Action Line Update

Funding Division Legal Advisory Committee Meeting: A meeting of the Funding Division Legal Advisory Committee has been scheduled for Monday, April 23, 2007 at 4:00 p.m. at SIFMA's 360 Madison Avenue offices. If you have any questions, please call Robert Toomey at 646.637.9224 with any questions.

Under Secretary Steel to Discuss Domestic Finance Priorities: For full story see Government and Federal Agency Markets Issues section.

Treasury Market Practices Group Conference: For full story see Government and Federal Agency Markets Issues section.

Minutes of the Federal Open Market Committee: The Federal Reserve Board and the Federal Open Market Committee on Wednesday released the minutes of the Committee meeting held on March 20-21, 2007. Noted in the minutes was the Committee's vote to seek conditions in reserve markets consistent with maintaining the federal funds rate at an average of around 5-1/4 percent.

Under Secretary Steel to Discuss Domestic Finance Priorities: U.S. Treasury Under Secretary for Domestic Finance, Robert K. Steel, will give luncheon remarks before the Exchequer Club in Washington, D.C. Wednesday, April 18. The Under Secretary will discuss Treasury's domestic finance agenda, including capital markets competitiveness, government sponsored enterprise reform and other issues critical to U.S. capital markets, financial institutions and federal finance.

OFHEO Releases Annual Report to Congress: James B. Lockhart, Director of the Office of Federal Housing Enterprise Oversight (OFHEO) released OFHEO's 2007 Report to Congress, detailing, among other things, the agency's annual examination conclusions and regulatory oversight of the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac for the year 2006. The report concludes that both Enterprises "remain a significant supervisory concern." Director Lockhart stated that "while both Enterprises made progress in correcting their problems, especially in systems, controls and financial reporting, it has taken much more time and money to correct than the GSEs or OFHEO expected," and that "a key indicator of a successful remediation will be the timely filing of annual and quarterly financial statements by each company..." The report also states that despite oversight constraints, such as complying with a 30 percent additional capital requirement and specific limits on the growth of both of their portfolios "...their support of the mortgage market grew by 8 percent in 2006 to $4.3 trillion as their guaranteed mortgage-backed securities (MBS) outstanding grew at double-digit rates". The report also includes a review and summary of the financial performance of the GSEs, OFHEO supervisory actions, the accounting environment at the GSEs, and OFHEO legislative recommendations. Lockhart in the report states that "[n]ow is the time for action on this important issue" referring to Congress's action the House Financial Services Committee's reform bill on regulatory oversight of the housing GSEs. If you have any questions regarding OFHEO's report, please contact Robert Toomey at 646.637.9224 or Robbin Conner at 646.637.9224.

Treasury Market Practices Group Conference: The Treasury Market Practices Group is hosting a conference on Thursday, June 14, 2007 from 8:30 a.m. to 12:30 p.m. at the Federal Reserve Bank of New York in New York City. Speakers at the event will provide guidance and information on applying best practice principles in the Treasury cash, repo and related markets. The conference will feature remarks by Anthony Ryan, Assistant Secretary for Financial Markets at the U.S. Department of the Treasury, and Tom Wipf, Chairman of the TMPG. All market participants - dealers, brokers, investment funds and foreign central banks - are encouraged to attend. Registration deadline is Tuesday, June 12, 2007. If you have any questions or comments please contact Robert Toomey at 646.637.9224.

Supreme Court Upholds Preemption in Watters v. Wachovia Decision : On April 17 the Supreme Court issued its decision for the Watters v. Wachovia Bank, N.A case. The decision, reached in a 5-3 vote, affirms the preemptive status of OCC regulations over state regulations for national banks and their operating subsidiaries. The opinion of the Court stated that "state regulators cannot interfere with the "business of banking" by subjecting national banks or their OCC-licensed operating subsidiaries to multiple audits and surveillance under rival oversight regimes." The decision is available here.

ECB Publishes First Report on Financial Integration in Europe: The European Central Bank (ECB) has published a report, entitled "Financial Integration in Europe", which is to be the first issue of a new annual publication contributing to advancing European financial integration and to raising public awareness of the Eurosystem's role in supporting this objective. The report, which begins by explaining the Eurosystem's interest in European financial integration and the main elements of the ECB's work on the subject, is divided into three chapters. The first chapter provides the ECB's assessment of the degree of financial integration in the different financial segments of the euro area. The second chapter provides in-depth assessment of selected issues relating to financial integration; this chapter contains three special features concerning: (i) monetary policy and financial integration; (ii) the role of cross-border banking in fostering progress in banking integration, calling for the reduction in obstacles to euro zone cross-border banking mergers; and (iii) the implications of the Single Euro Payments Area (SEPA) for financial integration. The third chapter gives an overview of the main activities pursued by the Eurosystem in 2006 to advance financial integration.

EU Commission Updates Lamfalussy League Table on Implementation of Securities-Related Directives: The EU Commission has updated its "Lamfalussy league table" which records the success of member states in meeting deadlines for the implementation of a series of securities-related Directives that were adopted as part of the Financial Services Action Plan (FSAP).

FSA Publishes Update on Investment Entities Listing Review: In response to feedback received in relation to Consultation Paper 06/21, entitled "Investment Entities Listing Review", which sets out revised proposals for the listing of investment entities, the Financial Services Authority (FSA) has announced that it will publish another consultation paper setting out proposals for a single listing regime applicable to both overseas and UK investment entities. Currently overseas companies are able to list under the "directive minimum" requirements in Chapter 14 of the Listing Rules while UK funds are subject to the more onerous requirements of Chapter 15. The consultation paper will be published in June 2007 with a view to implementation in the first quarter of 2008.

CEIOPS Announces 2007 Work Program for Insurance Groups Supervision Committee: The Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) has announced the 2007 work program for its Insurance Groups Supervision Committee. Amongst other things, the group will: (i) design a framework for developing a risk assessment system for insurance groups; (ii) examine supervisory requirements and practices in the reporting of intra-group transactions with the aim of developing an agreed framework for reporting; (iii) identify areas of insurance group supervision in which tasks can be delegated to or from the lead supervisor; and (iv) draft proposed additions to the current banking memorandum of understanding on crisis management to provide for the inclusion of insurance supervisors.

CEIOPS Launches Third Quantitative Impact Study for Solvency II: CEIOPS has launched its third quantitative impact study (QIS3) in order to assist the EU Commission with the Solvency II project. QIS3, which builds on CEIOPS' second quantitative impact study (QIS2) and recent advice to the Commission on Pillar I issues, aims to gain further information on: (i) the possible impact on balance sheets, and the amount of capital that might be needed, if the approach and calibration set out in the QIS3 specification were to be adopted as the Solvency II standard; (ii) the suitability of the suggested calibrations for the calculation of the Solvency Capital Requirement (SCR) and the Minimum Capital Requirement (MCR); and (iii) the effect of applying the QIS3 specification to insurance groups. Participants in QIS3 are asked to submit completed spreadsheets and questionnaires to national supervisory authorities by June 29, 2007.