Financial Industry Developments

CFTC Division of Market Oversight Reminds Market Participants of the Upcoming Expiration of Certain No‑Action Relief From the Ownership and Control Final Rule

On November 16, 2016, the U.S. Commodity Futures Trading Commission (the "CFTC") issued a reminder that previously specified no‑action relief will shortly be expiring. On November 18, 2016, at 12:00 a.m. Eastern time, revised electronic submission requirements for Forms 40/40S and 71 were put in effect. Release.

FDIC Board Approves Final Rule on Deposit Account Recordkeeping Requirements to Facilitate Timely Access to Deposits in Large Bank Failures

On November 15, 2016, the Federal Deposit Insurance Corporation (the "FDIC") issued a final rule relating to recordkeeping requirements for FDIC-insured entities with more than 2 million deposit accounts. Release.

CFTC Approves Final Rule Amending the Timing for Filing Chief Compliance Officer Annual Reports by Certain Registrants

On November 10, 2016, the U.S. Commodity Futures Trading Commission (the "CFTC") issued a final rule modifying and clarifying previous guidance regarding compliance reports for futures commission merchants, swap dealers and major swap participants. Release.

Rating Agency Developments

On November 16, 2016, Fitch issued a report entitled: Fitch Updates Recovery Ratings and Notching Criteria for Equity REITs. Release.

On November 16, 2016, Fitch issued a report entitled: Fitch Updates Rating Criteria for U.S. Military Housing. Release.

On November 15, 2016, Fitch issued a report entitled: Fitch Updates U.S. RMBS Surveillance and Re‑REMIC Criteria. Release.

On November 11, 2016, Fitch issued a report entitled: Fitch Updates U.S. and Canadian Multiborrower CMBS Surveillance Criteria. Release.

On November 11, 2016, Moody's updated its Index of Rating Methodologies. Report.

On November 11, 2016, Moody's updated its index entitled: Outdated Credit Rating Methodologies. Report.

On November 10, 2016, Fitch issued a report entitled: Fitch Updates Surveillance Criteria for U.S. CREL CDOs. Release.

On November 10, 2016, Fitch issued a report entitled: Fitch Clarifies Criteria for Rating U.S. FFELP Student Loan ABS. Release.

On November 10, 2016, Moody's issued a report entitled: U.S. Housing Finance Agency Single Family Programs. Report.

On November 10, 2016, Moody's issued a report entitled: U.S. Housing Finance Agency Multifamily Methodology. Report.

On November 10, 2016, Moody's issued a report entitled: U.S. Public Housing Authority Capital Fund Bonds. Report.

On November 10, 2016, Moody's issued a report entitled: U.S. Housing Finance Agency Issuer Rating Methodology. Report.

On November 10, 2016, Moody's issued a report entitled: Refining and Marketing Industry. Report.

RMBS and Other Securities Litigation

Majority of Claims Against RBS Dismissed in MBS Suit

On November 14, 2016, plaintiff Federal Home Loan Bank of Boston ("FHLBB") and defendants RBS Securities Inc., RBS Acceptance, Inc., RBS Financial Products, Inc., and RBS Holdings, USA (Inc.) (together, "RBS") filed a joint stipulation seeking the dismissal of certain securities fraud claims alleged by FHLBB in connection with the marketing and sale of 10 RMBS certificates. The stipulation of dismissal does not affect FHLBB’s claims against RBS arising from the sale of two other RMBS certificates, or FHLBB’s claims against any other defendant. FHLBB brought this litigation against RBS and dozens of other defendants in 2011, alleging violations of Massachusetts securities laws and claiming the defendants made untrue statements and omitted material facts about the quality of the loan pools underlying the securities. Further details of the dismissal are not publicly available. Stipulation.

European Financial Industry Developments

European Court of Auditors Special Report on Single Supervisory Mechanism

On November 18, 2016, the European Court of Auditors published a report on the Single Supervisory Mechanism ("SSM") (No 29/2016). The SSM was set up by the European Central Bank ("ECB") to ensure the consistent application of prudential rules across the euro-zone countries. The report examines the setup and workings of the SSM and concludes that the complexity of the new system is a challenge, especially because it relies too heavily on the resources of national supervisors. This means that despite the ECB's overall responsibility, the ECB has insufficient control over some important aspects of banking supervision.

The full report can be found here, but, in brief, specific concerns identified in the report relate to:

• Under resourcing of internal audit for its work on the SSM, which is given less attention than other audit tasks.
• Efforts to ensure transparency and accountability for the SSM towards the European Parliament and the general public are potentially weakened by the lack of a proper process for assessing and then reporting on supervisory effectiveness.
• The independence of the ECB's work relating to monetary policy and supervision functions.
• Insufficient staffing levels and overdependence on staff appointed by national authorities leading to the ECB having insufficient control over the composition and skills of supervision and inspection teams.
• Insufficient allocation of resources to joint off-site supervisory teams.
• Inspection teams for on-site supervision include insufficient ECB staff. There are also concerns over missing guidance on prioritization for inspection requests, IT shortcomings and the qualifications of national competent authority on-site inspectors.

The report sets out a number of recommendations on how the SSM could be improved in relation to issues outlined above and explains that the ECB was not willing to share a number of documents needed for the audit to be completed. As a result, the report only reflects a partial assessment of whether the ECB is managing the SSM efficiently in the areas of governance, off-site supervision and on‑site inspections.

Council of the EU Announces Political Agreement on MMF Regulation

On November 16, 2016, the Council of the EU published a press release announcing that its presidency has reached a provisional agreement with representatives of the European Parliament on the proposed Regulation on Money Market Funds ("MMF Regulation"). The press release can be read in full here.

The agreement reached at the final meeting of political negotiators covers the core issues concerning the regulation of MMFs, such as liquidity and diversification requirements, assets in which MMFs can invest (including the role of government debt) and transparency. It also provides for the European Commission to produce a report on the functioning of the MMF Regulation.

Although an overall agreement has been reached at the political level, a number of technical issues relating to the MMF Regulation are yet to be finalized. Once these are resolved, the agreement will then be submitted to the Council's Permanent Representatives Committee (COREPER) for endorsement on behalf of the Council. The Parliament and the Council will then be called on to adopt the MMF Regulation at first reading.

The MMF Regulation is designed to ensure the smooth operation of the short-term funding market. It follows efforts by the G20 and the Financial Stability Board (FSB) to strengthen the oversight and regulation of the shadow banking system.