On December 7, 2017, the Federal Reserve Board requested comment on a package of proposals that would increase the transparency of its stress testing program. The proposed enhanced disclosures have three components: (1) enhanced descriptions of supervisory models, including key variables; (2) modeled loss rates on loans grouped by important risk characteristics and summary statistics associated with the loans in each group; and (3) portfolios of hypothetical loans and the estimated loss rates associated with the loans in each portfolio. Comments on the measures will be accepted through January 22, 2018. Press Release.
Posts by: Amy Chan
U.S. Banking Agencies Support Conclusion of Reforms to International Capital Standards
On December 7, 2017, the United States banking agencies announced their support for the conclusion of efforts to reform the international bank capital standards initiated in response to the global financial crisis. The Group of Central Bank Governors and Heads of Supervision and the Basel Committee on Banking Supervision announced the finalization of the reforms to the “Basel III” agreement on bank capital standards. With this agreement, the Basel Committee will bring to conclusion the international reforms initiated in response to the global financial crisis. Press Release.
CFTC Approves Exemption from SEF Registration Requirement for Multilateral Trading Facilities and Organized Trading Facilities Authorized Within the EU
On December 8, 2017, the Commodity Futures Trading Commission (“CFTC“) announced the issuance of an order exempting certain multilateral trading facilities and organized trading facilities authorized within the European Union from the requirement to register with the CFTC as swap execution facilities. The order will become effective on January 3, 2018. Press Release. Order of Exemption.
CFTC Staff Issues Interpretive Guidance Clarifying Commodity Trading Advisor Registration Requirements Resulting from the European Union’s MiFID II Research Compensation Provisions for Investment Managers
On December 11, 2017, the Commodity Futures Trading Commission’s Division of Swap Dealer and Intermediary Oversight issued interpretative guidance providing that a futures commission merchant (“FCM“), swap dealer (“SD“), or introducing broker (“IB“) that receives separate compensation for commodity trading advice is not required to register as a commodity trading advisor, provided that the offered advice is “solely incidental” to the conduct of the FCM’s or SD’s business, or “solely in connection with” the operation of the IB’s business. Press Release. CFTC Staff Letter.
CFTC Comparability Determination on EU Margin Requirements and a Common Approach on Trading Venues
On October 13, 2017, the U.S. Commodity Futures Trading Commission (“CFTC“) announced determinations by the CFTC and the European Commission (“EC“) on comparability and equivalence of margin requirements for uncleared swaps. CFTC Commissioners unanimously approved a comparability determination finding the margin requirements for uncleared swaps under the laws and regulations of the European Union (“EU“) comparable in outcome to those under the Commodity Exchange Act (CEA) and CFTC regulations. This determination is effective immediately. This announcement coincides with the EC’s announcement of an equivalence decision which similarly finds that the CFTC’s uncleared swap margin rules are comparable in outcome to the EU’s corresponding margin requirements for uncleared OTC derivatives. Additionally, the CFTC and EC announced a common approach regarding certain CFTC and EU authorized derivatives trading venues. Press Release. Rule. Common Approach.
Rating Agency Developments
On October 16, 2017, KBRA published a report entitled: Container Leasing ABS Rating Methodology. Report
On October 16, 2017, KBRA published a report entitled: General Rating Methodology for Asset-Backed Securities. Report
On October 16, 2017, KBRA published a report entitled: Auto Loan Rating Methodology. Report
On October 16, 2017, KBRA published a report entitled: Credit Card ABS Rating Methodology. Report
On October 16, 2017, KBRA published a report entitled: Consumer Loan ABS Rating Methodology. Report
On October 12, 2017, KBRA published a report entitled: Aviation ABS Rating Methodology. Report
On October 12, 2017, DBRS published a report entitled: Rating Canadian Wholesale Securitizations. Report
On October 12, 2017, DBRS published a report entitled: Rating Canadian Equipment Finance Securitization Transactions. Report
On October 12, 2017, DBRS published a report entitled: Rating Canadian Auto Retail Loan and Lease Securitizations. Report
On October 12, 2017, DBRS published a report entitled: Rating Canadian Auto Fleet Lease Transactions. Report
On October 12, 2017, DBRS published a report entitled: Global Methodology for Rating Finance Companies. Report
On October 12, 2017, DBRS published a report entitled: Operational Risk Assessment for European Structured Finance Originators. Report
On October 12, 2017, DBRS published a report entitled: Operational Risk Assessment for European Structured Finance Servicers. Report
Federal Banking Agencies Propose Extension of Certain Capital Rule Transitions
On August 22, 2017, in preparation for a forthcoming proposal that would simplify regulatory capital requirements, federal banking regulators proposed a rule that would extend the existing transitional capital treatment for certain regulatory capital deductions and risk weights. The extension would apply to banking organizations that are not subject to the agencies’ advanced approach to capital rules, which are generally those with less than $250 billion in total consolidated assets and less than $10 billion in total foreign exposure. Comments on this proposal will be accepted for 30 days after publication in the Federal Register. FDIC Press Release. Federal Reserve Press Release. OCC Press Release. Proposal.
