European Banking & Finance News: A JD Supra Legal Reader

Barclays, ESMA standards, an amended Prospectus Directive, AIFMSD, FSA activities, and more…

For your convenience, here’s a roundup of recent advisories on developments in the European banking and finance industry:

Barclays / LIBOR

FSA Fines Barclays £59.5 Million for Manipulation of LIBOR (Orrick, Herrington & Sutcliffe LLP):

“On 27 June 2012, the FSA published the final notice issued to Barclays Bank plc, detailing a £59.5 million fine for misconduct relating to its submission of rates that formed part of the London Interbank Offered Rate and the Euro Interbank Offered Rate. This is the largest ever fine that the FSA has imposed.” Read on>>

Explanation of the Alleged LIBOR Manipulation Scheme (Howard Ullman):

“Good background on the alleged scheme to manipulate LIBOR. Via NPR’s Planet Money program, again. About halfway through, the program discusses allegations of interbank agreements to manipulate reported LIBOR rates… But does an interbank LIBOR conspiracy even make sense? Below in the link from economicpolicyjournal.com there’s an argument that the scandal is really a tempest in a teapot, because the banks can’t set the interest rates.” Read on>>

On the Barclays Scandal-This is Not a Compliance Failure It’s an Ethical Failure (Thomas Fox):

“In the movie ‘Margin Call’ the character played by Jeremy Irons says that there are three ways to lead in business: (1) Be the smartest; (2) Be there first; (3) Cheat. I thought about this trichotomy when reading several articles about the fine of $450 MM agreed to by the British bank Barclays on June 27, 2012 to settle allegations that it tried to manipulate certain benchmarks for rates, most particularly the London Interbank Offered Rates or LIBOR.” Read on>>

The Death of LIBOR? (Partridge Snow & Hahn LLP):

“Robert Diamond’s resignation today as CEO of Barclays PLC is the direct result of the bank’s deliberate submission of artificially low reports of its borrowing costs from 2005 to 2009. These reports were used by the British Bankers’ Association in compiling data from major banks and using that data in determining the London Interbank Offered Rate (‘LIBOR”). At least a dozen other banks, including Citigroup, Deutsche Bank, HSBC and UBS, are being investigated to determine if they likewise submitted false reports of their borrowing costs to the British Bankers’ Association.” Read on>>

Criminal Antitrust Update – June 2012 (Patton Boggs LLP):

“Lloyds Banking Group suspended traders in their derivatives group as a result of ongoing investigations of allegations that banks conspired to manipulate the LIBOR interest rate. A number of banks have apparently suspended or terminated staff that may have been implicated in collusion related to LIBOR rates.” Read on>>

The European Securities and Market Authority

ESMA Consults on Remuneration Guidelines for Alternative Investment Fund Managers (Skadden, Arps, Slate, Meagher & Flom LLP)

“The ESMA Paper recognises the difficulty in seeking to establish a single set of remuneration guidelines covering the entire spectrum of hedge, private equity, real estate and wider alternative asset managers. The private equity industry, in particular, should welcome the suggestion that a European-style private equity mechanism (whereby investors receive all of their capital back plus a hurdle before any variable compensation is paid to staff of the AIFM and those staff are subject to claw-back requirements) may of itself be sufficient to meet the risk-alignment requirements.” Read on>>

ESMA Consults on EMIR Rules (Katten Muchin Rosenman LLP):

“On June 25, the European Securities and Markets Authority issued a consultation paper on its proposed technical standards under the EU Regulation on OTC Derivatives, Central Counterparties and Trade Repositories. The Regulation … is intended to improve the functioning of OTC derivatives markets in the European Union by reducing risks via the use of central clearing and risk mitigation techniques, increasing transparency via trade repositories and ensuring sound and resilient central counterparties.” Read on>>

ACER and ESMA Publish Respective Consultations on REMIT and EMIR (McDermott Will & Emery):

