On April 20, 2017, the Bureau of Consumer Financial Protection (CFPB) issued a final rule to delay the October 1, 2017 effective date of the rule governing Prepaid Accounts Under the Electronic Fund Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z) by six months, to April 1, 2018. Report. Rule.
On April 26, 2017, Fitch issued a report entitled U.S. Public Finance College and University Rating Criteria. Report.
On April 26, 2017, Fitch published an update to its methodology for rating insurance companies. Release.
On April 24, 2017, DBRS issued a report entitled Representations and Warranties Criteria for U.S. RMBS Transactions. Report.
On April 24, 2017, DBRS issued a report entitled Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda. Report.
On April 24, 2017, DBRS issued a report entitled European RMBS Insight: Dutch Addendum. Report.
On April 21, 2017, DBRS issued a report entitled DBRS Criteria: Financial Ratio Definitions and Accounting Adjustments — Non-Financial Companies. Report.
On April 21, 2017, DBRS issued a report entitled Rating Entities in the Real Estate Industry. Report.
On April 21, 2017, DBRS issued a report entitled Rating Canadian Covered Bonds. Report.
On April 21, 2017, S&P issued a report entitled Foreign Exchange Risk In Structured Finance–Methodology And Assumptions. Report.
On April 20, 2017, DBRS issued a report entitled Rating Canadian Structured Finance Transactions. Report.
On April 21, 2017, the European Systemic Risk Board (“ESRB“) published a report on the revision of the European Market Infrastructure Regulation (the “EMIR“).
The report welcomes the European Commission’s November 2016 report on the outcome of its EMIR review, which the Commission carried out under Article 85(1) of EMIR. The ESRB supports the Commission’s plan to revise EMIR to include an emergency mechanism for quickly suspending the clearing obligation and to increase the transparency and predictability of margin requirements.
The ESRB agrees with the Commission that no fundamental change to EMIR is currently required, although it does recognize that some aspects of EMIR could be improved, such as improving the trade data reporting framework and transparency by obliging central counterparties (“CCPs“) to publish qualitative and quantitative information consistent with the Committee on Payments and Market Infrastructures – Board of International Organization of Securities Commissions disclosure framework.
In addition, the report suggests that enhancing tools in EMIR that restrict procyclicality would reduce risks to financial stability and could simplify EMIR requirements and make them more efficient.
Although the ESRB recognizes the difficulties faced by some counterparties in meeting the clearing obligation, it supports a broad application of the obligation, including for pension scheme arrangements and large nonfinancial counterparties that are active in the derivatives market.
A comprehensive review of EMIR will be needed in the future. This comprehensive review should address issues such as the potential use of margins and haircuts to meet macroprudential objectives when the analysis needed to develop these tools has progressed.
The ESRB restates its previous proposals, including revising the determination mechanism of dedicated resources and interoperability arrangements. The ESRB reported on CCP interoperability arrangements in January 2016, and published two earlier reports on EMIR to assist the Commission with its Article 85 review of the Regulation in July 2015.
On April 20, 2017, the Joint Committee of the European Supervisory Authorities (the “ESAs“) published its April 2017 report on risks and vulnerabilities in the EU financial system.
The ESA highlights the following main risks to the financial system:
The banking sector is being affected by high levels of non-performing loans (“NPLs“), high litigation costs, overcapacity and lack of focus in strategies to return to sustained profitability. Addressing low profitability challenges includes increasing supervisory action, making progress in structural reforms and improving the efficiency of secondary markets. Insurers face substantial challenges arising from prolonged low interest rates, and the fund industry’s rates of returns are subdued and remain mostly negative.
Increased asset price volatility and liquidity concerns have heightened risks relating to adequate valuation of asset prices. This has been exacerbated by political uncertainties.
Interconnectedness adds to financial sector risks. This includes concentration risk caused by highly correlated equity price movements for insurers and banks and high exposures of EU insurers to EU banks. Interconnectedness with the wider financial system is also increasing.