Rating Agency Developments
On August 23, 2017, DBRS published a report entitled Rating Companies in the Oil and Gas and Oilfield Services Industries. Report.
On August 21, 2017, Moody’s published a report entitled Government-Related Issuers. Report.
On August 18, 2017, DBRS published a report entitled Rating Companies in the Communications Industry. Report.
On August 18, 2017, DBRS published a report entitled Rating Companies in the Consumer Products Industry. Report.
On August 18, 2017, DBRS published a report entitled Rating Companies in the Merchandising Industry. Report.
On August 17, 2017, Fitch published a report entitled U.S. Military Housing Rating Criteria. Report.
Rating Agency Developments
On July 7, 2017, Kroll published its Research Recap for Q2 2017. Here are several articles of interest:
- ABS: KBRA Comments on Alitalia Extraordinary Administration Request
- AVIATION: 2017 Update Aircraft leasing Industry, How Private Placement Financings Contribute to Funding of Aircraft, KBRA Comments on Air Lease Corporation’s Exposure to Alitalia, KBRA Comments on Nordic Aviation Capital DAC’s Exposure to Alitalia, KBRA Comments on the Impact of Alitalia Extraordinary Administration Request on Aircraft Lessors
- CMBS: KBRA May Trend Watch Newsletter, NYU International Hospitality Industry Investment Conference Briefing, Oil Price Increases Won’t Plug CMBS Losses
- CORPORATES: Rating in a Vacuum or Rating in a Real World?
- FINANCIAL GUARANTY: Rating Risk and the Financial Guarantors: Deja Vu All Over Again
- FINANCIAL INSTITUTIONS: The Case for Community Banks, First Quarter 2017 Long-Term Bank Ratings Compendium, Trends for Business Development Companies 2017
- INSURANCE: Reinsurance Pricing and Capacity Are Rays of Sunshine for Florida Insurance Market
- MACRO-MARKET: China’s Imperial Ambitions, Tidal Waves in the Gulf
- PUBLIC FINANCE: In Bankruptcy Municipal Bondholders are Behind the Eight Ball, KBRA’s View on the State of the Solar Market: Conference Call Recap, Puerto Rico: Is It Doing Enough to Regain Capital Market Access?, Puerto Rico’s Economic Prospects Deepen its Quagmire
- RMBS: Freddie Mac ‘HVE’ LTV May Be Leading Indicator in STACR
- SOVEREIGNS: KBRA Comments on French Election
On June 29, 2017, DBRS published an update to its rating methodology for U.S. equipment lease and loan securitizations. Report.
On June 29, 2017, Fitch published an update to its rating criteria for insurance-linked securities. Release.
On June 28, 2017, Fitch published a report entitled U.S. State Housing Finance Agencies: Single-Family Mortgage Program Rating Criteria. Report.
On June 28, 2017, Fitch published a report entitled U.S. RMBS Surveillance and Re-REMIC Rating Criteria. Report.
On June 23, 2017, Moody’s published a report entitled Regulated Electric and Gas Utilities. Report.
On June 23, 2017, S&P issued a report entitled RMBS: Methodology And Assumptions: Assessing Pools Of Residential Loans In Austria, Denmark, Germany, And Sweden. Report.
On June 22, 2017, S&P issued a report entitled ABS: Global Methodology And Assumptions For Corporate Securitizations. Report.
On June 22, 2017, Fitch published a report entitled U.S. RMBS Rating Criteria. Report.
On June 22, 2017, Fitch published a report entitled EMEA CMBS and CRE Loan Rating Criteria. Report.
Federal Reserve Releases Results of CCAR
On June 28, 2017, the Federal Reserve Board announced that it has completed its annual review of the capital planning processes and capital adequacy of the largest U.S.-based bank holding companies and did not object to the capital plans of all 34 bank holding companies participating in the Comprehensive Capital Analysis and Review (CCAR). However, the Federal Reserve Board is requiring one firm to address weaknesses in its capital planning process and resubmit its capital plan by the end of 2017. Report. Press Release.