Month: June 2014

Basel Committee on Banking Supervision Publishes Consultative Document on Guidelines Concerning Weak Banks

On June 18, the Basel Committee on Banking Supervision (BCBS) published a consultative document on supervisory guidelines for identifying and dealing with weak banks.  The guidelines are intended to assist bank supervisors and include information on supervisory preconditions for dealing with weak banks; techniques to identify weak banks; preparatory work on recovery; and corrective measures.

The BCBS has requested comments on the consultative document by September 19, 2014.  Document.

Council of EU Agrees on General Approach on the Fourth Money Laundering Directive and Revised Wire Transfer Regulation

On June 15, the Council of the EU published a note (dated June 13, 2014) outlining the general approach of the Presidency of the Council of the EU to the proposed Fourth Money Laundering Directive (MLD 4).

On June 15, the Council of the EU also published a note (dated June 13, 2014) outlining the general approach of the Presidency of the Council of the EU to the proposed revised Wire Transfer Regulation (WTR).

On June 18, the Council of the EU published a press release stating that its Permanent Representatives Committee has called upon the incoming Italian presidency to begin negotiations with the European Parliament to adopt MLD 4 and the revised WTR.

MLD 4 contains, among other things, specific provisions concerning the identification of beneficial ownership.  The proposed directive and regulation are intended to ensure consistency between EU anti-money laundering rules and the international approach.  MLD4 ApproachWTR ApproachPress Release.

New York Appellate Division Affirms Denial of Merrill Lynch’s Motion to Dismiss Repurchase Claims

On June 17, New York’s Appellate Division, First Department intermediate appellate court affirmed the denial of Merrill Lynch’s motion to dismiss a repurchase suit brought by two RMBS Trusts.  The plaintiff-trusts allege that Merrill Lynch violated its contractual obligations to repurchase loans acquired from the now-bankrupt originator ResMae Mortgage Corporation.  The parties dispute whether Merrill Lynch guaranteed ResMae’s obligation to repurchase loans that breached representations and warranties in the event that ResMae was not able to do so.  The First Department held that the contractual provision at issue was ambiguous and extrinsic evidence would be required to determine its meaning.  Supreme Court DecisionFirst Department Decision.

SunTrust Settles with DOJ for US$968 Million

On June 17, the United States Department of Justice announced a US$968 million settlement with SunTrust Mortgage Inc.  Other parties to the settlement are the Department of Housing and Urban Development, the Consumer Financial Protection Bureau, and the attorneys general of 49 states and the District of Columbia.  The settlement resolves allegations of mortgage loan origination, servicing, and foreclosure abuses.  Approximately US$500 million of the settlement will be used for homeowner relief.  The settlement also resolves claims under the False Claims Act that SunTrust originated and underwrote Federal Housing Administration-insured mortgages that did not meet applicable requirements.  Press Release.

RBS Settles with FHFA for US$99.5 Million

On June 19, the Federal Housing Finance Agency (FHFA) and RBS Securities Inc. (RBS) announced a US$99.5 million settlement of claims that FHFA brought against RBS in a case against a number of financial institutions in the United States District Court for the Southern District of New York.  FHFA alleged that RBS made false and misleading statements in disclosures relating to six RMBS securitizations.  It brought claims for violations of Sections 11 and 12(a)(2) of the Securities Act of 1933, as well as the Virginia Securities Act.  The settlement does not resolve claims that FHFA brought against RBS in two other actions pending in the Southern District of New York and the District of Connecticut, nor does it resolve FHFA’s claims against any other defendant.  RBS did not admit any liability or wrongdoing.  Settlement Agreement

Fund Managers Sue Deutsche Bank for Breach of Contract and Fiduciary Duty

On June 18, financial institutions including BlackRock Inc., Pacific Investment Management Co., Prudential Financial Inc., DZ Bank AG, and Charles Schwab Co., sued Deutsche Bank National Trust Company in New York state court.  The suit alleges that Deutsche Bank breached contractual representations and warranties, knew there were defects in the loan origination process, and breached its fiduciary duty as to 544 RMBS trusts for which it served as trustee.  The plaintiffs also allege that the servicers of the trusts failed to give notice of the representation and warranty breaches or to enforce repurchase obligations, and that Deutsche Bank knew of these issues.  The complaint asserts six causes of action: (1) breach of contract; (2) violation of the Trust Indenture Act; (3) negligent breach of pre-default duty of independence; (4) breach of the fiduciary duty of care; (5) negligent breach of the duty of care; and (6) breach of the post-default fiduciary duty of independence.  The plaintiffs seek damages and costs.  Complaint

ACE Files Complaint Re-Asserting Repurchase Claims Dismissed by the First Department

On June 18, trustee HSBC filed suit on behalf of ACE Securities Corp. Home Equity Loan Trust Series 2006-SL2 against DB Structured Products, Inc., a Deutsche Bank Subsidiary, in New York state court.  The complaint attempts to revive claims previously dismissed by New York’s First Department intermediate appellate court.  In its December 2013 decision, the First Department held that the Trustee’s claims were untimely and that the certificate holder-plaintiffs who initially had brought the claims lacked standing to sue.  Plaintiff asserts that the new complaint is properly brought under a procedure that permits refiling a suit within six months after dismissal on certain grounds, alleging that it has cured the deficiencies previously identified by the First Department.  In the new action, the plaintiff again alleges that DB Structured Products breached contractual representations and warranties related to mortgage loans underlying the securitization at issue.  Complaint.

Rating Agency Developments

On June 18, Fitch released its criteria for analyzing multi-borrower U.S. CMBS transactionsFitch Report.

On June 18, Fitch released its criteria for rating securitizations in emerging marketsFitch Report.

On June 16, Fitch released its master criteria for revenue-supported obligations and entities in the public finance sectorFitch Report

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