ECON considered the draft report on hedge funds and private equity and also held a first exchange of view on the future structure of supervision. The Committee also held an exchange of view with Mr Holmquist on the financial market turmoil, and with Thoma
The future of social security systems and pensions
Lamfalussy follow-up: future structure of supervision
Report on hedge funds and private equity
Transparency of institutional investors
Exchange of views with Jörgen Holmquist
Exchange of views with Thomas Steffen
Votes
The future of social security systems and pensions: their financing and the trend towards individualisation
Ieke van den Burg (PSE/NL) presented her draft opinion on the future of social security systems and pensions. The rapporteur urges the Commission to review the IOPR directive to provide a solid solvency regime appropriate to institutions for occupational retirement provision.
Mrs van den Burg is also concerned about the current trend to shift from defined benefit pension systems to defined contribution pension systems and warns against the envisaged revision of IAS 19 that could add to that trend by abolishing the so-called “corridor”-approach.
Draft opinion
Timeline:
26 June: Deadline for amendments
15 July: Consideration of amendments
10 September: Vote in Committee
Lamfalussy follow-up: future structure of supervision
ECON held a first exchange of views on the working document on the future structure of supervision in Europe. Presenting the report, rapporteurs Ieke van den Burg (PSE/NL) and Daniel Dăianu (ALDE/RO) underlined that this document targets macro-level supervision, in particular to act at EU level with cross-border, cross-sector supervision of big financial institutions. The mandates and competences of colleges of supervisors should be revised as differences could create further fragmentation of the system. Mrs van den Burg criticized the Commission for not providing any vision on that issue.
The discussion revealed a consensus among most MEPs that the status quo of supervision in Europe is not satisfying. Opening the debate Piia-Noora Kauppi (EPP/FIN) welcomed that more governments are now contributing to EU supervision. The original Lamfalussy approach has changed and now also covers supervisory aspects, she noted, and called the Commission to give more power to level3. She also noted that the concept of colleges of supervisors is too much based on bilateral arrangements, and a level playing field is needed. However, too much relevance is given to non-regulated entities in the report, she said.
Sharon Bowles (EPP/UK) noted that the 13 points made in the document need further investigation. It has to be understood what has happened, she said. The concept of some kind of a European regulator might be legitimate, she said. The problem, however, is how to get there.
Pervenche Beres (PSE/FR) noted that the supervision is inadequate for crisis situations. In the short term, institutions should look at currently discussed directives such as Solvency II, UCITS, and CRD (and possibly financial conglomerates), in the medium term on strengthening the 3L3 Committees.
John Purvis (EPP/UK) warned against the risk to rush into things whose outcomes have not been considered. More regulation and supervision can be dangerous, particularly when looking at the global dimension.
Report
Timeline:
3 June: Hearing
24 June: Consideration of report
3 July: Deadline for amendments
Before 15 July: Consideration of amendments
10 September: Vote in Committee
October: Vote in Plenary
ECON draft report on hedge funds and private equity
Econ considered the draft report on Hedge funds and private equity drafted by Poul Nyrup Rasmussen (PSE/DA). The rapporteur requests the Commission to submit to Parliament by 30 November 2008 a legislative proposal or proposals on hedge funds, private equity and other relevant actors. It was made clear that the whole draft report including the recommendations made in the annexes can be subject for amendments.
Opening the discussion the report was harshly criticised by members from the EPP and ALDE. Sharon Bowles (ALDE/UK) underlined that the important underlying question of the report should be how to deal with risks. She also made clear that capital requirement for hedge funds are not the same as for other market participants. Also, public credit rating agency would not foster competition, she said.
Shadow rapporteur Kurt Lauk (EPP/DE) criticized that the report takes a crises situation in the banking sector to legitimate regulatory action against hedge funds and private equity, and also disagreed with the idea to set up a new supervisor. Leverage should be left to the market and cannot be arranged through a regulator, he made clear. With regard to CRA’s he said that the problem was a business model which is not transparent, and opposed the idea of a public European institution. He finally noted that is already sufficient legislation with regard to capital stripping, so no new legislation is needed.
Piia-Noora Kauppi (EPP/FIN) and John Purvis (EPP/UK) both reiterated that hedge funds and private equity are not the same. “There are only a few things that could be supported by the EPP”, she said and particularly opposing the recommendations towards leverage. Also, with regard to supervision, it should be looked at the outcome of the van den Burg report on the Lamfalussy follow-up.
Speaking for the PSE Pervenche Beres (PSE/FR) noted that it is not to make hedge funds and private equity responsible for the crises, but all market participants have to be looked at. Ieke van den Burg (PSE/NL) and Udo Bulmann (PSE/DE) in particular underlined the role of leverage and referred to a recent study for the PSE group. However, Mr van den Burg also warned to provide a guarantee of quality potentially given by public registers and a public credit rating agency as foreseen in the report as this could lead to a burden for bail-out.
