S Caldwell blog - 12.08.15Eight years on from the credit crisis, the drive to rehabilitate securitisation continues.

The most recent body to speak up for the increasingly regulated structures is the European Banking Authority, which last month published an Opinion and an accompanying Report on the establishment of a European framework for qualifying securitisations for the purposes of determining

clocksI bring good news from the Bank of England. Whether you have been up all night trying to close a £1 billion securities transaction for your client, or you are buying a house and there’s a last minute snag, the deadline for settling securities transactions and making high-value cash transfers is due to be extended

It’s been barely six weeks since the EMIR trade reporting obligations came into effect on 12 February and, as the regulatory dust begins to settle, parties to derivative transactions are still in the process of assessing their duties under the new regime.  In the lead up to the February deadline, bank and securities firms were busy implementing their client outreach programmes whilst we were busy putting out client alerts and blogging about the new requirements under EMIR.  We continue to help clients with their questions on this significant change to the EU regulatory landscape.

Two aspects of the new trade reporting regime in particular repay some close attention to avoid potential trip-ups.  First, the rules relating to what has been termed ‘backloading’, or, in other words, the requirement to transaction report historic trades.  After some uncertainty in the lead up to implementation, the requirements are now clearer.  Broadly, counterparties need to ensure that all historic trades that were either ‘live’ on 12 August 2012 (the date EMIR came into force), or subsequently became live prior to 12 February 2014 (the date the reporting requirements came into force), are reported.  For these trades, the deadline for reporting will range from just one day to a period of three years after the reporting obligations became effective, depending on the date of the trade and, if applicable, its termination date.  Our client alert sets out these timeframes in more detail.

Continue Reading Back(loading) to the Future – the Nuances of EMIR Transaction Reporting Requirements

EMIR’s trade reporting obligations come into effect on 12 February and counterparties to derivative transactions are currently scrambling to ensure they have all the appropriate systems in place to ensure compliance. For large financial institutions, this has already involved many months of hard work and, even still, many are not optimistic about meeting next month’s deadline. At the other end of the spectrum, the administrative burden on one-off or low volume commercial counterparties should be relatively light, and ensuring that the reporting obligations are covered not therefore too taxing.

What then of SPVs – which are neither operational goliaths like their derivative counterparties nor autonomous commercial entities capable of assessing the implications on cost, resources and time of each option open to them?
Continue Reading You Don’t Need EMIRacle – Trade Reporting for SPVs Made Easy

They say that the early bird catches the worm and it seems that courts in the US definitely agree. A recent decision by a court of appeals in Philadelphia could serve as a wakeup call for any noteholders or issuers and servicers that might have claims to bring in relation to, respectively, the disclosure of risks in offering materials or the valuation of underlying assets that they need to be diligent with regard to their filings. The facts of the case highlight why interested noteholders, issuers and servicers should scrutinise the relevant materials on which they have relied and investigate any claims in order to take relevant action in a timely manner.
Continue Reading The Operating Engineers Pension Trust Fund Lawsuit: The time is now (or has it already passed?)

So Eurosail-UK 2007-3BL plc (Eurosail) is not ‘balance sheet’ insolvent, no event of default has occurred under the RMBS notes it has issued and a post-enforcement call option (PECO) does not make limited recourse any of the notes it relates to.

Those are the conclusions of the Supreme Court (see here) after it substantially re-affirmed the judgments of both the High Court and the Court of Appeal in the case of BNY Corporate Trustee Services Ltd v Eurosail UK 2007-3BL and others.

Facts

For those unfamiliar with the facts, the case concerned an attempt by certain A3 noteholders to have an event of default under the notes declared on the basis that Eurosail was balance sheet insolvent due to, amongst other things, losses incurred as a result of the lack of currency swaps originally provided by Lehman Brothers.  The key argument being that the audited balance sheet of Eurosail showed an excess of liabilities over assets and that losses from the loss of the currency swaps could not realistically be recovered. 
Continue Reading ‘Point of no return’ is not the point says Supreme Court

Those issuers, corporate services providers, collateral managers, servicers and special servicers that regularly submit debt announcements on the Irish Stock Exchange will know how straightforward and quick it is to submit.  For those that don’t, at present this process involves simply sending a copy of the notice or announcement to the email address announcements@ise.ie and the publication is free of charge if a Word version of the notice is sent. 
Continue Reading Irish Stock Exchange announcements – Its all change at the Exchange!

As part of the Dodd-Frank financial reforms, the U.S. Commodity Futures Trading Commission (“CFTC”) increased its oversight of “swaps”.  One change stemming from Dodd-Frank is that a “swap”, as defined in the Commodity Exchange Act and CFTC regulations, is now a “commodity interest”.  The CFTC regulates collective investment vehicles that invest in commodity interests, which it calls “commodity pools”.  This can include SPVs which are not incorporated in the U.S..

The CFTC regulates the person with managerial or operational control over the commodity pool which is referred to as the commodity pool operator (“CPO”).  Determining precisely which person should serve as the CPO in any given structure requires an analysis beyond the scope of this blog post but where there is a commodity pool, there must be a CPO.  CPOs can be subject to onerous regulatory requirements.  Determining whether or not an entity is a commodity pool and then whether its operator needs to register as a CPO requires some careful analysis and, to make the issue more interesting, the rules have undergone significant changes recently.
Continue Reading CFTC Rules – When is a European SPV a commodity pool?

The Basel Committee on Banking Supervision announced yesterday that it had finalised the rules for the Liquidity Coverage Ratio or LCR i.e. the main mechanic for regulating liquidity in the Basel III package of reforms.

The LCR requires that a bank hold a sufficient stock of “High Quality Liquid Assets” to meet its net cash outflows in a hypothetical stress scenario. The rules set out the parameters for the stress scenario, the calculation of the net cash outflow and the type of assets which can constitute High Quality Liquid Assets.

Lobbying has achieved a notable success as certain “residential mortgage-backed securities rated AA or higher” can now be included in a bank’s stock of high quality liquid assets (subject to a 25% haircut, which is lower than the haircut applied to some corporate debt securities and to the limitation that this component can form no more than 15% of the buffer as a whole).
Continue Reading RMBS can form part of the Basel III liquidity buffer. Some good news for the structured finance industry.