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    Deposit Pricing Analysis in Advance of Rising Rates
    Published on September 30, 2014
    It seems that regardless of the positive economic indicator reported, one can find an offsetting indicator pointed in the complete opposite direction. The unemployment rate has been improving, yet there has been minimal wage growth (much less wage pressure). The Fed reiterated there is substantial slack in the employment picture in its most recent testimony. Asset purchases by the Fed are winding down, while China is buying more than ever before. Positive growth here in the states (this quarter that is) is countered by trouble in Europe. The ECB and China have recently lowered rates, while the overall consensus here seems to be that the Fed will change course and begin to tighten monetary policy in the middle of 2015.
    Darling Consulting Group
    Managing (With) the Fed: An Enterprise Approach
    Published on September 30, 2014
    Interest rates will rise. Of that we are relatively certain. However, we are less certain regarding the start date, sequencing, severity and the sustainably of the increase. Insurers are accustomed to managing the uncertainty of insurance risks. How should they manage investment risk in an uncertain rising interest rate environment? First, managements need to take a multi-year enterprise-based review to understand financial statement cash flow dynamics of interest rate changes. Next, they should select among alternative strategies the one offering the most favorable outcomes for key performance metrics. This review process should be simple and not burdened by models with decimal point displays implying levels of precision that do not exist.
    GR - NEAM
    UK Supervisory Approach to International Banks: Issues for Consideration by Non-EEA Branches
    Published on September 25, 2014
    On September 5, 2014, the Prudential Regulation Authority (PRA) published a supervisory statement1 (Supervisory Statement) setting out in detail the PRA’s approach to the authorization and supervision of existing and prospective international banks in the United Kingdom (UK). The Supervisory Statement is directed at PRA supervised deposit-takers and designated investment firms incorporated elsewhere in, and outside of, the European Economic Area (EEA).
    Sidley & Austin LLP
    New York’s Highest Court Endorses Application of “Separate Entity Rule” to International Banks
    Published on October 23, 2014
    In Motorola Credit Corporation v. Standard Chartered Bank, the New York Court of Appeals confirmed that the separate entity rule, which has existed for nearly 100 years, remains a valid rule of law. Specifically, the Court of Appeals held that “a judgment creditor’s service of a restraining notice on a garnishee bank’s New York branch is ineffective under the separate entity rule to freeze assets held in the bank’s foreign branches.” As a result of this ruling, restraining notices served on the New York branches of international banks cannot reach assets held in bank accounts located at banks’ foreign branches, meaning that judgment creditors seeking to restrain assets located in foreign bank branches must obtain formal recognition of restraining notices in the country in which the bank accounts that they seek to restrain are located. Sullivan & Cromwell LLP represented Standard Chartered Bank (“SCB”) before the New York Court of Appeals, and has represented the Bank in all phases of this litigation.
    Sullivan & Cromwell LLP
    Bank Capital Plans and Stress Tests October 2014
    Published on October 24, 2014
    Last Friday, the Board of Governors of the Federal Reserve System approved a final rule (the “Final Rule”) amending certain aspects of the existing capital plan (the “Capital Plan Rule”) and stress test rules (the “Stress Test Rules”) applicable to bank holding companies with $50 billion or more in total consolidated assets and the company-run Stress Test Rules applicable to bank holding companies with more than $10 billion but less than $50 billion in total consolidated assets and savings and loan holding companies and state member banks with more than $10 billion in total consolidated assets. The Capital Plan Rule is designed to enable the Federal Reserve to assess the internal capital planning process of each bank holding company with total consolidated assets of $50 billion or more (a “Large BHC”) and its ability to maintain sufficient capital to continue its operations under expected and stressful conditions. The Stress Test Rules require Large BHCs to conduct annual and mid-cycle company-run stress tests. State member banks and savings and loan holding companies with total consolidated assets of more than $10 billion and bank holding companies with total consolidated assets of more than $10 billion but less than $50 billion are subject to less stringent Stress Test Rules.
    Sullivan & Cromwell LLP
    IRS Issues Audit Directive on Worthless Debt Deductions for Banks and Bank Affiliates
    Published on October 29, 2014
    The Large Business and International Division (“LBI”) at the IRS issued an audit directive (the “Directive”) to its revenue agents relating to bad debt deductions claimed by banks and regulated bank affiliates. The Directive clarifies the application of the presumption rules for these bad debt deductions which, the IRS admitted, were out of date. Pursuant to the Directive, LBI examiners are instructed not to challenge worthless debt deductions claimed by banks and regulated bank affiliates (including a partnership wholly owned by a bank and its affiliates) satisfying the parameters described below. Under the Directive, credit-related loan charge-offs (including estimates of certain selling costs) reported on financial statements filed with the SEC or bank regulator will generally be treated as sufficient evidence that a debt is worthless. Furthermore, LBI examiners are not to challenge worthless debt deductions taken by banks or regulated bank affiliates in excess of such credit-related loan charge-offs if the bank or bank affiliate applies the conclusive presumption rule in the regulations and certain other requirements are satisfied.
    Sullivan & Cromwell LLP
    Cross-Border Recognition of Resolution Actions
    Published on October 2, 2014
    On September 29, 2014, the Financial Stability Board (the “FSB”) published a consultative document concerning cross-border recognition of resolution actions and the removal of impediments to the resolution of globally active, systemically important financial institutions (the “Consultative Document”). The Consultative Document encourages jurisdictions to include in their statutory frameworks seven elements that would enable prompt effect to be given to foreign resolution actions. In addition, due to a recognized gap between the various national legal resolution regimes that are currently in place and those recommended by the FSB, the Consultative Document sets forth two “contractual solutions” - that is, resolution-related arrangements to be implemented as a matter of contract among the private parties involved - to address two underlying substantive issues that the FSB considers critical for orderly cross-border resolution.
    Sullivan & Cromwell LLP
    ECB Comprehensive Assessment: Performance of Spanish banks
    Published on November 2, 2014
    This publication provides in-depth analysis on relevant issues affecting the Spanish banking industry.
    Analistas Financieros Internacionales
    North American Power & Utilities Deals - Q3 2014
    Published on November 3, 2014
    This report presents an analysis of North American merger and acquisition activity in the power and utilities industry.
    PricewaterhouseCoopers LLP
    The Impact of Regulatory and Shareholder Influence 2013 - 2014
    Published on July 31, 2014
    Banks today are pulled in multiple directions. Shareholders and advisory firms like ISS and Glass Lewis seek strong alignment between executive pay and performance, while bank regulators prefer less leveraged, lower-risk pay programs. In the extreme, each suggests different pay program designs. Shareholders and the Securities and Exchange Commission expect clear disclosure of pay and performance alignment often through more formulaic/quantitative approaches, while bank regulators are more accepting of discretion, provided it is applied within a consistent framework. Shareholders favor pay that adjusts in line with performance, with upside and downside opportunities, providing variation in payouts, while regulators view too much upside and stretch goals as potentially creating excessive risk.
    Meridian Compensation Partners, LLC
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