“In the last two weeks, both the Agency for the Cooperation of Energy Regulations (ACER) and the European Securities and Markets Authority (ESMA) have published consultations for market participants on the Regulation on wholesale energy market integrity and transparency (REMIT) and the European Market Infrastructure Regulation (EMIR), respectively… EMIR was introduced to regulate the over-the-counter (OTC) derivatives market, with the aim of mitigating counterparty risk. EMIR requires the clearing of trades by central counterparties and the reporting of trades to a trade repository. It will apply to all financial counterparties and to non-financial counterparties (counterparties, who, by elimination, are not financial counterparties), in certain circumstances.” Read on>>

ESMA Proposed Rules on Derivatives, Central Counterparties and Trade Repositories (Orrick, Herrington & Sutcliffe LLP):
“On June 25, the European Securities and Markets Authority (ESMA) issued a consultation paper containing draft Regulatory Technical Standards and draft Implementing Technical Standards, which set out specific details of how the Regulation of the European Parliament and Council on OTC derivatives, central counterparties and trade repositories (EMIR) will be implemented.” Read on>>

Amendments to the EU Prospectus Directive

What you need to know about the amendments to the EU prospectus regime implemented on 1 July 2012 (Reed Smith):

The European Commission has adopted two amending regulations to amend the Prospectus Directive Regulation, which also came into effect on 1 July 2012 (the “Amending Regulations”). The Amending Regulations address (i) the format and content of the prospectus, the base prospectus, the summary and final terms; (ii) the proportionate disclosure regime; (iii) retail cascades; and (iv) certain technical amendments and clarifications… The Amending Regulations reflect technical advice received from the newly created European Securities and Markets Authority.” Read on>>

What does the amended Prospectus Directive regime mean for issuers of standalone wholesale debt? (White & Case LLP):

“Let’s start with some good news. If an issuer does not target ‘the public’ with its bond issue, investors who have accepted the offer of securities will no longer have the right to withdraw their acceptance if the issuer publishes a supplement between approval of the prospectus and the later of closing and trading commencing. The two day (maximum) ‘cooling off’ period will now only be applicable to ‘public offer’ transactions.” Read on>>

UK Financial Services Authority Activities

Memoranda of Understanding Between FSCS, PRA and FCA Published (Orrick, Herrington & Sutcliffe LLP):

“On June 26, the FSA published a draft memorandum of understanding (‘MoU’) between the Financial Services Compensation Scheme (‘FSCS’) and the new Prudential Regulation Authority and a second MoU between the FSCS and the new Financial Conduct Authority.” Read on>>

FSA Update on Derivatives Reform (Orrick, Herrington & Sutcliffe LLP):

“On June 26, the FSA published a speech by David Lawton, FSA Acting Director of Markets, on recent progress made on derivatives reform. Mr. Lawton reports that much has been achieved over the past year as regards meeting the G20 commitments to improve counterparty risk management and transparency in the over-the-counter (OTC) derivatives markets.” Read on>>

FSA Censures Kaupthing for Liquidity Monitoring Failures (Orrick, Herrington & Sutcliffe LLP)

“On June 26, the FSA reported that it had issued a Final Notice (dated 18 June 2012) against Kaupthing Singer and Friedlander Limited (KSFL), the UK based subsidiary of the Icelandic banking group Kaupthing Bank Hf (KBHf). The FSA found that KSFL breached Principle 2 of the FSA’s Principles because it failed to consider promptly and properly whether liquidity stresses in KBHf would have a detrimental effect on its own liquidity position.” Read on>>

Speech by FSA’s Clive Adamson on ‘Regulating in a New Era of Professionalism’ (Orrick, Herrington & Sutcliffe LLP):

“It is the FSA’s intention that the Financial Conduct Authority (FCA) will look and feel different from the FSA. The aim is to move away from a primarily reactive style to a judgment based, confident and pre-emptive regulator that acts to ensure consumers get a better deal and markets are fair and orderly.” Read on>>

Additional Developments

Proposed Extension of UK Takeover Code Jurisdiction (Skadden, Arps, Slate, Meagher & Flom LLP):

“On 5 July, the U.K. Takeover Panel (the Panel) published a consultation paper setting out its proposal to extend the jurisdiction of the U.K. Takeover Code (the Code) to cover all public companies that have their registered office in the U.K., the Channel Islands or the Isle of Man. Currently, companies whose securities are not traded on a ‘regulated market’ are only subject to the Code if they have their registered office in, and are centrally managed and controlled in, the U.K., the Channel Islands or the Isle of Man.” Read on>>

