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17 March 2011

This week in "Brussels"
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Asset Management Corporate Governance/Accounting Financial Services Policy
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Articles from 10 March 2011 - 17 March 2011

Banking

Consultations open for more demanding standards for payments, clearing and settlement systems
The Committee on Payment and Settlement systems (CPSS) and the Technical Committee of the International Organisation of Securities Commissions (IOSCO) have issued for public consultation new and more demanding International Standards for payment, clearing and settlement systems.  View Article
FT: Turner said Basel III capital rules too low
"The best way to prevent another financial crisis is to force the largest banks to hold more equity capital against potential losses than required by the Basel III rules", said the FSA chief.  View Article
FT: European banks' stress test criteria is softened
The required capital ratio European banks need to hold to pass a stress test will be just 5% of core Tier 1 capital. Regulators repudiated claims that this will be too soft on the financial sector.  View Article
Paul Goldschmidt: Toughen - not weaken - EBA stress tests and make them check for contagion from failed banks
If recognised as "objective", the new stress tests will represent a major step forwards.  View Article
IMF working paper: 'Subsidiaries or Branches: Does One Size Fit All?'
This IMF working paper examines the relative advantages and disadvantages of different organisational structures for cross-border banking groups, from the point of view of both the financial groups and of the home/host authorities.  View Article
Bank of Spain informed that 12 banks must increase their capital to comply with the Royal Decree-Law
Overall, 12 banks must increase their capital for an amount totalling €15.15 billion, as detailed in the table at the end of this note. Of these 12 institutions, two are Spanish banks, two are subsidiaries of foreign banks and eight are savings banks.  View Article

Securities

ECON committee: Toughening up credit rating agency rules
The resolution did not find unanimous support. The S&D chose to abstain, with a view to amending the resolution before Parliament as a whole votes on it. The key points of discord were to do with methods for rating sovereign debt and with the structure of the European credit rating foundation.  View Article
Eurex Clearing prepares for upcoming regulatory reforms by expanding its services to interest rate and equity swaps
Eurex Clearing announced that it plans to expand its Eurex OTC Clear service to include OTC-traded interest rate and equity derivatives. This will be introduced in the context of the upcoming regulatory reforms requiring mandatory clearing for standardised OTC derivatives in the U.S. and Europe.   View Article
ICMA-ERC survey confirms long-term recovery in European repo market activity to pre-crisis levels
Godfried de Vidts, Chairman of the ICMA's European Repo Council, said: “The survey again demonstrates the increasing importance of CCPs in the repo market and also that significant volumes of repo-cleared trades are now registered with CCPs.”  View Article
FN: Fears grow over CDS restrictions
Industry participants have raised fears that the European credit and sovereign debt market could be severely damaged by new European rules that propose to clamp down on trading in certain types of credit default swaps.  View Article
FN: CME Clearing Europe sets May launch date
CME Group, the US futures marketplace, is to begin operating its European derivatives clearing house in May, after the launch was delayed by a change in focus of the business.  View Article
Reuters: US CFTC 'out of step' with other regulators
Jill Sommers, commissioner of the Commodity Futures Trading Commission, said: "One of my primary concerns is that the CFTC is moving out of step in time, substance or both with the SEC and the rest of the world in implementing trade execution requirements for standardised swaps."  View Article
ESMA response to the European Commission consultation on CSDs and securities settlement
ESMA suggests clarifying the concept of delays, which are no different from fails in so far as they imply settlement after the intended settlement date. However, ESMA agrees that delays in settlement instructions during the same settlement date may result in liquidity risk.  View Article
WSJ: ESMA to be strongly 'independent'
Steven Maijoor said that the role of the regulator is not to get a consensus position but rather to give a view based on the regulator's expertise and independent position.  View Article

Insurance

EIOPA published QIS5 results on Solvency II
Overall, the fifth quantitative impact study showed that the financial position of the European insurance and reinsurance sector assessed against the Solvency Capital Requirements (SCR) of the Solvency II directive remains sound.  View Article
CEA: Solvency II changes needed to preserve strength of Europe’s insurers
Following publication by EIOPA of the results of the fifth quantitative impact study (QIS5) into the effects of the EU's new Solvency II regulatory regime, the CEA has called for essential corrections to the implementing measures that will provide the technical detail of the new regime.  View Article

