Worldwide: Financial Industry Week In Review - April 13, 2015

Financial Industry Developments

Rating Agency Developments

On April 7, DBRS released its Cash Flow Assumptions for Corporate Credit Securitizations Methodology. Report.

On April 7, DBRS released its Rating CLOs and CDOs of Large Corporate Credit Methodology. Report.

On April 7, Fitch released its Updated Global Structured Finance & Covered Bonds Criteria Hierarchy. Report.

On April 6, Fitch updated its U.S. RMBS Cash Flow Analysis Criteria. Report.

On April 6, S&P released its Rating Methodology And Assumptions For Global CMBS. Report.

On April 2, DBRS added a Film Rights Appendix to its DBRS Master U.S. ABS Surveillance Methodology. Report.

On April 2, DBRS released its Rating U.S. Film Rights Securitization Methodology. Report.

On April 1, Moody's updated its Rating Methodology for Mortgage Insurers. Report.

On March 30, S&P released its Ireland RMBS Methodology And Assumptions, effective April 13, 2015. Report.

RMBS and Other Securities Litigation

Morgan Stanley Mortgage Capital Holdings LLC Motion to Dismiss RMBS Claims Granted in Part

On April 3, 2015, Judge Laura Swain of the U.S. District Court for the Southern District of New York granted in part and denied in part Morgan Stanley Mortgage Capital Holdings LLC's ("MSMC") motion to dismiss breach of contract and breach of the covenant of good faith and fair dealing claims brought by Deutsche Bank National Trust Company ("Deutsche Bank"), in its capacity as Trustee for the Morgan Stanley Structured Trust I 2007-1. Deutsche Bank alleged that MSMC, as the sponsor of the RMBS securitization, breached the representations and warranties in the Mortgage Loan Purchase Agreement, and was therefore obligated to cure or repurchase breaching loans. Judge Swain granted MSMC's motion to dismiss Deutsche Bank's claims that MSMC breached an implied covenant of good faith and fair dealing, holding that this was based on the same facts as, and therefore impermissibly duplicative of, the breach of contract claim. However, Judge Swain denied MSMC's arguments that the breach of contract claims should be dismissed. Judge Swain found that Deutsche Bank had provided adequate notice of breaches beyond the 1,620 loans specifically addressed in Deutsche Bank's breach notice letter because the letter gave MSMC notice of pervasive breaches. She also declined to dismiss Deutsche Bank's claims for compensatory, rescissory, and consequential damages at the pleadings phase. Order.

European Financial Industry Developments

ESMA to Centralize Instrument Reference and Trade Repositories Data

The European Securities and Markets Authority ("ESMA") has launched two major projects at the request of a number of National Competent Authorities ("NCAs"): the Instrument Reference Data Project and the Trade Repositories Project. The former envisages ESMA providing a central facility in relation to instrument and trading data and the calculation of transparency and liquidity thresholds required in relation to the Markets in Financial Instruments Regulation ("MiFIR"), while under the latter ESMA is to provide a single access point to trade repositories data under EMIR.

The request involves a delegation of some of the NCAs' tasks related to data collection requirements under MiFIR and the Market Abuse Directive to ESMA, as well as the creation of a central access point for regulators to data of the EU's six trade repositories. ESMA will collect data directly from market infrastructures, and make it available to NCAs and the public through a centralized system. Centralization of these functions is expected to save on costs compared with building similar systems in each country, lowering the burden on the financial system and EU taxpayers, while also working towards harmonization and support of the single market. The Instrument Reference Data Project is expected to go live in early 2017, and the Trade Repositories Project in 2016.

EBA's Recommendations to Non-EU and Review of EU Supervisory Authorities

The European Banking Authority has published a recommendation setting out its opinion on the confidentiality regime of several non-EU supervisory authorities to facilitate their participation in supervisory colleges overseeing international banks, led by EU supervisors.

The EBA expects all competent authorities to which the recommendation is addressed to comply with it and incorporate it into their supervisory practices as appropriate. The competent authorities must notify the EBA as to whether they have complied or intend to comply by June 2, 2015.

In a separate report, the EBA has identified that supervisory authorities across the EU have made significant progress towards improving the convergence of their supervisory practices since 2011 though some differences remain. The report covers the findings of an assessment carried out over the past 3 years, and focuses on Supervisory Review and Evaluation Process and assessment of risks, supervisory stress testing, ongoing review of internal models, and supervisory measures and powers.

Steps Towards a Capital Markets Union

The European Commission is consulting on a blueprint for creating a harmonized capital market across the EU, to facilitate capital raising in the EU while maintaining consumer and investor protection by simplifying the prospectus regime. The Commission is also consulting on an EU framework for securitization, hoping to improve credit information for SMEs, and is supporting the EU Private Placement Initiative. The consultation asks whether an EU private placement market should be created, with some of the same features as the successful US model for fixed rate debt instruments.

The review and capital markets union consultation will close on May 13, 2015, with a report expected by July 2015. Overview.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Orrick Partner Rohit Sachdev is proud to Chair the inaugural Storage East summit put on by Infocast on October 16-17th in Washington, D.C.

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Orrick Partner Rohit Sachdev is proud to Chair the inaugural Storage East summit put on by Infocast on October 16-17th in Washington, D.C.

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