Action Line Update
August 6, 2007
Highlights
- Fannie Mae to Provide Aggregated Third Party Origination Data
- Bank of Italy Consults on Amendments to Regulations to be Made under MiFID
- CONSOB Publishes Consultation Documents on Regulation Implementing MiFID
- FSA Policy Statement on Reforming Conduct of Business Regulations Implementing MiFID
- CEIOPS Publishes Response to Commission Letter Regarding Further Solvency II Work
New
Indicates a new item. Items that are solely informational are generally removed after two weeks. New items normally will be posted to the website weekly.
CROSS MARKET ISSUES
No updates.
CORPORATE CREDIT MARKETS
No updates.
FUNDING
No updates.
GOVERNMENT AND FEDERAL AGENCY MARKETS
Treasury August 2007 Quarterly Refunding: The Treasury Department's Quarterly Refunding Documents for August 2007 are available. As part of the refunding statement Treasury mentions that it has begun the process of working with Congress to promptly pass legislation to raise the debt ceiling, currently forecasted to be reached in early October. If you have any questions or comments please contact Robert Toomey at 646.637.9224.
MBS AND SECURITIZED PRODUCTS
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Fannie Mae to Provide Aggregated Third Party Origination Data: Beginning with pools issued 9/1, Fannie Mae will begin to provide certain third party origination statistics. Information regarding the number of loans, percentage of total UPB, and aggregate UPB will be disclosed, broken out by a loans status as originated by retail, broker, or correspondent. Fannie Mae states that all single-family MBS issuances should have this data reported by year end. More information is available here.
CSBS Releases Model Examination Guidelines: Yesterday the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators (CSBS/AARMR) released, as promised, model examination guidelines (Model Guidelines) for use by state mortgage regulators in the examination of state licensed lenders and brokers that offer subprime/nontraditional loans. CSBS/AAMR state the document will provide for a "uniform set of examination standards" with which examiners may test compliance with the nontraditional and subprime guidances. The Model Guidelines document specifically addresses, as "Covered Transactions", IOs, option-ARMs, option-FRMs (p22), hybrid ARMs (p22), "subprime ARM products", and "subprime extended amortization products" (amortization period longer than term of loan). Regarding "subprime ARM products": while 2/28s are specifically mentioned in a footnote, the characteristics of these products outlined in the Model Guidelines refer to both product features (e.g. teaser rates) as well as marketing practices (e.g. "loans�where borrowers are provided inadequate information"). It is noted, though, that "those institutions with sound Covered Transaction origination practices, underwriting, and risk management controls will not be subjected to criticism for merely offering such products". The Model Guidelines cover a number of areas, including marketing/origination, underwriting, operational/risk management, servicing, secondary market activities, investment lending, indirect origination through third parties, practices for institutions to avoid, and controls/policies and procedures. The Model Guidelines are attached and may be found here.
MUNICIPAL MARKETS
EUROPEAN MARKETS
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Bank of Italy Consults on Amendments to Regulations to be Made under MiFID: The Bank of Italy has published on its website a consultation document on amendments to Bank of Italy Regulations July 1, 1998 (Banking Deposit and Sub-Deposit of Clients' Securities and Money Regulation) and August 4, 2000 (Investment Firms Regulation) to be made under the Markets in Financial Instruments Directive (MiFID). The Consultation Document provides a first draft of the new regulation to be adopted. Whilst the Banking Deposit and Sub-Deposit of Clients' Securities and Money Regulation has been revised in its entirety, the Investment Firms Regulation has only been amended in respect of Italian investment firms' capital requirements and operations abroad. Comments are invited by August 27, 2007.
