On May 3, investors and capital markets participants will discuss solar securitization trends and possibilities at IMN’s 1st Annual Sunshine Backed Bonds Conference in New York. Renewable energy providers will have the unique opportunity to network with ABS investors interested in exploring renewable energy backed securities as a potential alternative investment. Orrick is an Associate Level Sponsor. Howard Altarescu will moderate the Exploring the Role of Securitization in Renewable Energy Finance panel.
Month: April 2013
FCA and PRA Publish Respective Approaches to Regulatory Failure
On April 19, the FCA and PRA (who together have taken over the powers of the FSA) published their respective approaches to investigating and reporting on regulatory failure, as required under the Financial Services Act 2012 (FS Act).
Part 5 of the FS Act outlines the tests for determining when each regulator must carry out an investigation into possible regulatory failure and provide reports of its findings and recommendations to HM Treasury. The tests are different for each regulator and will relate to their respective statutory objectives. The FCA and PRA statements of policy satisfy the FS Act which requires each regulator to explain how it will meet its statutory requirement to investigate possible occurrences of regulatory failure and to produce a report. PRA Approach. FCA Approach.
Banking Reform Bill Completes Committee Stage in House of Commons
On April 16, the Financial Services (Banking Reform) Bill 2012-13 completed its committee stage in the House of Commons. A revised version of the Bill, as amended in the committee stage, has been published.
The main aim of the Bill is to give HM Treasury and the relevant regulators powers to implement the recommendations of the Independent Commission on Banking (ICB) on ring-fencing requirements for the banking sector. The Bill is intended to make the banking sector safer, more resilient and more resolvable. The Bill will now pass to the report stage in the House of Commons. Banking Reform Bill.
Second Circuit Rejects Edge Act Jurisdiction in AIG RMBS Case
On April 19, the Second Circuit ruled that a lawsuit brought by American International Group (AIG) against several Bank of America entities involving alleged fraud in connection with $28 billion in RMBS had been improperly removed from state to federal court. Judge Barbara Jones of the United States District Court for the Southern District of New York had denied AIG’s motion to remand the case to New York state court, finding removal proper under the Edge Act, a statute enacted in 1919 that provides for federal jurisdiction if two conditions are met: (1) an international banking and financial corporation organized under the laws of the United States (an Edge Act corporation) must be a party; and (2) the lawsuit must involve an offshore banking transaction. The district court found that these conditions had been met because one defendant – Bank of America, N.A. (BANA) – was an Edge Act corporation and because 27 of the 1.7 million residential mortgage loans underlying the RMBS at issue were secured by properties outside of the United States. The Second Circuit vacated and remanded the district court’s decision for further proceedings, allowing defendants to press their other ground for removal – “related to” bankruptcy jurisdiction – that was not addressed in this interlocutory appeal. It held that the Edge Act only provided jurisdiction where the Edge Act corporation has engaged in the relevant offshore banking transaction. Because BANA did not originate the 27 international mortgage loans, the Second Circuit found that the Edge Act’s requirements were not satisfied, and that federal jurisdiction under the Edge Act therefore did not exist. Opinion.
Rating Agency Developments
On April 18, Fitch released its guidelines for rating state credit enhancement programs. Fitch Report.
On April 17, Moody’s released its methodology for rating general obligation bonds issued by U.S. local governments. Moody’s Report.
On April 15, DBRS released its methodology for rating Canadian covered bonds. DBRS Report.
Note: Free registration is required for rating agency releases and reports.
Joint Release on Additional Guidance for Resolution Plans
On April 15, the FDIC and the Fed issued a joint release which provides additional guidance, clarification and direction for the first group of 11 institutions filing their resolution plans pursuant to the Dodd-Frank Act. Separate guidance was issued for domestic and foreign-based institutions. Joint Release. Domestic Guidance. Foreign-Based Guidance.
European Commission Opens Antitrust Investigation into MasterCard
The Commission initiated an investigation last week into the inter-bank fees charged by MasterCard in relation to payments made by card-holders from non-EEA countries, restrictions placed by MasterCard on retailers attempting to reduce the cross-border fees they pay and MasterCard’s business rules and practices.
The Commission is concerned that MasterCard’s behaviour is anti-competitive, with inter-bank fees being largely passed on to retailers, harming EU consumers and affecting cross-border business.
The Commission press release announcing the investigation is available here.
FCA Publishes Occasional Papers on Behavioural Economics Exploring How People Make Financial Decisions
In his first speech as CEO of the FCA, Martin Wheatley vowed to crack down on unsuitable financial products by using elements of behavioural economics to better understand investor decisions.
The FCA is interested in behavioural economics to help the regulator understand the mistakes consumers make, how firms respond to these mistakes, how this affects competition and what interventions the FCA might consider. The FCA published a research paper on how it intends to implement behavioural economics in its work.
RBS to Face FCA Investigation into IT Failures
The FCA announced that it will conduct a formal investigation into the IT malfunction at RBS last summer, which left 17 million of its customers unable to access their accounts for up to three weeks. The investigation could result in enforcement action being taken against RBS.
Because of the public interest in the matter, the financial regulator took the unusual step of publicly announcing its investigation, as is allowed in “exceptional” circumstances in the FCA Handbook.
Court Denies Goldman Sachs’s Motion to Dismiss RMBS Action Brought by Prudential
On April 9, Judge Susan Wigenton of the U.S. District Court for the District of New Jersey denied Goldman Sachs’s motion to dismiss Prudential’s complaint alleging fraud in connection with the sale of $375 million in RMBS. Goldman argued that Prudential cannot bring claims under New Jersey state laws because Goldman is based in New York and the alleged misrepresentation and omissions at issue were contained in offering materials drafted and disseminated from New York. Judge Wigenton concluded it was premature to make a choice of law determination and held that Prudential had adequately pleaded its fraud, negligent misrepresentation, civil RICO and RICO conspiracy claims under New Jersey law. Decision.