United States: Financial Regulatory Developments Focus - April 29, 2015

Bank Prudential Regulation & Regulatory Capital

Federal Deposit Insurance Corporation Seeks Comment on Potential New Deposit Account Records Requirements for Banks with a Large Number of Deposit Accounts

On April 21, 2015, the US Federal Deposit Insurance Corporation issued an advanced notice of proposed rulemaking ("ANPR"), seeking input on potential new recordkeeping standards for certain FDIC-insured institutions with more than two million deposit accounts. The FDIC is required to provide depositors with access to their insured accounts as soon as possible after an institution fails. For a bank with a large number of deposit accounts, payments might be delayed if the bank's records are unclear or incomplete, making it difficult to determine what is insured and what is not. Generally, the FDIC seeks input on whether banks with a large number of deposit accounts should be required to have a greater responsibility in the deposit insurance determination process. Specifically, the FDIC seeks comment on whether banks should be required to meet certain records standards, including the ability to calculate insured and uninsured amounts for each depositor at the end of each business day. The FDIC also seeks input on what types of new data requirements would aid a quick and effective insurance determination process as well as the appropriate threshold for institutions to have to comply with the potential new requirements. The proposals will be open for comment for 90 days after the ANPR has been published in the Federal Register.

A statement issued by FDIC Director, Jeremiah O. Norton, in support of the ANPR is available at: https://www.fdic.gov/news/news/speeches/spapr0814b.html and the press release, including the ANPR, is available at: https://www.fdic.gov/news/news/press/2015/pr15034.html.

Basel Committee Removes Selected National Discretions and Replies to Frequently Asked Question on Funding Valuation Adjustment

On April 21, 2015, the Basel Committee on Banking Supervision agreed to eliminate certain national discretions from the Basel II capital framework. The use of national discretions can hinder comparability across jurisdictions and increase variability in risk-weighted assets. The Basel Committee has agreed to remove national discretions from the Basel II capital framework regarding: (i) the treatment of past due loans; (ii) the definition of retail exposures; (iii) transitional arrangements for corporate, sovereign, bank and retail exposures; (iv) the rating structure standards for wholesale exposures; (v) internal and external audit; and (vi) re-ageing. The national discretion for the internal ratings-based approach treatment of equity exposures will expire in 2016. The Basel Committee intends to monitor national discretions that are still available and consider whether more of them should be removed. The Basel Committee also responded to a frequently asked question on funding valuation adjustment ("FVA"). The FAQ notes that a bank's adoption of FVA should not have the effect of offsetting or reducing its "own credit" adjustment. A bank should continue to derecognize its debit valuation adjustment in full, whether or not it has adopted a funding valuation-type adjustment.

The press release is available at: http://www.bis.org/press/p150421.htm.

Derivatives Commodity Futures Trading Commission Issues No Action Letters for Erroneous Swap Trades and Swap Trade Confirmations

On April 22, 2015, the US Commodity Futures Trading Commission's Division of Market Oversight and the Division of Clearing and Risk issued two no-action letters providing certain time-limited relief to swap execution facilities and designated contract markets. CFTC Staff Letter 15-24 provides time-limited relief from certain CFTC regulations to permit SEFs and DCMs to correct clerical or operational errors that may cause a swap to be rejected for clearing and permits counterparties to resubmit the trade with the correct terms. The no-action letter also permits SEFs and DCMs to correct clerical or operational errors revealed after a swap has been cleared. It allows counterparties to execute a trade to offset the cleared trade and submit a new trade with the correct terms. The relief provided is set to expire on June 15, 2016. CFTC Staff Letter 15-25 extends the time period for relief previously provided in No-Action Letter 14-108, from September 30, 2015 to March 31, 2016, with certain modifications. This Confirmation No-Action Letter provides relief to SEFs from certain requirements concerning trade confirmations required from SEFs for non-cleared swaps. Specifically, it provides relief to SEFs from the requirement to obtain documents that are incorporated by reference in a trade confirmation issued by a SEF, prior to issuing the confirmation. Additionally, the letter relieves SEFs from the requirement to preserve such documents as records.