Cyber risk appears as a major risk and is on the rise. Currently, denial-of-service attacks, data theft or manipulation, malicious software, misinformation and false identification are the most relevant forms. Operational risks related to ICT risks also appear to be on the rise across the financial sector. The ESAs are responding to cyber and IT-related risks by, for example, drafting guidelines on ICT risk assessment for supervisors, assessing cybersecurity capabilities of central counterparties and assessing the potential accumulation of risk for insurers deriving from newly developed cybersecurity coverages.
On April 18, 2017, the European Securities and Markets Authority (“ESMA“) published a memorandum of understanding that it has entered into with the Reserve Bank of New Zealand and the Financial Markets Authority of New Zealand under Article 25 of the European Market Infrastructure Regulation (“EMIR“).
Article 25(2)(c) of EMIR requires the establishment of cooperation arrangements as a precondition for ESMA to recognize central counterparties (“CCPs“) established in New Zealand to provide clearing services to clearing members or trading venues established in the EU. The memorandum of understanding is designed to:
The memorandum of understanding is effective as of February 28, 2017, which is the date it was signed by the relevant authorities.
On March 1, 2017, the Securities and Exchange Commission (SEC) voted to adopt rule and form amendments that will require issuers to include a hyperlink to each exhibit in a filing’s exhibit index. The intent of the rule and form amendments is “to make it easier for investors and other market participants to find and access exhibits in registration statements and periodic reports that were originally provided in previous filings.” The final rules will take effect on September 1, 2017. Release. Final Rule.
On February 23, 2017, the Securities and Exchange Commission (SEC) published information and guidance on the use of robo-advisers, “which are registered investment advisers that use computer algorithms to provide investment advisory services online with often limited human interaction.” Each of the SEC’s Division of Investment Management and Office of Investor Education and Advocacy published information on the use of robo-advisors. Due to the “unique issues raised by robo-advisers,” the Division of Investment Management issued guidance for investment advisers that contains “suggestions on meeting disclosure, suitability and compliance obligations under the Investment Advisers Act of 1940.” The Investor Bulletin issued by the Office of Investor Education and Advocacy provides information individual investors should consider when using robo-advisors, which includes the level of human interaction important to the investor, the information that the robo-adviser uses in formulating recommendations, the robo-adviser’s approach to investing and the fees and charges involved. Release. Guidance. Investor Bulletin.
On February 23, 2017, the Federal Reserve Board (Board) and the Office of the Comptroller of the Currency (OCC) issued guidance regarding how supervisors should examine for compliance with the swap margin rule. The swap margin rule “established margin requirements for swaps not cleared through a clearinghouse”, and margin requirements “help ensure the safety and soundness of swap trading and help reduce risk to the financial system associated with non-cleared swaps.” The guidance issued by the Board and the OCC “explains that the Board and the OCC expect swap entities covered by the rule to prioritize their compliance efforts surrounding the March 1, 2017, variation margin deadline according to the size and risk of their counterparties.” Board Release. OCC Release. Board Guidance. OCC Guidance.
On March 1, 2017, DBRS issued a report entitled: Rating U.S. Private Student Loan Securitizations. Report.
On March 1, 2017, DBRS issued a report entitled: Cash Flow Assumptions for Corporate Credit Securitizations. Report.
On March 1, 2017, DBRS issued a report entitled: Rating CLOs and CDOs of Large Corporate Credit. Report.
On March 1, 2017, Fitch issued a report entitled: Renewable Energy Project Rating Criteria. Report.
On February 28, 2017, Moody’s issued a report entitled: Global Broadcast and Advertising Related Industries. Report.
On February 27, 2017, Fitch issued a report entitled: U.S. Public Finance Structured Finance Rating Criteria. Report.
On February 27, 2017, Fitch issued a report entitled: U.S. Public Finance Letter of Credit-Supported Bonds and Commercial Paper Rating Criteria. Report.
On February 24, 2017, DBRS issued a report entitled: U.S. RMBS Surveillance Methodology. Report.
On February 23, 2017, Fitch issued a report entitled: Criteria for Rating U.S. and Canadian Residential and Small Balance Commercial Mortgage Servicers. Report.
On February 23, 2017, Fitch issued a report entitled: Criteria for Rating Loan Servicers. Report.
On February 23, 2017, Fitch issued a report entitled: Criteria for Rating North American Commercial Mortgage Servicers Report.
