Winning Bidders Selected in FHFA REO Pilot Program

On July 3, the FHFA announced that the winning bidders in a real estate owned (REO) pilot initiative have been chosen and transactions are expected to close early in the third quarter.  The FHFA launched the pilot program in late February, and bids were solicited from qualified investors to purchase approximately 2,500 single-family Fannie Mae foreclosed properties.  FHFA Release.   

FDIC Makes Available Parts of Resolution Plans

On July 3, the FDIC made available the public sections of the initial resolution plans submitted to the FDIC and the Fed under Title I of the Dodd-Frank Act.  Firms in this group include U.S. bank holding companies with $250 billion or more in total nonbank assets and foreign-based bank holding companies with $250 billion or more in total U.S. nonbank assets. FDIC Release.   Summaries.    

CFTC Approves Guidance on Cross-Border Application of Swaps Provisions of Dodd-Frank

On June 29, the CFTC approved for public comment proposed interpretive guidance on the cross-border application of the swaps provisions of Title VII of the Dodd-Frank Act.  The proposed guidance interprets Section 2(i) of the Commodity Exchange Act (CEA), which states that the swaps provisions of the CEA shall not apply to activities outside the United States unless those activities have a direct and significant connection with activities in, or effect on, commerce of the United States.  Comments must be submitted within 45 days after publication in the Federal Register. CFTC Release.   

CFTC Final Order on the Effective Date for Swap Regulation

On July 3, the OCC issued a final Order on the effective date for swap regulation.  The OCC previously extended the temporary exemptive relief from the Commodity Exchange Act that otherwise would have taken effect on July 16, 2011, the general effective date of Title VII of the Dodd-Frank Act.  The final Order extends the previous extension with certain modifications, including: (i) removing references to entities terms such as “swap dealer”, “major swap participant”, and “eligible contract participant”, (ii) extending the potential latest expiration of the Order to December 31 or, depending on the nature of the relief, such other date as determined by the Commission, (iii) allowing the clearing of agricultural swaps; and (iv) removing references to the exempt commercial market and board of trade grandfather relief.  The Order is effective immediately. CFTC Release.   

CFTC Approval of Phased Compliance for Swap Regulations

On June 29, the CFTC approved a phased compliance program for certain swaps to non-U.S. swap dealers, non-U.S. major swap participants, U.S. swap dealers, U.S. major swap participants, and foreign branches of U.S. swap dealers and U.S. major swap participants. CFTC Release.   

On June 29, Moody’s released it consolidated global bank rating methodology.  Moody’s Report.

On June 29, DBRS released its global methodology for banks and banking organizations. DBRS Report.  

On June 29, Kroll Bond Ratings released its equipment lease and ABS rating methodology. Kroll Report.

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Class Certification Granted In $642M RMBS Suit Against Credit Suisse

On June 29, Judge Lewis A. Kaplan of the Southern District of New York certified a class of investors, led by Vaszurele Ltd., in their action against Credit Suisse Securities (USA) LLC (“Credit Suisse”).  The investors allege that Credit Suisse misrepresented the underwriting quality of loans originated by IndyMac Bank FSB in a $642 million RMBS offering.  The court found plaintiffs met each element for class certification, rejecting Credit Suisse’s argument that the varying sophistication of the investors should bar certification of the class. Decision.

SFO Press Release on Manipulation of LIBOR

On July 2, the Serious Fraud Office (SFO) published a press release regarding the manipulation of the setting of the London Interbank Offered Rate (LIBOR).  Press release. 

In the press release, the SFO stated that it had been working closely with the FSA and now that the FSA has concluded its investigation into the regulatory misbehaviour, the SFO is considering whether it is both appropriate and possible to bring criminal prosecutions.

The SFO hopes to come to a conclusion regarding possible criminal prosecutions within a month.  It is also working with the relevant authorities that are carrying out equivalent investigations in other jurisdictions.

On July 2, a statement made by George Osborne, Chancellor of the Exchequer on LIBOR and related reforms concerning the banking sector was also published.  This included an initiative to establish a joint committee to conduct an inquiry into professional standards in the banking industry. Statement.

HM Treasury Consults on Sanctions for Directors of Failed Banks

On July 3, HM Treasury published a consultation paper on sanctions for the directors of failed banks. Consultation Paper. 

In its consultation paper, the Government:

• proposes to introduce a "rebuttable presumption" that a director of a failed bank is not suitable to be approved by the regulator as someone who could hold a position as a senior executive in a bank.
• Is considering introducing criminal sanctions for serious misconduct in the management of a bank. This would involve the creation of a new criminal offence that would not necessarily involve any element of dishonesty when it is committed.

Responses to the consultation should be submitted by September 30.

Speech by Tracey McDermott on FCA's Approach to Enforcement

On July 2, the FSA published a speech by Tracey McDermott, acting director of the FSA's Enforcement and Financial Crime Division.  The speech focused on credible deterrence and the approach that the Financial Conduct Authority (FCA) will take to enforcement. Speech. 

Ms. McDermott commented on the FCA that:

• thematic and firm-specific supervisors will work in a more integrated way;
• the focus will increasingly be on senior management who fail to recognise and manage risks and fail to control the way products are sold; and
• it will have a low tolerance for repeat offenders.

The FSA also published a speech by Martin Wheatley, chief executive designate of the FCA.  His speech emphasised that the FCA will continue the FSA's policy of credible deterrence.  Speech.