Goldman Sachs Wins Summary Judgment In CDO Class Action

On September 8, 2015, the Southern District of New York granted summary judgment in favor of Goldman Sachs Group, Inc. in a class action lawsuit concerning the sale of two collateralized debt obligations.  The court had previously dismissed plaintiffs' fraud claims on all grounds but one—whether Goldman was aware of "singularly prohibitive risks" associated with the CDOs but failed to completely and accurately disclose those risks.  At summary judgment, it held that plaintiffs had not shown sufficient evidence to prove Goldman's knowledge of such risks.  In particular, the court rejected plaintiffs' reliance on inflammatory emails, which merely "show, at most, that some Goldman employees, based on the same information available to Plaintiffs, were bearish on the RMBS market."  The court also found insufficient evidence that Goldman knew the CDOs would perform poorly and intended for them to perform poorly.  Order.

Bank of America and Midland Settle RMBS Litigation

On September 8, 2015, Bank of America NA and Midland Loan Services settled Bank of America's lawsuit seeking a declaratory judgment that it did not breach the representations and warranties in connection with a CMBS securitization and, consequently, did not need to repurchase loans from the securitization.  As a result of the settlement, the lawsuit was dismissed with prejudice.  The terms of the settlement were not disclosed.  Dismissal Order.

Claims Dismissed From RMBS Class Action Against Citibank

On September 8, 2015, the Southern District of New York dismissed, for lack of jurisdiction, a large portion of claims from a derivative class action alleging that Citibank NA, as trustee of 27 trusts, had breached its contractual, statutory, and common law duties in connection with $17 billion of pooled loans.  Plaintiffs invoked federal jurisdiction based on the Trust Indenture Act of 1939 ("TIA") and asked the court to take supplemental jurisdiction over the accompanying state law claims.  Plaintiffs asserted TIA claims in connection with just 3 of the 27 trusts.  The court held that those claims could proceed, denying Citibank's argument that the TIA does not provide a private right of action.  However, the court declined to exercise supplemental jurisdiction over state law claims relating to the other 24 trusts.  The court concluded that supplemental jurisdiction was permissible, but that it should nonetheless decline such jurisdictions because the claims as to each trust—which must be litigated loan-by-loan and trust-by-trust—were not sufficiently related.  Order.

EBA Revises Implementing Technical Standards on Supervisory Reporting

On September 10, 2015, the European Banking Authority (EBA) issued a revised list of validation rules in its implementing technical standards on supervisory reporting under the Capital Requirements Regulation (Regulation 575/2013) (CRR).

On September 9, 2015 the EBA published an update (v2.4.0) to the XBRL taxonomy that national competent authorities (NCAs) should use for the remittance of data under Commission Implementing Regulation 680/2014, which contains implementing technical standards on supervisory reporting under the CRR.

European Parliament Announces Indicative Date for PSD2 Plenary Session

The European Parliament intends to consider the proposed Directive on payment services in the internal market (PSD2) in its plenary session to be held from October 5 – 8, 2015.

PSD2 aims to improve the transparency and security of payment services and extend the scope of the payment services framework to previously unregulated service providers.

ECB Response to Commission Review of EMIR Implementation   

On September 4, 2015, the European Central Bank (ECB) published an executive summary of its response to the consultation carried out by the European Commission to assist the Commission in its review of EMIR implementation.

The ECB's main recommendations include:

1. further study of the use of OTC derivatives by non-financial counterparties, with a view to assessing whether the current framework causes undue restrictions on such parties accessing the OTC derivatives market to support their regular business;
2. further enhancing margin requirements in order to mitigate procyclicality;
3. additional requirements to guarantee the resilience of portfolio margining models in times of stress;
4. clarifying the definitions and scope of EMIR to ensure that central bank transactions are fully exempt from the reporting obligations, enabling central banks to continue to perform their statutory tasks effectively;
5. establishing a process whereby the clearing obligation may be swiftly removed or suspended when the market situation so requires (for example when certain instruments become illiquid, or a central clearing partly is under recovery or resolution procedures);
6. providing additional safeguards to mitigate the risks of settlement in commercial bank money, and strengthening the requirements relating to the measurement, monitoring and management of exposures to entities other than clearing members; and
7. increasing access to EMIR trade data by the single supervisory mechanism and banking supervisors.

European Commission to Publish Legislative Proposal on Common Deposit Guarantee System by End of 2015

Jean-Claude Juncker, President of the European Commission, has announced that the Commission will publish a legislative proposal on first steps towards establishing a common deposit guarantee system by the end of 2015. His view is that the crisis in Greece in the summer of 2015 showed the need for a European deposit guarantee system "disconnected from government purses so that citizens can be absolutely sure that their savings are safe". The proposal will follow on from the recommendation of the June 2015 Commission report on completing Europe's Economic and Monetary Union (EMU).