Orrick's Financial Industry Week in Review

by Orrick, Herrington & Sutcliffe LLP
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Financial Industry Developments

CFPB Reports Risky Practices in Newly Supervised Nonbank Markets

On May 22, the CFPB issued a report highlighting illegal actions uncovered by its supervision of the nonbank payday, debt collection and consumer reporting markets.  These markets are being federally supervised for the first time under the CFPB's authority granted under Dodd-Frank.  Press Release.   

CFTC Announces Actions Relating to Utility Special Entity Swaps, Physical Commodity Hedging and Trading on SEFs and DCMs

On May 22, Acting CFTC Chairman Wetjen announced three actions to (i) protect liquidity for certain end-users of swaps with utility special entities, (ii) further consider certain issues relating to hedging of physical commodities, and (iii) promote trading on Designated Contract Markets (DCMs) and Swap Execution Facilities (SEFs)Press Release.   

Rating Agency Developments

On May 22, Fitch released its rating criteria for commercial real estate (CRE) loans securing covered bonds, which replaces its criteria published in October 2013.  Fitch Report.

On May 22, Kroll released its methodology for rating U.S. Distressed Commercial Real Estate (CRE) Liquidating Trust securitizations.  Kroll Report.

On May 21, Moody's released its methodology for rating companies in the global privately managed toll roads industry, which replaces the operational toll roads methodology published in December 2006.  Moody's Report.

On May 21, Kroll released its methodology for rating single-family rental securitizationsKroll ReportPress Release

On May 20, Fitch updated its Global Structured Finance Rating Criteria applicable to all structured finance asset classes.  Fitch Report.

Note: Free registration is required for rating agency releases and reports.

Asset Management

CFTC Implements Standard Approach for CPO Delegated Investment Management Authority

On May 12, the Division of Swap Dealer and Intermediary Oversight of the CFTC announced the implementation of a standardized, streamlined approach for processing requests for relief where a CPO that has delegated investment management authority as a CPO of a commodity pool to another person who is registered as a CPO, and the delegating CPO does not engage in the solicitation of participants for, or the management of property of, the applicable commodity pool.  Staff Letter.   

SEC Updates FAQs Regarding the Municipal Advisor Registration Rules

On May 19, the SEC updated its Frequently Asked Questions Regarding the Municipal Advisor Registration Rules to clarify when the proceeds of pension obligations bonds should be treated as "proceeds of municipal securities."  In the staff's view, proceeds of pension obligation bonds lose their character as proceeds of municipal securities under the Final Rules upon their contribution to the public pension plan when they are commingled with other pension funds for collective investment and are treated as "spent" to carry our their authorized purposes to fund the public pension plan under applicable state law.  FAQs.  

European Financial Industry Developments

Signature of the Intergovernmental Agreement on the Single Resolution Fund

On May 21, the Council of the EU published the agreement on the transfer and mutualisation of contributions to the single resolution fund (SRF) (also referred to as the intergovernmental agreement (IGA)).  

The Single Resolution Mechanism (SRM) implements the Bank Recovery and Resolution directive in the eurozone and any other participating Member State in the Banking Union. Under the IGA, the SRF will be built up over eight years, reaching a target level of at least one percent of the amount of covered deposits of all credit institutions authorized in all participating Member States.  AgreementPress Release

EU Commission Sends Statement of Objections to Three Banks in Cartel Investigation

On May 20, the European Commission announced that it has sent a statement of objections to Credit Agricole, HSBC and JP Morgan for their suspected participation in the euro interest rate derivatives (EIRDs) cartel.  The Commission is concerned that the three banks have colluded to influence the pricings of EIRDs, contrary to Article 101 of the Treaty on the Functioning of the European Union.  Four other banks have previously admitted their involvement in the cartel, enabling the Commission to settle the case with them and impose fines in December 2013.  However, Credit Agricole, HSBC and JP Morgan did not settle, so the investigation into their involvement continues under the standard (non-settlement) cartel procedure.  Press ReleaseStatement.  

ESMA Publishes Second Risk Dashboard for 2014

On May 16, the European Securities and Markets Authority (ESMA) published its second risk dashboard for 2014. The risk dashboard provides a snapshot of risk issues from the period of January 1, 2014 to March 31, 2014. Among other things, ESMA reports that: 

    • systemic stress indicators rose from a position of relative calm in EU financial markets, mirroring a re-emergence of heightened uncertainty at both global and EU levels;
    • liquidity risk remained broadly stable, with signals continuing to be mixed;
    • market risk rose as the uncertainties of an uneven recovery, and their implications for likely policy reactions, intensified at both global and EU levels;  
    • EU contagion risk remained broadly stable, though its nature appeared to shift; and
    • credit risk remained high, with the build-up of risks in new areas offsetting continued improvement in others.  Risk Dashboard.
Events

Orrick's Annual Financial Services Roundtable, June 11

Members of Orrick's Employment Law & Litigation Group invite you to join an interactive discussion of critical employment law issues impacting the financial services industry. Roundtable discussion topics include wage-and-hour cases impacting the financial services industry, employee background checks, update on EEOC and OFCCP enforcement initiatives for 2014 and the latest whistleblower law developments under federal and new California state law.  For more information and to register for this event, please click here.  

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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