Financial Industry Developments
CTFC Approves Re-Proposal of Position Limits Regulation
On December 5, 2016, the U.S. Commodity Futures Trading Commission ("CFTC") unanimously approved to re‑propose rules that implement limits on speculative futures and swap positions. Separately, the CFTC also approved final rules on aggregation of positions, a component of the existing position limits framework. The comment period ends 60 days after publication of the re-proposal in the Federal Register. Release.
OCC to Move Forward With Considering Fintech Charter Applications
On December 2, 2016, Comptroller of the Currency Thomas J. Curry announced that the Office of the Comptroller of the Currency ("OCC") would move forward with considering applications from fintech companies that conduct at least one of three core banking activities (i.e., receiving deposits, paying checks or lending money) to become special purpose national banks. Fintech companies will have the option to seek a charter, and the OCC will evaluate applicants to ensure they have a reasonable chance of success, appropriate risk management, effective consumer protection and strong capital and liquidity.
The OCC simultaneously published a paper discussing the issues and conditions that the agency will consider in granting special purpose national bank charters. Comments to the paper may be submitted through January 15, 2017. For further discussion relating to the announcement, please see "National Bank Charters for Fintech Companies." Orrick Alert. Release. White Paper.
CTFC Approves Minimal Capital Requirements for Swap Dealers and Major Swap Participants
On December 2, 2016, the U.S. Commodity Futures Trading Commission (CFTC) unanimously approved proposed rules that establish minimum capital requirements for swap dealers and major swap participants. The proposed rules set out minimum levels of qualifying capital for swap deals and major swap participants that are not subject to the capital rules of a prudential regulator. The comment period ends 90 days after publication of the proposal in the Federal Register. Release.
Rating Agency Developments
On December 7, 2016, Moody's published its ratings methodology for sustainable net cash flow and value for CMBS and CRE CDO CLO real estate collateral in the Americas and ex-Japan Asia Pacific. Report.
On December 6, 2016, DBRS published its methodology for rating European covered bonds. Report. Addendum.
On December 1, 2016, DBRS updated its master ratings methodology for U.S. asset-backed securitizations ("ABS"). Report.
On December 1, 2016, DBRS updated its ratings methodology for U.S. structured finance transactions. Report.
On December 1, 2016, DBRS updated its methodology for evaluating U.S. ABS originators. Report.
On December 1, 2016, DBRS updated its methodology for evaluating U.S. ABS servicers. Report.
On December 1, 2016, Fitch updated its U.S. RMBS master rating criteria. Report.
On December 1, 2016, Fitch updated and merged its ratings criteria for analyzing U.S. RMBS backed by seasoned performing, re‑performing and non‑performing loans purchased in the secondary market and issued starting in 2014. Report.
On December 1, 2016, Fitch updated its global consumer ABS rating criteria for analyzing ABS backed by consumer receivables globally. Report.
On December 1, 2016, Fitch updated its ratings criteria for analyzing large loans in CMBS. Report.
Distressed Debt and Restructuring Developments
Supreme Court Hears Oral Argument in Jevic on Whether Distribution of Settlement Proceeds May Depart From Statutory Priority Scheme
The United States Supreme Court heard oral arguments on December 7, 2016 in Czyzewski v. Jevic Holding Corp. The case poses a question that has divided the Second, Third, and Fifth Circuits: Whether a bankruptcy court may authorize the distribution of settlement proceeds in a way that departs from the statutory priority scheme in the Bankruptcy Code, including through a so-called "structured settlement." Read More.
Sixth Circuit Finds Bankruptcy Court Cannot Force City to Provide Services in Chapter 9
On November 14, 2016, the United States Court of Appeals for the Sixth Circuit held that courts in chapter 9 cases lack authority to order a municipal debtor to provide services to its constituents. Affirming the bankruptcy court's dismissal of customers' claims arising from the termination of their water service by the Detroit Water and Sewerage Department, the Sixth Circuit held that section 904 of the Bankruptcy Code prohibits a chapter 9 court from entering orders that "interfere" with a municipality's "political [and] governmental powers." In re City of Detroit, Mich., No. 15-2236, 2016 WL 6677715 (6th Cir. Nov. 14, 2016). Read More.
European Financial Industry Developments
Council of EU Postpones PRIIPS Regulation by One Year
On December 8, 2016, the Council of the EU announced that it has adopted a Regulation postponing the application date of the Regulation on key information documents (KIDs) for packaged retail and insurance‑based investment products ("PRIIPs"). (Regulation 1286/2014) (PRIIPs Regulation).
The PRIIPs Regulation will now apply from January 1, 2018 rather than December 31, 2016.
In the Council's press release on December 8, 2016, the Council explained that the delay will enable regulatory technical standards (RTS) to be defined, leaving enough time for the industry to adapt to the new rules.
The Council published a document (PE-CONS 51/16) setting out the text of the Regulation postponing the application of the PRIIPs Regulation.
European Commission Report on Benchmarking of Diversity Practices Under CRD IV
On December 8, 2016, the European Commission published a report on benchmarking of diversity practices under the CRD IV Directive (2013/36/EC).
Article 161(5) of the CRD IV Directive requires the Commission to review and report to the Council of the EU and the European Parliament on the results reached under the diversity benchmarking, including the appropriateness of benchmarking diversity practices.
The Commission discusses the EBA's report and reaches the conclusion that:
It would not be useful at this stage to envisage putting forward a legislative proposal to amend the provisions of the CRD IV Directive diversity provisions, given that it is satisfied with the added value of the benchmarking diversity practices;
There is still considerable room for improvement both in having diversity policies in place and achieving greater diversity of the management bodies of institutions;
The majority of the sampled institutions were not compliant with the CRD IV Directive requirement of putting in place a policy promoting the diversity of their management bodies; and
The majority of the institutions that had set a gender diversity target had not yet met it or had not set a timeline for doing so (or both).
ESMA Consultation on Consolidated Tape for Non‑Equity Products RTS Under MiFID II: Responses
On December 8, 2016, ESMA published the responses it has received to its consultation on draft regulatory technical standards (RTS) specifying the scope of the consolidated tape for non‑equity financial instruments under Article 65(8)(c) of the MiFID II Directive (2014/65/EU).
The Investment Association;
International Capital Market Association;
Wholesale Markets Brokers' Association (WMBA)
Association française des investisseurs institutionnels; and
Deutsche Börse Group.
ESMA will use the feedback it receives to finalize the draft RTS, which will be submitted to the Commission for endorsement. The date of application of MiFID II Directive and MiFIR is January 3, 2018.