On November 30, the Federal Reserve Board approved a final rule specifying its procedures for emergency lending under Section 13(3) of the Federal Reserve Act. The final rule provides greater clarity regarding, among other things, the Board’s authority to engage in emergency lending to programs and facilities with “broad-based eligibility.” The final rule will take effect January 1, 2016. Press Release. Final Rule.
Elizabeth Elias, a Senior Associate in Orrick’s New York office, represents issuers and investors in asset-backed securities transactions, including whole business, commercial PACE lien, oil and gas, and musical composition and sound recording copyright and income stream securitizations.
She also has experience representing a variety of market participants, including sponsors, issuers, underwriters and service providers, in public and private offerings of commercial mortgage-backed securities.
Posts by: Elizabeth J. Elias
Federal Reserve, OCC, FCA, FHFA and FDIC Adopt Joint Final Rule on Swap Margin Requirements
On October 22, the Office of the Comptroller of the Currency (the “OCC”), the Federal Reserve Board (the “Board”), the Farm Credit Administration (the “FCA”), the Federal Housing Finance Agency (the “FHFA”), and the Federal Deposit Insurance Corporation (the “FDIC”) adopted a joint final rule establishing capital and margin requirements for swaps not cleared through a clearinghouse. The intention of the rule is to promote the stability of swap dealers in light of the risk to the financial system associated with non-cleared swap activity. The amount of margin will vary based on the relative risk of the non-cleared swap. The rule will apply to entities that are regulated by the OCC, the Board, the FCA, the FHFA or the FDIC that register with the Commodity Futures Trading Commission or Securities and Exchange Commission as a dealer or major participant in swaps. The rule does not apply to swaps of financial institutions with $10 billion or less in total assets that enter into swaps for hedging purposes or to swaps entered into by commercial end users for purposes of hedging commercial risk. The rule will be phased in beginning September 1, 2016. FDIC Press Release. OCC Press Release. Final Rule.
Rating Agency Developments
On October 28, Moody’s updated its rating methodology for insurance premium finance-backed securities. Report.
On October 27, Moody’s updated its rating methodology for floorplan asset-backed securities. Report.
On October 26, DBRS published its methodology for ratings in the automotive manufacturing industry. Report.
On October 26, DBRS published its methodology for ratings in the automotive suppliers industry. Report.
FDIC Adopts Proposed Rule to Increase Deposit Insurance Fund to Statutorily Required Minimum Reserve Ratio
On October 22, the Board of Directors of the Federal Deposit Insurance Corporation (the “FDIC”) adopted a proposed rule to increase the Deposit Insurance Fund to a statutorily required minimum reserve ratio of 1.35 percent. The rule would impose on banks with at least $10 billion in assets a surcharge of 4.5 cents per $100 of their assessment base, after making certain adjustments. The FDIC expects the reserve ratio will reach the minimum 1.35 percent after two years of payments of the proposed surcharges. FDIC Press Release. OCC Press Release. Rule.
FDIC Issues Final Securitization Safe Harbor Rule
On October 22, the Federal Deposit Insurance Corporation (the “FDIC”) issued a final rule revising certain provisions of its Securitization Safe Harbor Rule. The final rule clarifies the requirements as to the retention of an economic interest in the credit risk of securitized financial assets in connection with credit risk retention regulations adopted under Section 15G of the Securities Exchange Act. The final rule will be effective on the date that is the later of: (i) 60 days after publication of the final rule in the Federal Register; and (ii) January 1, 2016. Final Rule.
CFTC Announces Further Extension of Time-Limited No Action Relief
On October 14, the U.S. Commodity Futures Trading Commission’s (“CFTC”) Division of Market Oversight (the “Division”) announced further extension of the time-limited no action relief for swaps executed as part of a package transaction in the categories currently receiving relief under CFTC Letter No. 14-137. The extension of time-limited relief is meant to enable the Division to continue to assess the appropriate response for applying the trade execution requirement to swaps in certain package transactions. Press Release.