Asset Management

IPE: European Commission imposes sanctions on Czech Republic over IORP Directive
The news comes a month after the Czech government agreed to introduce a second-pillar pension system, financed by diverting 3% of contributions from its current pay-as-you-go system. However, the proposals met opposition following their announcement, with even government loyalists opposing them.  View Article
IPE: Occupational pensions could come under financial services laws – EFRP
The European Federation for Retirement Provision has warned that occupational pension schemes are increasingly likely to face financial services legislation emanating from Europe as the European Union attempts to harmonise guidelines.  View Article
EVCA: Post-flotation performance of European venture-backed IPOs
A new academic study provides insight into the after-market performance of listed venture capital-backed companies in Europe.  View Article
FN: Small is beautiful again in hedge funds
The authors of the Deutsche Bank report wrote: "After 2008, we saw a marked trend towards the brand name managers, many of whom had opened their funds to new investors for the first time in many years and offered institutional quality, safety and minimal headline or career risk".  View Article

Corporate Governance/Accounting

EuropeanIssuers’ response to the EU Single Market Act
Member of EuropeanIssuers, The Quoted Companies Alliance (QCA), has given a response, in particular on the aspects regarding access to capital by SMEs and related proposals. The EuropeanIssuers are therefore supporting their views which reflect the views of smaller quoted companies in Europe.  View Article
ESBG: Corporate governance and access to finance
The ESBG in collaboration with the AFI released a “Corporate governance and access to finance” study. This study reveals that countries with better standards of corporate governance tend to have higher levels of financial inclusion and deeper banking market penetration.   View Article
Sir David Tweedie’s speech on the future of financial reporting
A speech was given by Sir David Tweedie, Chairman of the IASB, at the US Chamber of Commerce Event, 'The Future of Financial Reporting: Convergence or Not?' in Washington/DC.  View Article
EFRAG-IASB Financial Instruments Discussion Forum – feedback report
EFRAG issued a feedback report summarising the views expressed by European constituents during the discussion forum on Financial Instruments that was held in Brussels on 28 February 2011.  View Article
IFAC 'Proposed Member Body Compliance Programme Strategy' released for comment
The Compliance Advisory Panel (CAP) published for comment the IFAC Proposed Member Body Compliance Programme Strategy 2011-2014. The paper is a result of the strategic discussions held between the CAP, IFAC compliance staff and PIOB representatives in October 2010 and January 2011.  View Article
EFRAG commented on Exposure Draft Hedge Accounting issued by IASB
EFRAG published its final comment letter to the IASB in response to the Exposure Draft Hedge Accounting (the ED), issued in December 2010. The ED proposes significant changes to hedge accounting for hedges of individual and closed groups of items.   View Article
EFRAG commented on Trustees Strategy Review
EFRAG issued its final comment letter on the IFRS Foundation paper for public consultation on the status of the Trustees Strategy Review.  View Article
ECIIA and EUROSAI signed government auditing cooperation agreement
The new European agreement foresees several forms of collaboration between the two entities, leveraging the experience and authority of each. Both entities recognise the strong needs for ongoing development of control in the Public Sector at European level.  View Article
FN: EU Commission to launch governance review next month
Claire Bury, head of the Commission's company law, governance and financial crime unit, said the review will cover three main areas: structure of company boards, shareholder engagement and the EU's own governance legislation.  View Article