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CONSOB Publishes Consultation Documents on Regulation Implementing MiFID: The Italian regulator (CONSOB) has published on its website a Consultation Document providing proposed amendments to CONSOB Regulation No. 11768/98 (Market Regulation) and Regulation No. 11522/98 (Intermediaries Regulation) ('CONSOB Regulations') to be made under the Legislative Decree implementing MiFID, currently under examination by the commissions of the Italian Parliament and due to enter into force on November 1, 2007. The Consultation Document is organised by subject and provides both an overview and specific comments on the amendments to be made to each sections and the relevant rules of CONSOB Regulations. The Consultation Document also provides a first draft of the new regulation to be adopted. Comments are invited by September 15, 2007.
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FSA Policy Statement on Reforming Conduct of Business Regulations Implementing MiFID: The Financial Services Authority (FSA) has published Policy Statement 07/14 (PS07/14), which explains the FSA's final decisions in the light of the agreement it has reached with the EU Commission on notification under Article 4 of MiFID Level 2 Implementing Directive, following the publication of Policy Statement 07/6 (PS07/6) in May 2007. PS07/6 contained proposals for amendments to the UK conduct of business regime, in order to implement aspects of MiFID. PS07/14 also provides feedback on the responses received to the FSA Article 4 proposals for a new conduct of business sourcebook, as set out in Consultation Paper 06/19 (CP06/19).
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CEIOPS Publishes Response to Commission Letter Regarding Further Solvency II Work: The Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) has published its response to a letter from the EU Commission, which sets out CEIOPS's follow-up work on the Solvency II project whilst simultaneously making specific requests of CEIOPS where further work is required before Solvency II comes into force. Amongst other things, CEIOPS's response states that: (i) CEIOPS is highly committed to supporting the Commission in developing the Solvency II project; (ii) though expected delivery of Solvency II, both in its scope and timing, is particularly challenging, the consequent workload will characterise CEIOPS's work plan and priorities in the coming months and years; and (iii) delivery of a complete draft of a fourth quantitative impact study (QIS4) a month after the presentation of the report on the third quantitative impact study (QIS3) would be difficult as CEIOPS does not have the resources or the expertise to produce the report by itself.
CESR Publishes Work Programme for Further Work in the Area of the Market Abuse Directive: The Committee of European Securities Regulators (CESR) has published its programme for further work in relation to the Market Abuse Directive (MAD). The work programme reflects CESR's continued efforts in preparing for convergent implementation and application of the market abuse regime, which CESR aims to do by ensuring that a common approach to the operation of MAD takes place throughout the EU. Issues identified for further work include: (i) assistance to the EU Commission in developing a list of sanctions and measures applicable under the MAD, in order to accommodate concerns about the diversity of measures and sanctions applied in member states; (ii) harmonisation of requirements for insiders' lists; and (iii) providing guidance on suspicious transactions reporting.
FSA Announces new Training and Competency Regime: The Financial Services Authority (FSA) has issued Policy Statement 07/13, which contains feedback on responses received to its March 2007 consultation on introducing a more outcome-focused and principles-based Training and Competence Regime, and sets out, in final form, the new rules and guidance. The final rules also incorporate the rule changes needed to make the TC Sourcebook comply with the Markets in Financial Instruments Directive (MiFID). The new regime, amongst other things, will: (i) introduce a new, overarching competence rule in the Senior Management Arrangements, Systems and Controls sourcebook which will apply to all UK authorised firms, including wholesale firms, which will replace the training and competence commitments set out in the current TC Sourcebook; (ii) replace the existing TC Sourcebook with a simpler, shorter, principles-based sourcebook for retail firms only which will be more outcome-focused and user-friendly and will comply with MiFID; and (iii) retain the existing compulsory exam requirements for specified retail activities to maintain protection of retail consumers. The new TC regime will come into force on November 1, 2007.
FSA Issues Publication Supporting the Delivery of Treating Customers Fairly Initiative: The FSA has issued its latest publications supporting the delivery of the Treating Customers Fairly (TCF) initiative. The first publication, entitled the 'Culture paper', looks at firms' culture in relation to treating customers fairly and highlights examples of both good and poor practice seen in firm visits and the FSA's own TCF experiences. The second publication, entitled 'Management Information document' is designed to help firms develop and use management information to demonstrate that they are treating their customers fairly.