Draft report
Timeline:
15 May: Deadline for amendments
2-3 June: Consideration of amendments
25 June: Vote in Committee
July: Vote in Plenary
Transparency of institutional investors
ECON discussed the 40 tabled amendments to the report on the transparency of institutional investors prepared by Sharon Bowles (ALDE/UK). The rapporteur noted that most of the amendments could be combined and be part of compromise amendments.
However, Mrs Bowles will not take on board the amendment 18 on the self-regulation of hedge funds and private equity stating that it is too soon to say that CoD’s are not sufficient
On amendment 40 posed by Mrs van den Burg on securities lending with the purpose of voting on borrowed shares, Mrs Bowles agrees that this is not very good practice. However, she questions whether this is can be put into legislation.
Vote in Committee is planned for May 19
Draft opinion
Amendments
Exchange of views with Jörgen Holmquist
Speaking before the ECON Committee Director General Jörgen Holmquist outlined some of the forthcoming measures following the financial turmoil. Changes to the CRD may include an update on the large exposures regime, harmonisation of hybrid capital rules, quantitative restrictions or qualitative provisions with regard to securitisation, and changing the legal basis for the colleges of supervisors, Mr Holmquist said. In that respect, the Commission will organise a seminar for ECON in June. An agreement on the proposed changes should be found before April 2009.
With regard to the supervisory structures and the call for more integrated European regulation and supervision he noted that “few, if any, Member States consider this to be a viable option at the moment.” Strengthening cooperation and convergence of supervisory practices is therefore the best way forward, he noted and announced a consultative document to be published mid-May
The Commission also expects the industry to deliver comprehensive data on the primary and secondary markets by June. “If the industry does not deliver a satisfactory response, we will consider regulation”, he underlined.
Furthermore, the IASB is working on off-balance sheet vehicles and fair value measurement, and also agreed to amend IFRS 7 to include new disclosure requirement. Although there is a clear need to coordinate all possible accounting changes, there will be no changes in the middle of the present turbulence, he said. Also, Commissioner McCreevy will outline his thinking on rating agencies soon.
Discussion in Committee mainly concentrated on supervisory aspects. Ieke van den Burg (PSE/NL) reminded to the discussions on her own report stating that the current status quo is not enough. Piia-Noora Kauppi (EPP/FIN) called for more supervisory convergence with regard to the colleges of supervisors, noting that the current voluntaries are not sufficient. Also, Wolf Klinz (ALDE/DE) reminded the differing organisational structure of supervision in member states and wondered if this organisation should not be harmonized.
Mr Holmquist underlined that it might be dangerous to find a uniform system how the supervisory structure is organised. It is better to concentrate on information exchange and the quality of information provided, he said. However, it is thought to strengthen cooperation by putting this on a legal basis, he said. The Commission will provide something that is realistic to go through the Council and Member States. However, he does not propose any changes to the legal status of the 3L3 Committees.
Finally, responding to a question on the UCITS directive he reminded that one should be careful to change the current regime as this could endanger the success of the product.
(Speech currently not available)
Exchange of views with Thomas Steffen - CEIOPS
ECON held an exchange of views with the Chair of CEIOPS, on the current work CEIOPS is undertaking. Thomas Steffen informed the Committee on the consultations on proportionality and group supervision and announced to send the advice to the Comission end May. With regard to the QIS 4 exercise he reminded that this timetable also depends on the industry as 25 % participation is expected. Although the QIS 4 report is expected to be published on 19 November, Mr Steffen confirmed to MEPs that preliminary results might possibly available for ECON already by beginning October.
Mr Steffen stated that the current financial turbulences did fortunately not lead to liquidity problems such as in the banking sector. CEIOPS reports on the issue find that the risk for the pensions and insurance sector is manageable, he said.
With regard to the IOPR directive he noted that the latest CEIOPS study revealed a high diversity in the directives national implementation. Therefore, it would be premature to recommend changes to the directive, he said.
Responding to MEPs on the transfer on liabilities in case of group supervision Mr Steffen made clear that CEIOPS will not work out on that. He also confirmed that CEIOPS is testing surplus funds as Tier1 capital and that QIS 4 is testing equity risks, introducing a ‘equity dampener’. He noted that there are diverging views within CEIOPS on the treatment of pension funds and to include them in Solvency II. “Within CEIOPS some regret it, and some welcome it”, he said.
Asked about the 3rd county group supervision aspect, Mr Steffen noted that the main problem is that of mutual recognition. He informed members that CEIOPS started an ‘equivalence’ exercise investigating third countries, starting in the re-insurance sector, and afterwards with regard to solvency II.
Votes
Competition: Sector inquiry on retail banking
Rapporteur: Gianni Pittella (PSE)
Adoption of draft report
Green Paper on Retail Financial Services in the Single Market
Rapporteur: Othmar Karas (EPP–ED)
Adoption of draft report
© Graham Bishop