Financial Services Policy

Commissioner Šemeta: The Common Consolidated Corporate Tax Base is about eliminating huge administrative burdens
The CCCTB is also about ensuring that the cross-border nature of enterprises is properly recognised, by allowing them to offset losses in one Member State against profits in another.   View Article
European Commission proposed a common system for calculating the tax base of businesses operating in the EU
The aim of this proposal is to reduce significantly the administrative burden, compliance costs and legal uncertainties that businesses in the EU currently face in having to comply with up to 27 different national systems for determining their taxable profits.   View Article
ACCA comments on the CCCTB: The route to go to enhance cross-border trade and reduce compliance costs
However, ACCA also states that the implementation of the CCCTB and its consequences on revenues should be carefully watched.   View Article
ECR: Common EU tax base proposal completely misses the point
MEP Kay Swinburne, European Conservatives and Reformists group economics spokesperson, warned that the common EU-wide method of computing corporate taxes is unnecessary and could damage countries that choose to have more competitive corporate tax regimes.  View Article
ECOFIN council conclusions: Economic governance and short selling debated
The ECOFIN Council agreed a general approach on a package of legislative proposals aimed at strengthening economic governance in the EU – and more specifically in the euro area – as part of the EU's response to the challenges highlighted by recent turmoil in sovereign debt markets.  View Article
Commission proposes reform of European Anti-Fraud Office
Commissioner Šemeta said: “OLAF is a cornerstone in the protection of the EU budget and the fight against fraud. Through this reform procedure, we intend to make it even stronger, more efficient and more capable, to the benefit of each and every European citizen".  View Article
ECON committee: MEPs give backing to appointment of Peter Praet to ECB Board
Mr Praet, who was quizzed at a public hearing by the committee, stressed the need for Europe's citizens to have ownership of economic governance reforms.   View Article
ECON committee debate on the European Semester
A new balance must be struck in the EU between joint and individual responsibility for better economic governance, said European Council President, Herman Van Rompuy. National parliaments and the European Parliament both have a crucial role to play in legitimising future governance structures.  View Article
Federal Trust Briefing: UK's "European Union Bill"
Dr Andrew Blick analyses the contents of the Bill, seeks to put them in their political context and attempts to foresee some of the Bill's consequences for the United Kingdom's position within the European Union.   View Article
IMF working paper on Crisis Management and Resolution: Early lessons from the Financial Crisis
This paper compares the policy choices in recent and past crises, explains why those choices varied, and assesses the current state of financial and operational restructuring and institutional reform.  View Article
Weber speaks on the implications of Financial Regulation
Speaking at the University College of London Economics and Finance Society, Prof Weber, President of the Deutsche Bundesbank, said Basel III rules will serve as the first line of defence against a systemic crisis.  View Article

Economic Crisis

Eurozone summit: A 'Pact for the Euro' for stronger economic policy coordination for competitiveness and convergence
Euro area leaders have decided to adopt a Pact for the Euro to strengthen the economic pillar of the monetary union, achieve a new quality of economic policy coordination in the Euro area and improve competitiveness, thereby leading to a higher degree of convergence.   View Article
ALDE on the Eurozone Summit: Move from pact to action
European Liberals and Democrats are disappointed by the limited results of the Eurozone summit which are unlikely to reassure markets at a time when many Member States are under strong pressure from the bond markets, and the European banking system remains fragile.   View Article
Klaus Engelen: 'Angela Merkel's nightmare'
In The International Economy article, Engelen says the markets are testing the German Chancellor's approach of trial-and-error, and asks if there is an end game in sight.  View Article
Joint statement by the EC and the ECB on the measures announced by the Portuguese government
The Portuguese authorities have formulated an ambitious policy response to proceed with fiscal consolidation, address structural problems and strengthen the financial system.  View Article
Moody's downgraded Spain credit rating
Moody's cut the long-term debt rating by a notch to "Aa2" with a negative outlook, a serious setback to Spain's efforts to quell fears it may need an international financial rescue.  View Article
Spanish Treasury commented on Moody’s downgrade of Spanish debt
The Spanish authorities believe that Moody's analysis focuses on the budgetary risks without sufficiently taking into account Spain's commitment to budget stability and the rebalancing of the economy, as made clear by the far-reaching reforms approved and set in motion.   View Article

Commentaries

Paul Goldschmidt on the Eurozone Summit: Mostly 'talk', little 'substance'
Goldschmidt concludes that should, once again, the market be disappointed with the outcome, renewed instability in the Sovereign debt market is to be expected.   View Article




© Graham Bishop

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