On February 19, DBRS published its derivative criteria for European Structured Finance Transactions. Report.

On February 19, DBRS published its legal criteria for European Structured Finance Transactions. Report. 

Bureau of Consumer Financial Protection Issues Policy on No-Action Letters

On February 18, the Consumer Financial Protection Bureau issued a new policy statement on No-Action Letters.

Under the Policy, Bureau staff, in its discretion, would issue no-action letters (NALs) to specific applicants in instances involving "innovative financial products or services that promise substantial consumer benefit where there is substantial uncertainty whether or how specific provisions of statutes implemented or regulations issued by the Bureau would be applied."

A NAL would advise the recipient that, subject to its stated limitations, the staff has no present intention to recommend initiation of an enforcement or supervisory action against the requester with respect to a specified matter. However, NALs would be subject to modification or revocation at any time at the discretion of the staff, and may be conditioned on particular undertakings by the applicant with respect to product or service usage and data-sharing with the Bureau. Also, NALs would be nonbinding on the Bureau, and would not bind courts or other actors who might challenge a NAL recipient's product or service, such as other regulators or parties in litigation. 

National Credit Union Administration Board Accepts UBS Securities LLC Offer of Judgment

On February 25, the National Credit Union Administration Board ("NCUA") accepted an offer of judgment tendered by UBS Securities LLC ("UBS") in the amount of $33,014,285 plus prejudgment interest, which will be calculated by the court. NCUA and UBS will attempt to agree on costs and fees also to be paid by UBS.  Acting as the liquidating agent for Southwest Corporate Federal Credit Union and Members United Corporate Federal Credit Union, NCUA's complaint alleged that UBS made material misstatements in connection with the sale of 20 RMBS certificates, alleging more than $918 million in actual gross losses.  UBS specified in the offer of judgment that its offer should not be construed as an admission of liability. Offer of Judgment. Complaint. 

Delegated Regulation Adopted Under Market Abuse Regulation

On February 26, the European Commission adopted a Delegated Regulation supplementing the Market Abuse Regulation (No. 596/2014) ("MAR") laying down regulatory technical standards on accepted market practice.

MAR defines "accepted market practice" as a specific market practice that is accepted by a competent authority of a member state (Article 3(1) MAR). ESMA is required to develop draft regulatory technical standards specifying the criteria, procedure and requirements for establishing an accepted market practice and the requirements for maintaining or terminating it or modifying the conditions for its acceptance. The Delegated Regulation provides for a list of "supervised persons" for the purposes of the Delegated Regulation, and lays down requirements for establishing an accepted market practice.

The Council of the EU and European Parliament are expected to review and consider the Delegated Regulation. Provided there are no objections the Delegated Regulation will apply from July 2, 2016.

PRA Publishes Policy Statement on Internal Governance of Third Country Branches

The U.K. Prudential Regulation Authority (PRA) has issued a policy statement on the internal governance arrangements of U.K. branches of non-EEA banks and PRA designated investment firms, known as "third country branches."

The rules and supervisory statement cover general organizational requirements; persons who effectively direct the business; responsibility of senior personnel; skills, knowledge and expertise; compliance and internal audit; risk control; outsourcing; and record keeping. These rules replace the rules and guidance in chapters 4 to 9, and 21, of the Senior Management Arrangements, Systems and Controls section of the PRA Handbook. The rules will come into effect on 7 March 2016. Press release.

EU-wide Stress Tests Launched by EBA

The EBA has published a methodological note and the macroeconomic scenarios for the 2016 EU-wide stress test for banks. The stress test is designed to provide supervisors, banks and other market participants with a common analytical framework to consistently compare and assess the resilience of EU banks to economic shocks. The test is to be conducted on a sample of 51 EU banks and will cover 70% of the EU banking sector.

The methodological note explains the methodology by which the banks are intended to calculate the stress impact of the provided scenarios and sets constraints for their bottom-up calculations. It also aims to provide banks with guidance and support for performing the test. The EBA has also published a press release containing related technical documents, including a set of frequently asked questions (FAQs) on the stress tests.

Results from the stress-test are expected in the third quarter of 2016.

Draft Report on Virtual Currencies Published by EU Committee on Economic and Monetary Affairs

On February 25, a draft report on the subject of virtual currencies was published by the European Parliament's Committee on Economic and Monetary Affairs ("ECON").

The draft report consists of a motion for a European Parliament Resolution and an Explanatory Statement. The motion contains an analysis of virtual currencies ("VC"s) and distributed ledger technology ("DLT"). The motion stresses that VCs and DLT have the potential to contribute positively to consumer welfare and economic development by, amongst other things:

• Lowering transaction costs for payments and transfers of funds and thereby reducing global total costs for remittances by up to €20 billion
• Reducing the cost of access to finance without a traditional bank account
• Enhancing the speed and resilience of payment systems
• Providing for a high degree of privacy, but without full anonymity so that transactions can be traced back in case of malfeasance

However, the motion also notes the following risks which should be addressed appropriately:

• The potential for money laundering, terrorist financing and tax fraud
• The sometimes limited capacity of regulators in the area of new technology
• The legal uncertainty surrounding new applications of DLT, which may be the subject of (sometimes ill-suited) existing legislation or of no regulation at all

ECON argues that regulatory capacity must be enhanced in light of these risks but calls for a proportionate regulatory approach so as not to stifle innovation at an early stage. ECON welcomes the European Commission's suggestions for including VC exchange platforms in the Fourth Money Laundering Directive ((EU) 2015/849) and recommends a review of EU legislation on payments, including the Payment Services Directive (2007/64/EC) and the second Electronic Money Directive (2009/110/EC).