Federal Reserve Board Issues Final Rule Implementing Dodd-Frank Section 622

On November 5, the Federal Reserve Board issued a final rule implementing Section 622 of the Dodd-Frank Act, which generally prohibits a financial company from combining with another company if the ratio of the resulting company's liabilities exceeds 10% of the aggregate consolidated liabilities of all financial companies.  Press Release.  Final Rule.

Fannie Mae and Freddie Mac Announce CEO of Joint Securitization Entity and Enter Into Governance and Operating Agreements

On November 3, Fannie Mae and Freddie Mac jointly announced the first CEO of Common Securitization Solutions, LLC (CSS), which was established by the companies to design, develop, build and operate the Common Securitization Platform, a new secondary mortgage market infrastructure.  Additionally, Fannie Mae and Freddie Mac entered into governance and operating agreements for CSS.  Release.

On November 6, Fitch released its updated criteria for rating securitizations in emerging markets.  Report.

On November 5, DBRS released its methodology for rating companies in the automotive manufacturing industry.  Report.

On November 5, DBRS released its methodology for rating companies in the automotive supplier industry.  Report.

On November 5, S&P published an advance notice of proposed change to its bank rating methodology to potentially expand recognition of a bank's "additional loss-absorbing capacity" in certain situations.  Article.

On November 3, Fitch released an updated version of its global structured finance and covered bonds rating criteria hierarchy.  Report.

On November 3, Moody's released its methodology for rating unregulated utilities and unregulated power companies.  Report.

Note: Free registration is required for rating agency releases and reports.

Bank of America and U.S. Bank Agree to Settle MBS Suit with Pension Funds

On October 30, Bank of America notified Judge Katherine B. Forrest of the United States District Court for the Southern District of New York of a planned settlement of an action brought by pension funds in 2012.  The funds had alleged that Bank of America and U.S. Bank violated their duty to ensure that the loans underlying 19 Washington Mutual RMBS portfolios did not contain missing, defective, or incomplete documents, and to ensure that defective loans were removed from the trusts.  The complaint included claims for violating the Trust Indenture Act of 1939, breach of contract, and breach of the implied covenant of good faith and fair dealing.  Letter.  Complaint.

ESMA Call for Evidence on AIFMD Passport and Third Country AIFMs

On November 7, the European Securities and Markets Authority (ESMA) published a call for evidence on the EU passport under the Alternative Investment Fund Managers Directive (AIFMD) and third country Alternative Investment Fund Managers (AIFMs).

Under the AIFMD, non-EU AIFMs and non-EU Alternative Investment Funds (AIFs) managed by EU AIFMs are subject to the national private placement regime of each of the member states where the AIFs are marketed or managed. However, the AIFMD makes provision for the passport to be potentially extended in the future.

Responses to the call for evidence from the EU and the non-EU stakeholders (as well as ongoing input ESMA is receiving from national competent authorities) will help ESMA develop the opinion and advice it is required to deliver to the European Commission.

The deadline for responses to the call for evidence is January 8, 2015.  ESMA will consider the feedback it receives to the call for evidence in the first quarter of 2015.  It is required to deliver the opinion and the advice to the Commission by July 22, 2015.  Call for Evidence.

EBA Consults on RTS on Contractual Recognition of Write-Down and Conversion Powers under BRRD

On November 5, the European Banking Authority (EBA) published a consultation paper on draft regulatory technical standards (RTS) on the contractual recognition of bail-in under the Bank Recovery and Resolution Directive (BRRD).

Under the BRRD, firms and other entities to whom the BRRD applies are required to include in relevant agreements a contractual term by which the creditor or party to the agreement creating a relevant liability recognizes that the liability may be subject to the write-down and conversion powers specified in the BRRD.  In the proposed draft RTS, the EBA seeks to determine the cases in which the requirement to include the contractual term does not apply.

The deadline for responses is February 5, 2015. The EBA is required to submit the draft RTS to the European Commission by July 3, 2015.  Consultation Paper.