Morgan Stanley Reaches Agreement to End DOJ Investigation into MBS Deals

On February 25, 2015, Morgan Stanley announced that it reached an agreement in principle with the U.S. Department of Justice, Civil Division, and the U.S. Attorney’s Office for the Northern District of Califoirnia, Civil Division (collectively, the “Civil Division”) to resolve claims that the Civil Division intended to bring against Morgan Stanley related to residential mortgage-backed securities.  As part of the settlement, Morgan Stanley agreed to pay the Civil Division $2.6 billion.  The exact nature of the resolved claims and additional terms of the settlement agreement were not specified.  8-K.

EBA Opinion on Regulation of EU Lending-Based Crowdfunding

On February 26, 2015, the European Banking Authority (“EBA“) published an opinion on lending-based crowdfunding. The opinion notes that certain Member States (France, Italy, Spain and the UK) have created specific regulations to address risks arising from crowdfunding. Italy’s regulation only covers investment-based crowdfunding. In Spain, the draft law in the final approval stages. The EBA concludes that the convergence of practices across the EU for the supervision of crowdfunding is desirable in order to avoid regulatory arbitrage, create a level playing field, ensure that market participants can have confidence in crowdfunding, and contribute to the single European market.

The EBA considers that crowdfunding, whilst still at an early stage, should be regulated by existing legislation, the most relevant being the Payment Services Directive (the “Directive“), but acknowledges that the lending aspects of crowdfunding are not regulated by EU law.

The EBA also stated that the business models of lending-based crowdfunding platforms do not fall inside the perimeter of credit institutions with the result that funds provided by lenders to crowdfunding platforms would not qualify as deposits eligible for protection under a deposit guarantee scheme, representing a further risk to lenders.  Opinion.

ECB Publishes Eurosystem Oversight Report

On February 27, 2015, the European Central Bank (“ECB“) published its 2014 Eurosystem oversight report, the third such report, reviewing the oversight that the Eurosystem has performed in the period from 2011 to mid-2014.  The Eurosystem is the monetary authority of the Eurozone and consists of the European Central Bank and the central banks of each of the Eurozone member states.

The oversight report focuses on the Eurosystem’s oversight of financial market infrastructures, including payment systems, securities and derivatives clearing and settlement systems and trade repositories.

The oversight report also discusses future work priorities. The future work priorities state that the oversight priorities of the Eurosystem will still be driven by the implementation measures of the regulatory reform process and the need to avoid the emergence of systemic risks in the Eurozone. The Eurosystem will also conduct assessments of the design and operation of T2S, the securities settlement platform operated by the Eurosystem that is set to go live in June 2015. Finally the Eurosystem will continue to conduct regular analyses of correspondent banking activities and is currently reviewing its assessment guides for credit cards, direct debits and credit transfers.  Report.

Federal Reserve Board Extends Comment Period

On February 26, the Federal Reserve Board extended until April 3 the comment period for its proposed rule to implement capital surcharges for the largest, most systemically important U.S. bank holding companies. The proposed rule would establish a methodology to identify whether a firm is a global systemically important banking organization and would also establish the size of a firm’s risk-based capital surcharge. The proposal is designed to further strengthen the capital positions of these institutions.  Release.

CFTC Reopens Comment Periods

On February 24, the CFTC submitted for publication in the Federal Register a notice reopening the comment periods for the two Position Limit rulemakings, in anticipation of questions and comments that may arise from the Commission’s Energy and Environmental Markets Advisory Committee meeting.  Release.

FHFA House Price Index Shows Increases for Fourteen Consecutive Quarters

On February 26, the FHFA House Price Index showed that U.S. house prices rose 1.4 percent in the fourth quarter of 2014.  This marked the fourteenth consecutive quarterly price increase in the purchase-only, seasonally adjusted index.  House prices rose 4.9 percent from the fourth quarter of 2013 to fourth quarter of 2014.  Release.

 

SEC Chair and European Union Financial Services Commissioner Meet

On February 26, the SEC Chair Mary Jo White hosted a meeting with European Union Financial Services Commissioner Jonathan Hill. Chair White and Commissioner Hill discussed the importance of international cooperation in regulating global financial markets and a variety of other topics of mutual interest, including market structure, asset management, accounting standards and small business capital formation.  They also discussed Commissioner Hill’s proposal for an EU Capital Markets Union.  Release.

European Commission Publishes Green Paper on Building a Capital Markets Union

On February 18, the European Commission published a green paper on building a Capital Markets Union.

The green paper identifies a number of key priorities to create a fully integrated single market for capital. The early action priorities include relaxing rules around securitization, reviewing the prospectus regime, widening the small and medium-sized investor base by ensuring comparable cross-border credit information and credit-scoring, developing private placement markets by introducing common market practices, principles and standardizes documentation and boosting long-term investment through the European Fund for Strategic Investment and the European Long-Term Investment Funds regulatory framework.

The Commission will publish an action plan later in 2015 to identify and remove barriers for the free movement of capital, and aims to have in place a fully functioning Capital Markets Union by 2019.  Green Paper.

 

ICMA Publishes a Guide to the Pan-European Private Placement Market

On February 11, the International Capital Market Association (ICMA) published a guide on common market standards and best practices for the development of Pan-European private placement (PEPP) transactions. The guide is intended to be a foundation for a truly pan-European private placement market.

The guide states the market characteristics of a PEPP transaction and includes a guide to negotiation and documentation, emphasizing the utility of the Loan Market Association’s standard documents which were issued in January 2015. The guide further explains the roles of the parties in a PEPP transaction and gives an indicative timetable.

ICMA states that the guide is intended as guidance only and that negotiation of the contractual terms for each document in a PEPP transaction is essential. The guide will be updated and supplemented as the PEPP market and corresponding practice develops throughout the Member States of the European Union.  Guide.