Alternative Investment Fund Managers Directive: EU and Offshore Perspectives (Harney Westwood & Riegels):

“Directive 2011/61/EU on Alternative Investment Fund Managers, known colloquially as the ‘Alternative Investment Fund Managers Directive’ or the ‘AIFMD’, will overhaul the pan-European regulatory regime applicable to the managers of hedge funds, real estate funds, private equity and other collective investment schemes containing, what is loosely being described as, ‘alternative investments’. On its face, the AIFMD restricts its scope to the regulation of investment managers rather than underlying funds being managed. However it is clear these regulations will have a knock on effect in shaping and influencing the forms of the investment funds under management.” Read on>>

It’s the Math, Stupid (Dechert LLP)

“As I write this, everyone continues to celebrate the result of the most recent Summit and the alleged breakthrough for the European Union and the Spanish and maybe Italian banks. The announcement that the European Financial Stability Facility, or the European Stability Mechanism, will actually lend directly to the banks in Spain and Italy was a bit of an overachievement for this body and, as I write this, stock markets are surging across the world on the news and spreads are coming in a smidge on the periphery.” Read on>>

Proposal for a Directive on Recovery and Resolution of Credit Institutions and Investment Firms (White & Case LLP):

“The European Commission has published its long awaited proposal for a Directive establishing a framework for the recovery and resolution of banks and investment firms in the EU. The proposed Directive delivers on the EU’s commitments to the G20 to introduce legislative reform and can also be seen as a first step in the process of achieving Banking Union in the EU, as announced by Commission President Barroso recently.” Read on>>

Banking Reform: Delivering Stability and Supporting a Sustainable Economy, June 2012 (Reed Smith):

“HM Treasury published the Paper on 14 June 2012. It sets out the Coalition Government’s proposals for implementation of the Final Report by the Independent Commission on Banking chaired by Sir John Vickers (the “Vickers Report”). The objective of the reforms is for the UK to remain a successful global financial centre without asking taxpayers to bear unacceptable risks. This is a clear intent to reduce the perceived implicit guarantees to the banking sector and all the undesirable consequences that flow from the implicit guarantees.” Read on>>

UK Banking Reform White Paper Published (Katten Muchin Rosenman LLP):

“The White Paper confirms that the UK Government will introduce legislation to implement the ICB’s recommendations in relation to ring-fencing, depositor preference and primary loss-absorbing capacity requirements. The Government intends to publish a draft version of the legislation for pre-legislative scrutiny in autumn 2012 – following the end of the White Paper comment period on September 6, 2012. The target date for completion of the passage of the legislation is late 2014 or early 2015 with full implementation in 2019.” Read on>>

European Commission Proposes Bank Recovery and Resolution Framework (Katten Muchin Rosenman LLP):

“On June 6, the European Commission published a legislative proposal for a Directive introducing a recovery and resolution framework covering deposit-taking banks and certain other large financial institutions. The aim of the proposed Directive is the introduction of a comprehensive set of measures aimed to ensure that financial regulators have the necessary powers to take action to address developing problems at banks.” Read on>>

European Commission President Calls for Banking Union (Orrick, Herrington & Sutcliffe LLP):

“José Manuel Barroso, president of the European Commission, commented in an interview with the FT this week that all 27 EU countries should submit their big banks to a single cross-border supervisor as part of a banking union. He said that the EU needs to take ‘a very big step’ towards deeper integration if it is to learn lessons from the sovereign debt crisis.” Read on>>

MF Global and the New UK Special Administration Regime (Skadden, Arps, Slate, Meagher & Flom LLP):

“The MF Global UK Limited (MFG UK) case is the first opportunity for market participants to observe the impact of the UK’s new Special Administration Regime (the SAR) for failed investment banks. The SAR is Britain’s response to perceived defects — highlighted by the collapse of Lehman Brothers — in the UK insolvency regime, including the delay in the return of assets to clients.” Read on>>

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