Month: September 2012

Consultation on Non-EEA National Depositor Preference Regimes

Posted on

The FSA has published a consultation paper looking at the implications of non-EEA national depositor preference regimes which prioritise the claims of home-country depositors over those of depositors outside the home country if a firm becomes insolvent.

The proposed new FSA rules would prohibit firms from non-EEA  countries that operate such regimes from accepting deposits through a UK branch, unless measures are introduced to eliminate the disadvantage to UK depositors caused by the subordination of their claims in favour of home country depositors.

It is intended that the new rules will be in place by January 2013, with a compliance deadline of January 2015.

Legislative Proposals for an EU Banking Union

Posted on

On September 12, the European Commission published its legislative proposals to establish a single supervisory mechanism (SSM) for eurozone banks. An accompanying communication sets out the ‘roadmap’ for achieving the banking union.

There are two legislative proposals, both of which the Commission has called on the Council of the EU and the European Parliament to adopt by the end of the year:

  • a regulation to create the SSM, which tasks the European Central Bank with prudential regulation policy and provides for non-euro countries to join voluntarily; and
  • a regulation to adapt the existing European Banking Authority Regulation (1093/2010) to ensure the preservation of the integrity of the single market and balanced decision making by the European Banking Authority.

NCUA Sues UBS Over $1.1 billion in RMBS Sold to Collapsed Credit Unions

Posted on

On September 6, 2012, the National Credit Union Administration Board (NCUA) sued UBS in the United States District Court for the District of Kansas.  The NCUA filed the suit in its capacity as Liquidating Agent of U.S. Central Federal Credit Union and Western Corporate Federal Credit Union, which collectively are alleged to have purchased over $1.1 billion in RMBS from UBS.  The complaint alleges that the originators of the mortgages collateralized into the RMBS had “systematically abandoned” the underwriting guidelines described in the offering documents.  The NCUA also alleges that the offering documents contained untrue statements of material fact concerning weighted average LTV ratios, the evaluation of the borrowers’ capacity and likelihood to repay the mortgage loans, and the reduced documentation programs used by the originators.  The NCUA asserts claims under Sections 11 and 12(a)(2) of the Securities Act of 1933, Sections 25401 and 25501 of the California Corporate Securities Law, and the Kansas Uniform Securities Act.  The NCUA seeks rescission or rescissionary damages or, in the alternative, compensatory damages.  NCUA Complaint.

Prudential Files RMBS Lawsuits Against Goldman Sachs and RBS

Posted on

On August 21, 2012, several Prudential entities sued several RBS entities in New Jersey State court seeking to recover damages allegedly suffered in connection with over $343 million in RMBS.  Prudential also sued several Goldman Sachs entities in New Jersey State court on August 24, 2012, seeking to recover damages allegedly suffered in connection with over $270 million in RMBS.  In both cases, Prudential alleges that the offering documents for the RMBS at issue contain untrue statements of material fact and omissions concerning the underwriting standards used to originate the underlying loans, the result of the defendants’ pre-closing due diligence, owner-occupancy rates, the process by which appraisals in connection with the underlying loans were performed, the assignment of the loans to the RMBS trusts, and the credit ratings assigned to the RMBS.  In the case against RBS, Prudential also alleges that the offering documents contain untrue statements of material fact and omissions concerning the loans’ LTV and CLTV ratios; in the case against Goldman Sachs, Prudential also alleges that the offering documents contain untrue statements of material fact and omissions concerning exceptions made during the loan underwriting process.  Prudential asserts causes of action for common-law fraud / fraudulent inducement, aiding and abetting fraud, negligent misrepresentation, and violation of New Jersey’s civil RICO statute.  Prudential seeks compensatory damages, treble damages in connection with its RICO claim, rescission, attorneys’ fees and costs, and prejudgment interest.  RBS Complaint.  Goldman Sachs Complaint.

German Bank Sues Goldman Sachs Over $189 Million in RMBS

Posted on

Deutsche Zentral-Genossenschaftsbank AG (DZ Bank) filed a summons with notice in New York State court on September 7, 2012, against several Goldman Sachs entities asserting claims in connection with DZ Bank’s alleged purchase of 9 RMBS for over $189 million.  DZ Bank alleges that Goldman Sachs provided offering materials that misrepresented or omitted material information about, among other things, the underwriting standards used to originate the underlying loans, the statistical characteristics of the loans, and the transfer of the loans to the RMBS trusts.  DZ Bank asserts causes of action for common-law fraud, fraudulent inducement, negligent misrepresentation, aiding and abetting fraud, declaratory judgment, and contract claims, including rescission, restitution, and mutual mistake.  DZ Bank seeks compensatory damages, punitive damages, and rescission.  Summons.

German High Frequency Trading Act Potential Implications for HFT Firms and Other Firms Using Automated Trading Strategies

Posted on

On July 30, the German Ministry of Finance published a discussion draft bill regarding High Frequency Trading for the German financial services sector in the form of an “Act for the Prevention of Risks and the Abuse of High Frequency Trading” (“HFTA”). The new rules amend various German laws to extend their application to high frequency and algorithmic trading.  Click here to read more.

Rating Agency Developments

Posted on

On September 13, Fitch updated its global rental fleet ABS criteria.  Fitch Report.

On September 13, Fitch updated its global criteria for cash flow analysis in CDOs.  Fitch Report.

 On September 11, DBRS released its criteria for Canadian structured finance transactions, ABCP, and structured finance hedge counterparties.  DBRS Structured Finance Report.  DBRS ABCP Report.  DBRS Hedge Counterparty Report. 

On September 11, Fitch updated its sovereign rating model.  Fitch Release.  Fitch Report.

On September 10, Fitch updated its covered bond criteria.  Fitch Report. 

CFTC Seeks Public Comment on ICE Clear Europe Request about Futures

Posted on

On September 11, the CFTC requested public comment on a petition from ICE Clear Europe Limited for an order pursuant to Section 4d(a) of the Commodity Exchange Act which would permit ICE Clear Europe and its clearing members that are registered futures commission merchants to: (i) commingle in a futures customer account positions in futures and options, and foreign futures and foreign options, and related customer money, securities and property; and (ii) portfolio margin such futures and options, and foreign futures and foreign options, in the futures customer account.  Comments should be submitted by September 25.  CFTC Release.