ESMA Announces Recognition of UK CSD in Event of No-Deal Brexit

 

On March 1, the European Securities and Markets Authority (ESMA) published a press release announcing that in the event of a no-deal Brexit, it will recognize Euroclear UK and Ireland Ltd, the UK central securities depository (UK CSD), as a third country CSD under the Central Securities Depositories Regulation (909/2014) (CSDR).

ESMA has adopted this recognition decision in order to allow the UK CSD to serve Irish securities and to avoid any negative impact on the Irish securities market. ESMA has previously communicated that its board of supervisors supports continued access to the UK CSD.

The UK CSD will be recognized to provide its services to the EU, having been assessed as meeting the recognition conditions under Article 25 of the CSDR.

The recognition decision would take effect on the date following Brexit date, under a no-deal Brexit scenario.

FDIC-Insured Institutions Report Net Income of $59.1 Billion in Fourth Quarter 2018

 

Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported aggregate net income of $59.1 billion in the fourth quarter of 2018, up $33.8 billion (133.4 percent) from a year ago. The improvement in net income was led by higher net operating revenue and lower income tax expenses. Financial results for the fourth quarter of 2018 are included in the FDIC’s latest Quarterly Banking Profile released February 21. Release.

FHA Expands Pilot Program to Accelerate Financing of Low-Income Housing Tax Credit Projects

 

On February 21, U.S. Housing and Urban Development (HUD) Secretary Ben Carson announced a significant expansion of a Federal Housing Administration (FHA) pilot program that streamlines FHA mortgage insurance applications for affordable housing developments that have equity from the sale of Low-Income Housing Tax Credit (LIHTC) Program, the nation’s primary source of affordable housing production. Release.

SEC Modifies Timing for Filing of Non-Public Form N-PORT Data

 

On February 27, the Securities Exchange Commission (SEC) modified the submission deadlines for registered investment companies filing non-public monthly reports on Form N-PORT. Form N-PORT is a new form for reporting both public and non-public fund portfolio holdings to the Commission in a structured data format. As a result of today’s changes, rather than filing non-public monthly reports with the Commission within 30 days after each month-end, funds will be required to maintain the relevant information in their records and file all three monthly reports with the Commission no later than 60 days after the end of each fiscal quarter. Release.

Bureau Announces System for Prepaid Issuers to Submit Account Agreements

 

On February 27, the Consumer Financial Protection Bureau (Bureau) announced a streamlined electronic submission system for prepaid account issuers to submit their account agreements to the Bureau. Prepaid issuers can register for the system now before the April 1 effective date of the Bureau’s prepaid rule. Release.

SDNY Denies Class Certification in Royal Park Action Against Trustee Bank of New York

 

On February 15, Judge Gregory H. Woods in the United States District Court for the Southern District of New York denied certificateholder Royal Park Investments SA/NV’s (“Royal Park“) renewed motion for class certification in its lawsuit against RMBS trustee Bank of New York Mellon. This was the second time Judge Woods denied Royal Park’s motion for class certification in this case, and it is consistent with other judges’ rulings on Royal Park’s class certification motions in its lawsuits against trustees. Judge Woods found that Royal Park failed to demonstrate that questions of law or fact common to class members predominated over individualized questions. Judge Woods held that liability must be determined individually on a loan-by-loan and trust-by-trust basis, and that none of the inquiries required to prove liability were susceptible to simple, class-wide proof. Further, each putative class member needed to demonstrate that it holds litigation rights, which requires the court to undertake a difficult, fact-dependent analysis of individualized legal issues. In addition, the Court found that each putative class member would present a different statute of limitations defense, and these defenses would apply different time periods under New York law because the trusts were non-residents. Finally, the Court held that the damage calculation in this case required hundreds of fact intensive inquiries that could not be answered on a class-wide basis.

Rating Agency Developments

 

On February 20, DBRS published a report entitled: Rating Pooled Aircraft Lease Securitizations. Report.

On February 20, DBRS published a report entitled: Rating CLOs and CDOs of Large Corporate Credit. Report.

On February 15, Fitch published a report entitled: U.S. Public Finance Letter of Credit-Supported Bonds and Commercial Paper Rating Criteria. Report.

On February 15, Fitch published a report entitled: U.S. Public Finance Structured Finance Rating Criteria. Report.

EIOPA Publishes Recommendations for Insurers in Event of No-Deal Brexit

On February 19, EIOPA published recommendations (EIOPA-BoS-19/040) on providing guidance on the treatment of UK insurance undertakings and distributors with regard to cross-border services in the EU in the event of the UK leaving the EU without a deal.

The recommendations are addressed to NCAs and their general objective is to minimise the detriment to policyholders with cross-border insurance contracts. They are issued in accordance with Article 16 of the EIOPA Regulation (1094/2010), and are based on the Solvency II Directive (2009/138/EC), the Insurance Distribution Directive ((EU) 2016/97) (“IDD“), EIOPA guidelines and other relevant EIOPA instruments.

The recommendations relate to matters including the following:

  • Authorization of third-country branches. In accordance with Article 162 of Solvency II, UK insurance undertakings may seek authorization to carry out cross-border business through a branch in a member state.
  • Orderly run-off. NCAs should prevent that UK undertakings conclude new insurance contracts or establish, renew, extend, increase or resume insurance cover under the existing insurance contracts in their jurisdiction if they are not authorized for such insurance activities under EU law. This is without prejudice to policyholder rights to exercise an option or right in an existing insurance contract to realize their pension benefits.
  • Change in the habitual residence or establishment of the policyholder. If a policyholder with habitual residence or, in the case of a legal person, place of establishment in the UK, concluded a life insurance contract with a UK insurance undertaking and afterwards the policyholder changed its habitual residence of place of establishment to a EU27 member state, NCAs should consider in the supervisory review that the insurance contract was concluded in the UK.
  • Distribution activities. NCAs should ensure that UK intermediaries and entities that intend to continue or commence distribution activities to EU27 policyholders and for EU27 risks after the UK’s withdrawal, are established and registered in the EU27 in line with the relevant provisions of the IDD.
  • Portfolio transfer. If it was initiated before the withdrawal date, the NCAs should allow the finalization of portfolio transfer from UK insurance undertakings to EU27 insurance undertakings.

Competent authorities must inform EIOPA whether they comply or intend to comply with the recommendations within two months of the translated versions being issued. They will apply as of the date the UK leaves the EU.

ESMA Publishes 2019 Work Program for Credit Rating Agencies, Trade Repositories and Third-Country CCPs and CSDs

 

On February 19, EMSA published its 2018 annual report and 2019 work program relating to its supervision of credit rating agencies (“CRAs“), trade repositories (“TRs“) and its monitoring of third-country central clearing counterparties (“TC-CCPs“) and central securities depositories (“TC-CSDs“) (ESMA80-199-273). READ MORE