CFTC Staff Letter 15-24 is available at: http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/15-24.pdf and CFTC Staff Letter 15-25 is available at: http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/15-25.pdf. Commodity Futures Trading Commission Issues Guidance for Swap Execution Facilities on the Calculation of Projected Operating Costs

On April 23, 2015, the CFTC's Division of Market Oversight issued guidance to SEFs concerning the calculation of projected operating costs for the purpose of complying with the financial resource requirements under SEF Core Principle 13 and CFTC Regulation 13.1303. This guidance follows two no-action letters providing relief for erroneous swap trades and swap trade confirmations issued on April 22, 2015. The guidance provides that the cost of variable commissions that a voice-based SEF might pay its employee-brokers does not need to be included in a SEF's calculation of projected operating costs. However, any fixed salaries or compensation payable to the SEF's employee-brokers must be included in the calculation of projected operating expenses.

The CFTC guidance to SEFs is available at: http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/15-26.pdf.

Enforcement Merrill Lynch International Fined for Transaction Reporting Failures

On April 22, 2015, the Financial Conduct Authority fined Merrill Lynch International £13,285,900 for failing to report, or to accurately report, transactions between November 2007 and November 2014. Transaction reporting is required to assist the FCA in monitoring the market and to provide information relating to investigations into market abuse, insider trading and market manipulation. In the final notice, the FCA notes that Merrill Lynch has since taken steps to ensure accurate reporting and to remediate the causes of the failings, including a review of internal systems and processes. The final notice is available at: http://www.fca.org.uk/static/documents/final-notices/merrill-lynch-international.pdf.

US and UK Regulators and Authorities Fine Deutsche Bank $2.5 Billion for Failings related to IBOR and LIBOR

On April 23, 2015, US and UK regulators imposed fines on Deutsche Bank AG for failings related to EURIBOR and LIBOR (collectively known as IBOR) submissions. The CFTC imposed a financial penalty of $800 million, the US Department of Justice imposed a financial penalty of $775 million on DB Group Services (UK) Limited, a wholly-owned subsidiary of Deutsche Bank, which agreed to plead guilty to wire fraud for its role in manipulating LIBOR, the New York Department of Financial Services imposed a fine of $600 million and the UK FCA imposed a fine of £227 million (circa $340 million). The FCA found that Deutsche Bank had breached several regulatory requirements by attempting to manipulate IBOR rates and improperly influence IBOR submissions and for failing to have proper systems and controls in place. The FCA also fined the bank for the failure by its Managers and Senior Managers to deal with it in an open and cooperative way, for misleading the FCA and for not responding to requests for information timeously and effectively. The CFTC Order stated that from at least 2005 through early 2011, and across currencies, Deutsche Bank's submitters routinely took into account other Deutsche Bank traders' derivatives trading positions, as well as their own cash and derivatives trading positions, when making the bank's IBOR submissions. Furthermore, Deutsche Bank allowed submitters and traders to prioritize profit motives over appropriate submission considerations, permitted a culture of trader self-interest to exist and created conflicts of interest, which allowed the misconduct to occur.

The FCA notice is available at: http://www.fca.org.uk/static/documents/final-notices/deutsche-bank-ag-2015.pdf, the CFTC order is available at: http://www.cftc.gov/ucm/groups/public/@lrenforcementactions/documents/legalpleading/enfdeutscheorder042315.p df, the New York Department of Financial Services order is available at: http://www.dfs.ny.gov/about/ea/ea150423.pdf and the US Department of Justice press release, including the plea agreement entered into with DB Group Services UK Limited, is available at: http://www.justice.gov/opa/pr/deutsche-banks-london-subsidiary-agrees-plead-guilty-connection-long-running-manip ulation.

