Orrick's Financial Industry Week in Review - January 28, 2013


Financial Industry Developments

CFPB Rule on Originator Compensation

On January 20, the CFPB issued a final rule implanting the requirements and restrictions imposed by the Dodd-Frank Act on: (i) loan originator compensation; (ii) qualifications of, and registration or licensing of loan originators; (iii) compliance procedures for depository institutions; (iv) mandatory arbitration; and (v) the financing of single-premium credit insurance.  The rules relating to arbitration and credit insurance will be effective on June 1, with the remaining provisions of the rule becoming effective on January 10, 2014.  CFPB Release.  CFPB Summary.  CFPB Final Rule.   

Treasury and IRS FATCA Regulations

On January 17, Treasury and the IRS issued comprehensive final regulations implementing the information reporting and withholding tax provisions commonly known as the Foreign Account Tax Compliance Act (FATCA).  These regulations finalize the step-by-step process for U.S. account identification, information reporting, and withholding requirements for foreign financial institutions (FFIs), other foreign entities, and U.S. withholding agents.  Treasury Release.  FATCA Information.

Rating Agency Developments

On January 25, DBRS published its methodology for Canadian structured finance flow-through ratings.  DBRS Methodology.

On January 22, DBRS published its methodology on rating European consumer and commercial asset-backed securitizations.  DBRS Methodology.  

On January 24, KBRA published its U.S. credit card ABS rating methodology.  KBRA Report.

On January 22, Fitch published its updated global rating criteria for dealer floorplan ABS.  Fitch Release.  Fitch Criteria.

Recent Orrick Alerts

Derivatives Reform in Europe: European Market Infrastructure Regulation and the Regulatory Technical Standards

The European Market Infrastructure Regulation (EMIR) will transform the clearing and reporting of derivative contracts in the EU.  While the process for finalizing the requirements has been ongoing for some time, the regulatory and implementing technical standards were adopted last month and a number of obligations are intended to come into force in 2013.  With firms engaged in the implementation process, our regulatory team has prepared a summary Client Alert (which includes a link to a more detailed analysis of these provisions).  Click here to read more.    

European Financial Industry Developments

International Organization of Securities Commissions: Report on the Distribution of Complex Financial Products

On January 21, the International Organization of Securities Commissions (IOSCO) published its final report on the suitability requirements for the distribution by intermediaries of complex financial products to both retail and non-retail customers.  The report seeks to promote consumer protection and sets out nine principles to be applied by policy makers at a national level in accordance with the particular types of customers in their jurisdiction.  Rather than giving a precise list of what the IOSCO considers to be complex financial products, the report instead provides criteria by which such products can be determined and identified.

The nine principles at the core of the report concern the following areas: enforcement, incentives, customer classification, overarching duties to all customers (regardless of classification), customer protection for non-advisory services, suitability protection for advisory services, compliance and disclosure.

 European Banking Authority: Development of Recovery Plans

On January 23, the European Banking Authority (EBA) published its formal recommendation regarding the development of recovery plans for certain EU banks.  The recommendation comes in advance of the proposed Recovery and Resolution Directive, which will task the EBA with the development and co-ordination of recovery and resolution plans.  By providing guidance to ensure a coordinated recovery approach across the EU, it is hoped that Europe’s banks and economies will be in a collectively stronger position to resolve adverse financial circumstances.  The recommendation identifies a group of 39 banks which should be asked to present group recovery plans to their respective competent authorities by December 31, 2013.  It also suggests that these plans should be drafted in accordance with Annex 2 of the recommendation, which sets out a template comprising the following three sections:

    • a general overview and summary of the recovery plan;
    • core details of the recovery plan, including a list of available options should a crisis situation arise and an assessment of their impact and execution; and
    • follow-up measures to be taken once the core of the recovery plan is in place.

Joint Finalized Guidance from the FSA and OFT on Payment Protection Products

On January 24, the FSA and the Office of Fair Trading (the OFT) published their joint finalized guidance on payment protection products.  The guidance sets out what the FSA and OFT require of firms as they seek to develop new payment protection products to meet the needs of consumers similar to those met by payment protection insurance (PPI).  The guidance stresses that new payment protection products may pose similar risks as PPI. When developing new payment protection products, firms should be mindful of the importance of: 

    • identifying the target market for the protection;
    • ensuring that the cover offered meets the needs of that target market; and
    • avoiding the creation of barriers to comparing, exiting or switching cover.

American Securitization Forum 2013 Conference

January 27-30, 2013 – ASF 2013 is the largest capital markets conference in the world. Hosted by the American Securitization Forum at the ARIA Hotel and Convention Center in Las Vegas, NV., the conference attracts the industry's top professionals where they will discuss the most relevant topics and challenges in the industry.  Orrick is an Associate-level sponsor, and several partners, of counsel and associates will attend.  On January 28, Howard Altarescu will be speaking on a panel regarding the Private Label RMBS Sector.  Click here to view the current agenda.


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