim to create an integrated EU covered bonds framework.

The Commission's proposed Directive sets out the conditions that covered bonds must satisfy to be recognized under EU law. It also strengthens investor protection by imposing specific supervisory duties. The proposal for a Directive is complemented by a proposal for a Regulation amending Regulation (EU) No 575/2013 (the "Capital Requirements Regulation").

Rating Agency Developments

On March 14, 2018, Fitch issued a report entitled: Fitch Updates Single- and Multi-Name Credit-Linked Notes Rating Criteria. Release.

On March 13, 2018, Fitch issued a report entitled: Fitch Updates U.S. RMBS Cash Flow Analysis Criteria. Release.

On March 9, 2018, Fitch issued a report entitled: U.S. Trust Preferred CDOs Surveillance Rating Criteria. Release.

On March 9, 2018, Moody's issued a report entitled: Municipal Bonds and Commercial Paper Supported by a Borrower's Self-Liquidity. Release.

On March 9, 2018, Kroll issued a report entitled: RMBS: Reverse Mortgage Securitization Global Rating Methodology. Release.

On March 8, 2018, Fitch issued a report entitled: Fitch U.S. RMBS Loss Metrics. Release.

On March 8, 2018, Kroll issued a report entitled: Financial Institutions: Securities Firm Rating Methodology. Release.

RMBS and Other Securities Litigation

SDNY Grants Trustees' Motion to Dismiss Triaxx CDOs' RMBS Claims with Prejudice

On March 8, 2018, Judge Naomi Reice Buchwald of the United States District Court for the Southern District of New York issued a Memorandum and Order granting Defendants' motion to dismiss Plaintiffs' Third Amended Complaint in its entirety in Triaxx Prime CDO 2006-1, Ltd., et al. v. The Bank of New York Mellon and U.S. Bank, N.A., and forbidding Plaintiffs from amending the Complaint any further. In dismissing Plaintiffs' breach of contract claims for lack of standing, the Court found that Plaintiffs failed to remedy the deficiencies that previously resulted in dismissal of these same claims, covered here ("Triaxx I"), because Plaintiffs assigned away their right to sue under the contracts. Judge Buchwald also dismissed Plaintiffs' negligence and breach of fiduciary duty claims because Plaintiffs failed to allege that Defendants owed them any duty of care or fiduciary duty. Additionally, the Court held that the fiduciary duty claims were an improper attempt to re-plead claims already dismissed as abandoned in Triaxx I, and in any event, the claims were barred by New York's economic loss doctrine. Plaintiffs' claim for equitable relief directing U.S. Bank to assign Plaintiffs the authority to sue was also dismissed as inappropriate and unsupported by law. [Memorandum and Order]

Lehman Brothers to Pay $2.38 Billion in Connection with RMBS Claims

On March 8, 2018, Judge Shelley C. Chapman of the United States Bankruptcy Court for the Southern District of New York issued a decision from the bench valuing RMBS breach of representation and warranty claims against now-defunct Lehman Brothers Holdings Inc. at approximately $2.38 billion. While the Trustees of the Lehman-issued RMBS at issue sought an $11.4 billion valuation, the Court concluded that such a figure was not a fair or reasonable estimate of the claims, particularly in light of the fact that over a dozen institutional investors agreed to the lower figure earlier in the proceedings. The Court also highlighted that the Trustees could not point to any comparable settlement to support their valuation.