CEBS Approves Amendments to Guidelines on Financial Reporting: The Committee of European Banking Supervisors (CEBS) has published the approved amendments to the Guidelines on Financial Reporting (FINREP), which were submitted for public consultation on April 20, 2007. The guidelines are designed for banking institutions to use when preparing their financial reports based on International Accounting Standard (IAS)/International Financial Reporting Standards (IFRS). CEBS has confirmed that this will be the only amendment made to the Guidelines on Financial Reporting during 2007, in accordance with its policy of limiting the changes to the Guidelines to a maximum of one per year.
FSA Letter to CEO's on Managing Compliance Risks: The FSA has published a letter, sent from Hector Sants, FSA Chief Executive, to the Chief Executive Officers of the global investment banks which took part in the FSA's roundtable discussion in March 2006 discussing the issues and facts emerging from the FSA's work on observing good practices for managing compliance risk in major global investment banks operating in London. The letter (and the appendix to it) set out the good practices that the FSA observed in this area from cross-firm work and the roundtable discussions. The good practices noted include: (i) firms having a clear and meaningful understanding of what 'compliance risk' means; (ii) firms having a clear understanding of the characteristics of the desired compliance culture and desired behaviours; and (iii) the involvement of senior regional management in meeting challenges arising from principles-based regulation.
HMT and FSA Consult on UK Recognised Covered Bonds Legislative Framework: Her Majesty's Treasury (HMT) and the FSA have issued a consultation paper on proposals for a new legislative framework to establish a UCITS compliant covered bonds regime in the UK. The joint consultation contains HMT proposals for the new legislative framework for covered bonds in the UK and the FSA's proposed principles based implementation of the regime and its accompanying guidance. The proposals contained in the consultation document include that: (i) the issuer of the covered bonds must be a credit institution with its registered office in the UK; (ii) UK-recognised covered bonds will be regulated by the FSA with particular regard to the protection of bondholders; (iii) the bonds will be supported by an asset pool containing (amongst other things) the sums raised by the issue of the bonds or eligible property of an equivalent value; (iv) the asset pool must have sufficient collateral to cover bondholder claims throughout the whole term of the covered bond; and (v) in the event of the issuer's insolvency, bondholders have a priority claim on those assets. Comments are invited by October 15, 2007.
CESR Publishes Questionnaire on Assessment of CESR Activities: CESR has published a questionnaire for interested stakeholders to provide CESR with feedback and their assessment of CESR's activities, to assess its effectiveness since its creation in September 2001. CESR hopes the responses gathered via the questionnaire could form an important contribution to the evaluation of the Lamfalussy process. CESR will therefore report to the EU institutions on the results of the questionnaire. The questionnaire is open for answers until September 14, 2007.
CEIOPS Provides Feedback to the EU Commission on its Green Paper on Retail Financial Services in the Single Market: The Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) has published a letter to the EU Commission, which provides feedback on the Commission's Green Paper on Retail Financial Services in the Single Market. Amongst other things, the letter states that CEIOPS: (i) generally supports the analysis and initiatives in the Green paper; (ii) welcomes the references to its work on insurance and pensions issues; and (iii) is of the view that work on the EU prudential insurance regulatory framework, the Solvency II project, will contribute significantly to EU harmonisation and the single market for financial services.
Shareholders Rights Directive Published in Official Journal: Directive 2007/36/EC on the exercise of certain rights of shareholders in listed companies has been published in the Official Journal. The Directive establishes requirements in relation to the exercise of certain shareholder rights attached to voter shares in relation to general meetings of companies which have their registered office in a member state and whose shares are admitted to trading on a regulated market situated or operating within a member state. Member states are required to implement the Directive by August 3, 2009.