Rating Agency Developments

On June 25, S&P announced the categories of debt instruments whose ratings will carry a structured finance identifier as required under the new European regulation on credit rating agencies. The symbol will be applied to all relevant structured finance ratings globally by early September. S&P Release.

On June 24, S&P revised its methodology for deriving recovery rates for U.S. CMBS held in re-REMICs or CDO transactions. S&P Release.

On June 24, Fitch released a report on ratings comparability which discusses Fitch’s goal of comparability of default risk across asset classes for like-rated securities. Fitch Release.

On June 21, S&P published updated assumptions for loan losses that banks in Spain will experience under their credit stress testing methodology. S&P Release.

On June 21, S&P published its revised methodology and assumptions for global railcar and container lease securitizations. S&P Release.

On June 22, DBRS published its methodology for rating Canadian equipment finance securitizations. DBRS Release.

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Basel Committee Announces Adjustments to Basel II Requirements

On June 18, the Basel Committee on Banking Supervision announced adjustments to the Basel II market risk framework which was released in July 2009. The Committee: (i) reconfirmed the capital charge for non-correlation trading securitization positions, though a two-year transition period will be implemented during which charges may be based on the larger of the capital charges for net long and net short positions; (ii) set the floor for the correlation trading securitization positions at 8% of the standardized measurement method; and (iii) agreed to a coordinated start date of not later than December 31, 2011 for all elements of the July 2009 trading book package, which includes the Revisions to the Basel II Market Risk Framework and Guidelines for Computing Capital for Incremental Risk in the Trading Book. Release.

Obama Administration Approves State Plans for Use of Foreclosure Prevention Funding

On June 23, the Obama Administration approved the plans of the State Housing Finance Agencies in Arizona, California, Florida, Michigan, and Nevada to use $1.5 billion in “Hardest Hit Fund” foreclosure-prevention funding. This first round of funding will support local initiatives to assist struggling homeowners in those states.  Treasury Release.

Fed, OCC, OTS, and FDIC Issue Final Guidance on Incentive Compensation

On June 21, the Fed, the OCC, the OTS, and the FDIC issued guidance on incentive compensation arrangements at financial organizations, finalizing the proposed guidance issued by the Fed last October. The guidance will become effective on the date of publication in the Federal Register. Release.  Guidance.

Rating Agency Developments

On June 16, Fitch released a report discussing loss mitigation and modification efforts, including both HAMP and non-HAMP modifications, undertaken by RMBS servicers. Fitch Report.

On June 14, S&P published capitalization rate assumptions and updated its methodology for evaluating the CMBS collateral typically included in U.S. CMBS transactions that it rates. S&P Release (capitalization rate assumptions). S&P Release (methodology). 

On June 11, Moody’s updated its methodology for rating insurance trust preferred security CDOs, and U.S. bank trust preferred security CDOs. Moody’s Release (insurance trust preferred security CDOs). Moody’s Release (U.S. bank trust preferred security CDOs).

On June 17, S&P provided its methodology and assumptions for assessing primary mortgage insurance in Mexican RMBS. S&P Release.

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CFTC Approves Box Office Receipt Contracts

On June 14, the CFTC found that the terms and conditions of the proposed Weekend Motion Picture Revenue futures and binary option contracts for the motion picture Takers, submitted by Media Derivatives, Inc., do not violate the Commodities Exchange Act or the CFTC’s regulations under the Act, and therefore approved the contracts.  The CFTC found that the contracts are based on commodities, are not readily susceptible to manipulation and serve an economic hedging purpose.  Release.  Statement of the CFTC.

EU Public Consultation on Short Selling and Credit Default Swaps

On June 14, the European Commission launched a public consultation on options being considered for a forthcoming legislative proposal dealing with potential risks arising from short selling and credit default swaps. Responses to the consultation are requested by July 10. Consultation. FAQs. Consultation Document.

Fed Issues Final Credit Card Act Rule on Penalty Fees and Rate Reevaluations

On June 15, the Fed approved a final rule to protect credit card users from unreasonable late payment and other penalty fees and to require credit card issuers to reconsider interest rate increases imposed since the beginning of last year. The final rule represents the third stage of the Fed’s implementation of the Credit Card Accountability Responsibility and Disclosure Act of 2009. The provisions of the Act addressed in this rule will generally go into effect on August 22. Federal Release.  Final Rule.

Rating Agency Developments

On June 7, S&P released revised assumptions for minimum reinvestment interest rates in fixed-rate U.S. structured finance and municipal housing bonds. S&P Release.

On June 7, S&P refined its methodology and assumptions for analyzing insurer capital adequacy under their risk-based capital model. S&P Release.

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