Rating Agency Developments
On November 9, 2016, Fitch updated its ratings criteria for analyzing U.S. wireless tower transactions. Report.
On November 8, 2016, DBRS published its ratings methodology for Canadian trade receivable securitization transactions. Report.
On November 8, 2016, DBRS published its ratings methodology for Canadian residential mortgages, home equity lines of credit and reverse mortgages. Report.
On November 8, 2016, DBRS published its ratings methodology for Canadian credit card and personal line of credit securitizations. Report.
On November 4, 2016, Fitch updated its ratings criteria for charter schools. Report.
European Financial Industry Developments
European Parliament Writes to EBA About the Development of Regulatory Technical Standards (RTS) on Strong Customer Authentication and Secure Communication
On November 11, 2016, the EBA published a letter (dated October 24, 2016) from the European Parliament in relation to the development of regulatory technical standards ("RTS") on strong customer authentication ("SCA") and secure communications under the Revised Directive on Payment Services ("PSD2") in the internal market ((EU) 2015/2366).
The European Parliament's negotiating team is of the view that payment initiation service providers and account information service providers should have direct access to the payer's account without being required by an account servicing payment service provider to use a particular business model. In its letter, the European Parliament therefore raised its concerns surrounding the EBA's proposal for a dedicated interface that could give rise to account servicing payment service providers excluding or limiting direct access to a payer's account via existing online banking facilities. Article 98(2) of PSD2 mandates that the EBA develop RTS in order to secure and maintain fair competition among all payment service providers and to ensure technology and business model neutrality, and the introduction of the dedicated interface will go against this principle.
The European Parliament also stated in its letter that it is of the view that the RTS are unclear in relation to the exemptions from the SCA (notably, whether the exemptions are optional or mandatory).
Implementing Regulation on Information for Calculation of Technical Provisions and Basic Own Funds for Q4 2016 Reporting Under Solvency II Adopted by European Parliament
On November 11, 2016, the European Commission adopted an Implementing Regulation laying down information for the calculation of technical provisions and basic own funds for reporting with reference dates from September 30 until December 30, 2016, in accordance with the Solvency II Directive (2009/138/EC).
EIOPA provided the Commission with the technical information related to end of September 2016 market data on October 11, 2016, which was published in accordance with Article 77E(1) of Solvency II.
The aim is that by setting out technical information on relevant risk-free interest rate term structures, fundamental spreads for the calculation of the matching adjustment and volatility adjustments for every reference date, conditions for the calculation of technical provisions and basic own funds will be uniform across all insurance and reinsurance undertakings for the purposes of Solvency II.
The annexes to the Implementing Regulation set out the technical information to be used by reinsurance and insurance undertakings for the reference dates from September 30 to December 30, 2016, are as follows:
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Annex I: the relevant risk-free rate term structures.
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Annex II: the fundamental spreads for the calculation of the matching adjustment.
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Annex III: the volatility adjustments for each relevant national market.
Econ Vote on Resolution on Basel III Revisions
On November 10, 2016, the European Parliament published a press release on a vote taken by its Committee on Economic and Monetary Affairs ("ECON") in relation to revisions to Basel III, which are currently under consideration by the Basel Committee on Banking Supervision ("BCBS").
The text of the resolution has not been published, yet the release states that it calls on the European Central Bank ("ECB"), the European Commission ("EC") and the EBA to engage in the BCBS's work and report to the ECON on their progress. Furthermore, the press release states that the revisions should:
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strengthen the overall financial provision of European banks but should not significantly increase overall capital requirements;
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respect the principle of proportionality and the important role played by banks in financing the European economy; and
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consider and mitigate the differences between jurisdictions and, at the same time, avoid penalizing the EU banking model.
The resolution will be considered by the European Parliament in its plenary session between November 21, 2016 and November 24, 2016.
The package of reforms to Basel III is expected by the end of 2016 and will cover issues such as internal ratings-based ("IRB") approaches and operational risk as well as the standardized approach for credit risk.
