EC Sets out Roadmap on the European Economic and Monetary Union


The European Commission (“EC“) published a communication and legislative proposal on the December 6, 2017, with the goal of finalizing Europe’s economic and monetary union.

The communication, which contained a number of measures, was directed at the European Parliament, the European Council, the Council of the EU and the European Central Bank.  The communication sets out deadlines for completing certain initiatives including a number of financial services measures relating to the capital markets union, as well as banking reforms.

The communication also outlined the legislative proposal for the establishment of the European Monetary Fund, which is intended to replace the European Stability Mechanism.  The European Monetary Fund will continue the European Stability Mechanism’s role of providing financial stability where this is required by member states, as well as raising funds by issuing capital market instruments.

The communication is available here and the legislative proposal is available here.

New York Appellate Court Dismisses Two Deutsche Bank RBMS Suits Under California’s Four-Year Statute Of Limitations


On December 5, 2017, the First Department of the Appellate Division of the Supreme Court of New York unanimously overturned a New York Supreme Court holding that California’s statute of limitations did not bar Plaintiff’s claims.  Trustee Deutsche Bank National Trust Company (“DBNTC“) had brought suit against Barclays Bank PLC and HSBC (collectively, the “Defendants“).  The Defendants had moved to dismiss on the grounds that New York’s borrowing statute, CPLR 202, requires out-of-state plaintiffs to bring cases within the timeframes set forth in statutes of limitations established under both New York law and under the place “where the cause of action accrued.”  Defendants argued that the suits brought by DBNTC, whose principal place of business is California, were thus barred by California’s four-year statute of limitations for contract actions.  DBNTC argued that the New York choice-of-law clauses of the underlying contracts should determine the applicable statute of limitations.  The First Department held that “because these provisions do not expressly incorporate the New York statute of limitations, they cannot be read to encompass that [six-year] limitation period.”  Rather, “in cases where (as here) the alleged injury is purely economic,” the cause of action is deemed “to have accrued in the jurisdiction of the plaintiff’s residence.”  Decision.

Implementing Decision Adopted Regarding US Trading Venues Under MiFIR


On December 5, 2017, an Implementing Decision was adopted by the European Commission which recognized certain US trading venues under MiFIR.

The Implementing Decision outlined that the European Commission considers US designated contract markets and swap execution facilities as equivalent to trading venues as defined in the MiFID II Directive.

As well as the decision, which is available here, the European Commission and the Commodity Futures Trading Commission (“CFTC“) issued a joint statement which confirmed the ability of EU counterparties to trade derivative instruments which are subject to EU trading obligations on the markets and facilities referred to above.

The joint statement also outlined that the CFTC have recommended to the European Commission that an order of exemption from SEF registration requirements is authorized in the EU.

The joint statement is available here.

Verena Ross Gives Speech On Asset Management Sector Priorities

Verena Ross, ESMA Executive Director, gave a speech which was published on December 5, 2017 which outlined the asset management sector priorities of ESMA for 2018.

The speech builds on a speech given by the ESMA Chair, Steven Maijoor, on November 16, 2017, and in particular discussed the co-operation arrangements that need to be in place between regulators prior to Brexit; the intention to carry out more detailed analysis of the performance of active and passive funds; and ESMA’s decision not to set specific reference parameters in relation to stress testing under the MMF Regulation.

The speech also referred to MiFID II and in particular, the importance of investment firms and trading venues obtaining the legal entity identifier in good time.

The full speech is available here.

Rating Agency Developments


On December 6, 2017, DBRS issued a report entitled: Operational Risk Assessments for Canadian Structured Finance. Release.

On December 6, 2017, DBRS issued a report entitled: Master Canadian Structured Finance Surveillance Methodology. Release.

On December 6, 2017, DBRS issued a report entitled: Rating Canadian Structured Finance Transactions. Release.

On December 6, 2017, S&P issued a report entitled: ABS: Global Framework For Assessing Operational Risks Specific To Wireless Device Payment Plan Agreements. Release.

On December 5, 2017, Moody’s issued a report entitled: Apparel Companies. Release.

On December 4, 2017, DBRS issued a report entitled: Rating European Covered Bonds Addendum: Market Value Spreads. Release.

On December 4, 2017, DBRS issued a report entitled: Rating European Covered Bonds. Release.

On December 4, 2017, Fitch issued a report entitled: Exposure Draft: U.S. RMBS Surveillance and Re-REMIC Rating Criteria. Release.

On December 1, 2017, Fitch issued a report entitled: Covered Bonds Rating Criteria. Release.

On November 30, 2017, Fitch issued a report entitled: Dealer Floorplan ABS Rating Criteria. Release.

On November 30, 2017, Fitch issued a report entitled: Insurance Rating Criteria. Release.

On November 30, 2017, Fitch issued a report entitled: U.S Utility Tariff/Stranded Cost Bonds Rating Criteria. Release.

On November 30, 2017, Fitch issued a report entitled: U.S. Equipment Lease and Loan ABS Rating Criteria. Release.

On November 30, 2017, Fitch issued a report entitled: Trade Receivables Securitisation Rating Criteria. Release.