Financial Services

European Securities and Markets Authority Calls for Evidence on Virtual Currencies

On April 22, 2015, the European Securities and Markets Authority published a call for evidence on investment using virtual currency or distributed ledger technology. ESMA has been monitoring virtual currency investment to understand market developments, the potential benefits and risks for investors and potential issues for market integrity and financial stability. ESMA sets out its analysis in the paper and requests feedback on three particular topics: (i) virtual currency investment products, such as collective investment schemes or derivatives that have virtual currencies as an underlying or which invest in virtual currency businesses; (ii) virtual currency based assets, securities and asset transfers; and (iii) the application of distributed ledger technology to securities. ESMA is not proposing regulatory action at this stage but will continue to monitor investments using virtual currencies or distributed ledger technology to assist national regulators in keeping up to date with market developments. In July 2014, the European Banking Authority published an opinion proposing a potential regulatory regime for virtual currencies and advising national regulators to "discourage" financial institutions from buying, holding or selling them until a regulatory regime is in place. The call for evidence is available at: http://www.esma.europa.eu/news/ESMA-seeking-information-new-developments-virtual-currency-investment?t=326 &o=home.


European Securities and Markets Authority Consults on Draft Guidelines on Knowledge and Competence under MiFID II

On April 23, 2015, ESMA launched a consultation on draft guidelines specifying the criteria for the assessment of the knowledge and competence of employees in investment firms that provide investment advice, information about financial instruments, investment services or ancillary services to clients. Under the new Markets in Financial Instruments Directive II, investment firms will have to ensure and be able to demonstrate to national regulators that employees of the firm involved in such activities have the necessary knowledge and competence to provide such advice, to act in the best interests of the client and to act honestly, fairly and professionally. The draft guidelines will apply to investment firms and national regulators from January 3, 2017, the date that MiFID II comes into effect. Responses to the consultation are due by July 10, 2015. ESMA intends to publish its final report in Q4 2015.

The consultation paper is available at: http://www.esma.europa.eu/news/ESMA-consults-draft-guidelines-specifying-criteria-assessment-knowledge-and-com petence-MiFID-II?t=326&o=home.

Recovery & Resolution

Statement by Mark Carney Chairman of the Financial Stability Board to the International Monetary and Financial Committee

On April 22, 2015, the Financial Stability Board published a statement written by FSB Chairman Mark Carney to the International Monetary and Financial Committee. The statement contains information on ongoing work to finalize post-crisis reforms and measures being taken by the FSB to promote financial stability. The letter discusses certain financial vulnerabilities, such as diminished market liquidity, asset price discontinuities, financial institution misconduct and contagion across markets. The statement reports certain measures taken by the FSB to address these risks, including the formulation of a plan to identify financial stability risks associated with market liquidity in fixed-income markets and asset management activities, ending too-big-to fail for global systemically important banks and developing procedures for implementation monitoring of the agreed international financial regulatory reforms.

The statement is available at: http://www.financialstabilityboard.org/2015/04/statement-by-mark-carney-chairman-of-the-financial-stability-board- to-the-international-monetary-and-financial-committee-2/.

Upcoming Events

April 29, 2015: US House of Representatives Committee on Financial Services hearing entitled "Legislative Proposals to Enhance Capital Formation and Reduce Regulatory Burdens." April 29, 2015: US House of Representatives Committee on Financial Services hearing entitled "The Impact of International Regulatory Standards on the Competitiveness of U.S. Insurers."

April 30, 2015: US Senate Committee on Banking, Housing and Urban Affairs hearing entitled "Examining Insurance Capital Rules and FSOC Process."

May 1, 2015: US House of Representatives Committee on Financial Services hearing entitled "Oversight of the Financial Industry Regulatory Authority."

May 8, 2015: EBA public hearing on its proposed regulatory technical standards on the detailed records to be kept by firms of financial contracts under the Banking Recovery & Resolution Directive.

May 8, 2015: EBA public hearing on its proposed guidelines on sound remuneration practices.

May 11, 2015: EBA public hearing on its proposed RTS on the content of Business Reorganization Plans and Progress Reports and proposed guidelines on the assessment of such plans.

May 13, 2015: US Securities and Exchange Commission Equity Market Structure Advisory Committee first meeting focusing on Rule 611 of SEC Regulation National Market System, also known as the "Order Protection Rule" or "Trade-through Rule."

May 13, 2015: Financial Conduct Authority Prudential Supervision Forum.

May 18, 2015: EBA public hearing on its proposed guidelines for limiting exposures to shadow banking entities.

June 3, 2015: EBA workshop on application of proportionality principle in the EU banking supervisory framework. June 3, 2015: Joint Committee of European Supervisory Authorities Third Consumer Protection Day 2015.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions