Judge Sam Sparks of the United States District Court for the Western District of Texas granted judgment to defendants in two related cases filed by the FDIC on behalf Guaranty Bank (now defunct) arising out of Guaranty Bank’s purchases in 2004 and 2005 of US$2.1 billion in RMBS. Defendants Goldman Sachs, Deutsche Bank, Merrill Lynch and RBS Securities sought judgment on the pleadings that the FDIC’s claims were time barred under the Texas Securities Act’s five-year statute of repose. The court agreed, holding that under the Supreme Court’s recent decision in CTS Corp. v. Waldburger the FDIC Extender Statute did not preempt the Texas statute of repose. Goldman/DB Order. Merrill/RBS Order.
FDIC
Agencies Provide Feedback on Second Round Resolution Plans
On August 5, the Fed and the Board of Directors of the FDIC announced the completion of reviews of the second round of resolution plans submitted by 11 large, complex banking organizations in 2013. Press Release.
FDIC Gives Guidance to S-Corporation Banks Regarding Dividends under Basel III
On July 21, the FDIC clarified how it will evaluate requests by S-Corporation Banks to make dividend payments that would otherwise be prohibited under the Basel III capital conservation buffer. New Basel III capital rules include a capital conservation buffer which prohibits or limits the dividends a bank can pay when its risk-based capital ratios fall below certain thresholds. If an S-corporation bank has income but is limited from paying dividends as a result of the new rules, its shareholders may have to pay taxes on their pass-through share of the S-corporation’s income from their own resources. To avoid this problem, a bank may request approval from their primary federal regulator to make a dividend payment that would not otherwise be permitted. Absent serious safety-and-soundness concerns about the requesting bank, the FDIC generally would expect to approve such requests by well-rated S-corporation banks that are limited to the payment of dividends to cover shareholders’ taxes on their portion of an S-corporation’s earnings. Press Release. Financial Institution Letters.
FDIC Releases Proposal to Amend Stress Test Rule
On June 16, FDIC announced it is seeking comment on a notice of proposed rulemaking amending the Annual Stress Test rule. This proposed rule would shift the timing of the annual stress testing cycle by approximately 90 days and clarify that institutions covered by the rule will not have to calculate their regulatory capital ratios using the Basel III until the testing cycle beginning on January 1, 2016. The public comment period closes 60 days from publication in the Federal Register. Press Release. Proposed Rule.
Bank Regulatory Agencies Seek to Identify Reductions to Regulatory Burden
On June 4, the Fed, FDIC and OCC published the first of several requests for comments to identify outdated, unnecessary or unduly burdensome regulations imposed on insured depository institutions.
The Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA) requires the federal banking regulators to review regulations issued by the agencies at least every 10 years. It also requires the regulators to break down the regulations by category, present each category for comment and identify areas of regulations that are outdated, unnecessary or unduly burdensome.
The regulators have divided the regulations into 12 categories and will request comments with respect to each category over the next two years. Fed Press Release. Rule Notice.
Final Guidance for Medium-Sized Firms on Dodd-Frank Stress Tests
On March 5, the Fed, the FDIC, and the OCC issued final guidance which describes supervisory expectations for stress tests to be conducted by financial companies with between $10 and $50 billion in total assets. The guidance confirms that these companies are not subject to the Fed’s capital plan rule, the Fed’s annual Comprehensive Capital Analysis and Review, Dodd-Frank Act supervisory stress tests, or related data collections, which apply to bank holding companies with assets of at least $50 billion. Joint Release. Final Supervisory Guidance.
FDIC Extends Comment Period for Resolution Strategy
On February 18, the FDIC extended the comment period to March 20 for the Single Point of Entry (SPOE) strategy for the resolution of Systemically Important Financial Institutions. FDIC Release. FDIC Extension Notice.
Publication of Resolution Plans
On January 10, the Fed and the FDIC made available public portions of resolution plans for 116 institutions which are regulated by the Fed and the FDIC and required to submit resolution plans by the Dodd-Frank Act. Joint Release. Resolution Plans.
Volcker Rule Exclusion for TruPS CDOs
On January 14, the Fed, CFTC, FDIC, OCC and SEC issued an interim final rule which will permit banking entities to retain interests in certain collateralized debt obligations backed primarily by trust preferred securities (TruPS CDOs) if the following conditions are met: (i) the TruPS CDO was established and the interest was issued before May 19, 2010; (ii) the banking entity reasonably believes that the offering proceeds received by the TruPS CDO were invested primarily in Qualifying TruPS Collateral (as defined by the rule); and (iii) the banking entity’s interest in the TruPS CDO was acquired on or before December 10, 2013, the date the agencies issued final rules implementing section 619 of the Dodd-Frank Act (the Volcker Rule). The agencies also released a non-exclusive list of issuers which meet the requirements of the interim final rule. Comments must be submitted within 30 days of publication in the Federal Register. Joint Release. Joint Interim Final Rule. List of Excluded CDO Issuers.
J.P. Morgan Brings $1 Billion Claim Against FDIC for WaMu RMBS Indemnification
On December 17, J.P. Morgan Chase Bank filed a complaint in the United States District Court for the District of Columbia against the Federal Deposit Insurance Corporation (FDIC) seeking $1 billion in indemnification for settlements made by J.P. Morgan on behalf of Washington Mutual in RMBS actions. J.P. Morgan alleges that the FDIC is contractually obligated to indemnify J.P. Morgan for certain claims against WaMu in consideration for J.P. Morgan’s purchase of WaMu out of FDIC receivership and assumption of its liabilities. J.P. Morgan seeks indemnification for settlements of twenty different RMBS cases; the complaint does not identify the amounts of the individual settlements. Complaint.