Rating Agency Developments
On October 8, Fitch published a report clarifying the application of its United Kingdom RMBS criteria during the ongoing consultation period. Report.
On October 12, DBRS published a report describing its methodology for generation of consistent interest rate stresses across currency markets. Report.
On October 13, Fitch published updated criteria for rating aircraft enhanced equipment trust certificates. Report.
On October 14, Fitch released its criteria for rating debt issued to finance availability-based infrastructure projects. Report.
On October 14, DBRS published its global methodology for rating finance companies. Report.
On October 14, DBRS published its criteria for rating U.S. rental car ABS transactions. Report.
On October 14, DBRS published its criteria for rating structured finance CDO restructurings. Report.
Rating Agency Developments
On October 1, DBRS published its U.S. RMBS rating methodology. Methodology.
On October 1, DBRS published its rating methodology for European consumer and commercial ABS transactions. Methodology.
On October 1, DBRS published its methodology for rating companies in the mining industry. Methodology.
On October 1, DBRS published its methodology for rating operators in the container terminal industry. Methodology.
On October 1, Fitch updated its criteria for rating U.S. RMBS. Criteria.
On October 1, Moody’s published its methodology for rating public housing authority (PHA) capital fund bonds issued in the U.S. municipal market. Methodology.
On October 2, Moody’s published its methodology describing its approach to monitoring existing securities backed by low-income residential construction loans to developers in Mexico. Methodology.
On October 5, Fitch updated its methodology for analyzing U.S. Tobacco Settlement ABS. Criteria.
On October 5, Fitch updated its global rating criteria for trade receivables securitizations. Criteria.
On October 5, KBRA released a proposed U.S. Equity REITs & REOC rating methodology. Methodology.
On October 5, Moody’s published its approach in considering data quality in structured finance transactions. Methodology.
On October 6, DBRS published its methodology for rating sovereign governments. Methodology.
On October 7, DBRS published its global methodology for rating life and property/casualty insurance companies and insurance organizations. Methodology.
CFTC’s Division of Market Oversight Provides Additional Time to Comply with Electronic Reporting Requirements in the OCR Final Rule
On September 28, the U.S. Commodity Futures Trading Commission’s (the “Commission”) Division of Market Oversight issued a no-action letter that provides reporting parties additional time to comply with certain reporting requirements of the ownership and control final rule. The rule requires reporting parties to electronically submit trader identification and market participant data on new and updated forms. These forms allow for better identification of participants in futures and swaps markets. Providing reporting parties with additional time is aimed at improving the reliability and consistency of data provided to the Commission. The no-action letter extends relief to dates ranging from April 27, 2016 to February 13, 2017. Press Release.
Rating Agency Developments
On September 24, DBRS published a report describing its approach for monitoring European CMBS ratings. Methodology.
On September 25, DBRS published its methodology for rating European RMBS transactions issued in Europe with residential loans originated in Europe. Methodology.
On September 25, DBRS published its methodology for rating securitizations issued in Canada with collateral originated in Canada. Methodology.
On September 28, Fitch updated its rating criteria for infrastructure and project finance. Criteria.
On September 28, Moody’s published its rating methodology for corporate synthetic collateralized debt obligations. Methodology.
On September 28, Moody’s published its rating methodology for collateralized loan obligations. Methodology.
On September 28, Moody’s updated its methodology for rating securitization transactions backed predominately by loans granted to microenterprises, small- and medium-sized enterprises (SMEs) and self-employed individuals. Methodology.
On September 29, Fitch updated its rating criteria for toll roads, bridges and tunnels. Criteria.
On September 29, DBRS published its methodology for rating Portuguese electricity tariff securitizations. Methodology.
On September 30, DBRS published a report describing the criteria applied in reviewing derivatives in the context of a European structured finance transaction. Methodology.
On September 30, Moody’s published its methodology for assessing credit risk for companies in the restaurant industry. Methodology.