Judge James M. Peck issued an important opinion in the Lehman Brothersbankruptcy late last month. The opinion protects a non-debtor counterparty’s right to rely on a contractually agreed methodology for damages calculations upon the liquidation of a safe harbored swap agreement—even if the debtor’s bankruptcy triggers the provision.
Lehman Court Finds Safe Harbors Protect Damage Calculation Provisions In Swap
Bitcoin: The Past or the Future?
Bitcoin strives to be a secure online medium of exchange that provides anonymity and doesn’t require purchasers to surrender credit card information to sellers. While it is not currently a significant market mover, the virtual currency’s regulatory and legal issues are troubling policymakers.
Banks Dodge One Volcker Rule Bullet But Anticipate Another
Banks will avoid a costly, forced divesture of assets after an “interim final rule” was approved by regulators on January 14, exempting certain collateralized debt obligations backed by trust-preferred securities (TruPS CDOs) from ownership restrictions imposed by the Volcker Rule.
The Federal Reserve Approves Goldman Sachs, JP Morgan’s Capital Management Plans
In early December, two Wall Street giants, Goldman Sachs and JP Morgan Chase, finally satisfied the Federal Reserve’s stiffer requirement with improved capital plans. The banks successfully put the matter behind them by resubmitting capital plans after the regulators found “significant weaknesses” in the ones submitted in March during a stress test. “We are pleased that the Fed determined” the bank’s stress test “process improvements met their expectations,” JPMorgan’s chief executive Jamie Dimon said in a statement.
Volcker Rule challenged in Court: Will Regulators Accede or Demur?
The American Banker’s Association (ABA) filed a petition on December 24, 2013, in the United States Court of Appeals for the District of Columbia challenging a provision of the recently approved final version of the Volcker Rule (the Final Rule) requiring community banks to divest their holdings in a commonly held debt instrument known as Collateralized Debt Obligation backed by Trust-Preferred Securities or TruPS-backed CDO.
Bank of England Curbs Funding for Lending Scheme to Focus on Small Business Lending
Effective beginning 2014, the Bank of England will scale back the Funding for Lending Scheme (FLS), which was introduced on July 13, 2012, by removing funding supplied to banks for the purpose of stimulating mortgage lending. By doing so, it aims to refocus the program solely towards stimulating business loans for small firms.
The FLS program was originally designed to “[incentivize] banks and building societies to boost their lending to the UK real economy.” Participating banks may borrow UK Treasury Bills in exchange for eligible collateral, which consists of all collateral eligible in the Bank’s Discount Window Facility. According to the Bank, “[l]ending to smaller businesses in 2014 will continue to be encouraged by allowing banks to draw £5 in the scheme for every £1 of net lending to SMEs. The fee for all drawings from the FLS extension will be set at 25 basis points, which is the lowest point of the previous fee scale.”
Investigation Into Libor Scandal Heats Up In UK, US
The Libor scandal continues unfolding as British prosecutors have identified twenty-two individuals as potential co-conspirators in an investigation of suspected London Interbank Offered Rate (“Libor”) manipulation. Libor, the estimated average interest rate charged by London banks for inter-bank borrowing, is linked to over $300 trillion in loans, financial products and contracts.
The individuals, who were also named in criminal charges brought earlier this year against former Citigroup trader Tom A.W. Hayes and two former brokers at RP Martin Holdings, were notified of the investigation in mid-October. Some of the individuals identified could face additional criminal charges in the United States.
Prospectus Disclosure Regime in Europe — the Proportionate Disclosure Regime and Supplementary Prospectuses
Regulators have recently clarified two important aspects of the prospectus regime that applies across the European Economic Area pursuant to the Prospectus Directive (Directive 2003/71/EC as amended by Directive 2010/73/EU). The Prospectus Directive provides the overarching European regulatory framework for the publication of prospectuses in connection with debt and equity securities being offered to the public or admitted to trading on regulated markets in the EEA.
SEC Proposes Rules on Crowdfunding
On October 23, 2013, the Securities and Exchange Commission (SEC) proposed rules which would, if adopted, govern the offer and sale of securities under new Section 4(a)(6) (the “Crowdfunding Exemption”) of the Securities Act of 1933 (Securities Act), provide a framework for the regulation of registered funding portals and brokers, and exempt securities sold pursuant to the Crowdfunding Exemption from the registration requirements of Section 12(g) of the Securities Exchange Act of 1934 (Exchange Act).
JPMorgan Chase Suffers First Quarterly Loss Under CEO Jamie Dimon
Due in large part to the $9.2 billion it set aside to cover mounting legal expenses, JPMorgan Chase, the nation’s largest bank, suffered its first quarterly loss under CEO Jamie Dimon. JPMorgan reported a loss of $380 million, or 17 cents per share for the third quarter, compared with a profit of $5.71 billion, or $1.40 per share just a year earlier. This cast a somber tone for the unusually humble Dimon, stating that the loss was “very painful for me personally.”