FRB Requests Public Comment on Proposal to Amend Regulation A


On December 4, 2017, the Federal Reserve Board (“FRB“) requested public comment on a proposal to amend Regulation A to make certain technical adjustments, including to reflect the expiration of the Term Asset Backed Securities Loan Facility (“TALF“) program.  Regulation A governs extensions of credit by Federal Reserve Banks.   The proposed amendments are “intended to allow the regulation to address circumstances in which the Federal Open Market Committee has established a target range for the federal funds rate rather than a single target rate, and to reflect the expiration of the TALF program.”  Comments on the proposal must be received within 30 days of publication in the Federal Register. Release. Proposal.

CFTC Staff Grants Time-Limited Extension of Swap Data Reporting Relief for Certain Swap Dealers and Major Swap Participants Established under the Laws of Australia, Canada, the European Union, Japan or Switzerland


On November 30, 2017, the U.S. Commodity Futures Trading Commission‘s (“CFTC“) Division of Market Oversight announced in a no-action letter that it had extended relief it provided certain CFTC-registered swap dealers (“SD“) and major swap participants (“MSP“) in November 2016.  The no-action letter states that the Division of Market Oversight “will not recommend that the CFTC take an enforcement action against a non-U.S. SD or a non-U.S. MSP established in Australia, Canada, the European Union, Japan or Switzerland, that is not part of an affiliated group in which the ultimate parent entity is a U.S. SD, U.S. MSP, U.S. bank, U.S. financial holding company, or U.S. bank holding company, for failure to comply with the swap data reporting requirements of Part 45 and Part 46 of the CFTC’s regulations (SDR Reporting Rules), with respect to its swaps with non-U.S. counterparties that are not guaranteed affiliates, or conduit affiliates, of a U.S. person.”  The relief provided in the no-action letter is subject to certain terms and conditions as outlined in the letter, and is time-limited.  The Division of Market Oversight does not currently intend to extend the no-action relief beyond December 1, 2020. Release. No-Action Letter.

European Parliament’s Committee on ECON Publishes Draft Reports on CRR II Regulation and CRD V Directive


On December 1, 2017, Economic and Monetary Affairs (“ECON“) published its draft report on the proposed CRR II Regulation and its draft report on the proposed CRD V Directive.

The European Commission’s proposals for the CRR II Regulation and the CRD V Directive contain revisions to the Capital Requirements Regulation (Regulation 575/2013) (CRR) and the CRD IV Directive (2013/36/EU) respectively.

The draft reports contain proposed amendments to the CRR II Regulation and the CRD V Directive as well as explanatory statements by the rapporteur.

The amendments include:

  • Scope: the definition for a small, non-complex institution should be amended to include a relative component geared to the gross domestic product of a particular member state;
  • Global systemically important institutions (G-SIIs): the leverage quotas for G-SIIs should increase to 4%. Grandfathering provisions for the introduction of the total loss absorbing capacity standard for G-SIIs should be introduced in order to ensure that buffers for liabilities capable of being bailed –in are built up as quickly as possible;
  • Remuneration and transparency: large institutions should be obliged to set and disclose a figure for the salary of each individual board member representing a proportion of the median salary of the institutions’ employees; and
  • Lending to SMEs and infrastructure:  the support factor for investment in infrastructure should equally be applicable to lending to public enterprises. A set of criteria to govern the exclusion of certain institutions from the scope of the CRR should also be introduced to encourage the set up promotional banks.

The draft report on the proposed CRR II Regulation (PE613.409v02-00) (dated November 22, 2017) is available here and the draft report on the proposed CRD V Directive (PE613.410v01-00) (dated November 16, 2017) is available here.

EC Publishes Report on Follow-Up to Call for Evidence on EU Regulatory Framework for Financial Services


The European Commission (“EC“) published on December 1, 2017 a report on the follow-up to its call for evidence on the EU regulatory framework for financial services. The report contains an update on progress on the initiatives relating to its call for evidence since the prior communication in November 2016.

The report sets out details of measures introduced following the call for feedback, including several ongoing initiatives that require further analysis. These include:

  • the Commission’s work to monitor the application and impact of the outsourcing provisions in the Benchmarks Regulation;
  • the study conducted by the European Commission as part of the capital markets union action plan to assess the distribution of retail products to retail investors across the EU. The European Commission indicated that it expects to publish final findings from the study at the start of 2018;
  • the launch by the EBA of an IT tool aimed at promoting further proportionality in banking regulation. The idea is that the tool will help guide banks through relevant regulatory standards, provisions and templates in view of their specific size and business model; and
  • the assessment by the European Commission of the proportionality of the Alternative Investment Fund Managers Directive (2011/61/EU). The outcome of the European Commission’s review is expected in 2018.

The report is available here.

CFTC Statement on Self-Certification of Bitcoin Products by CME, CFE and Cantor Exchange


On December 1, 2017, the Commodity Futures Trading Commission (“CFTC“) issued a Statement on the Self-Certification of Bitcoin Products by the Chicago Mercantile Exchange (“CME“), the CBOE Futures Exchange (“CFE“) and the Cantor Exchange (“Cantor“).

CFTC Chairman J. Christopher Giancarlo stated that “we have had extensive discussions with the exchanges regarding the proposed contracts, and CME, CFE and Cantor have agreed to significant enhancements to protect customers and maintain orderly markets. The Statement also emphasized that “the Commission will continue to assess whether further changes are required to the contract design and settlement processes . . . These activities include monitoring and analyzing the size and development of the market, positions and changes in positions over time, open interest, initial margin requirements, and variation margin payments, as well as stress testing positions.” Release.