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07 April 2011

This week in "Brussels"
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Asset Management Corporate Governance/Accounting Financial Services Policy
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Articles from 31 March 2011 - 07 April 2011

Banking

EBA publishes details of stress test scenarios and methodology
The European Banking Authority (EBA) has published documents explaining the scenarios and methodology for its 2011 EU-wide stress test, which will be applied on a wide sample of European banks covering over 60% of total EU banking assets.   View Article
BBA welcomes EU proposal to make 'too-big-to-fail' a thing of the past
The EC proposes to strengthen supervision and mechanisms that will allow financial firms to fail with minimal customer and economic impact. The British Banking Association says this will help level the regulatory playing field in the UK.  View Article
EC, ECB and IMF welcomed the Irish authorities’ banking system announcements
EC, ECB and IMF staff welcomed the rigorous capital needs assessment and strongly support the authorities’ plans to ensure that these capital needs are met in a timely manner. The capital needs can be funded comfortably under the programme supported by the EU and IMF.  View Article
EU Commissioner Michel Barnier paid his inaugural visit to the EBA
Barnier highlighted the key challenges with which the EBA is currently confronted, including the on-going round of stress tests and remuneration policies. Concerning the new stress test, Barnier insisted on the need to be “credible, robust and ambitious in terms of disclosure and transparency”.  View Article
Basel III: Stronger banks and a more resilient financial system
Stefan Walter, Secretary General of the Basel Committee on Banking Supervision (BCBS), stressed that there are still significant risks on the horizon, while key reforms still need to be carried through if policymakers want a truly stable banking and financial system.   View Article
BUSINESSEUROPE: Global impact of Basel III and Solvency II on the financing of enterprises
BUSINESSEUROPE underlines the importance of a comprehensive quantitative impact study on the cumulative effects of both Basel III and Solvency II, which assesses both macroeconomic effects and the consequences for the financing of European companies.   View Article
CEPS Senior Fellow calls for retail financial market integration in Europe
In her new book, a Senior Fellow of the Centre for European Policy Studies (CEPS) has called for the implementation of European frameworks for financial safety, regulation and consumer protection.  View Article
State Aid: Commission approves restructuring of ABN AMRO Group, subject to conditions
The conditions include a ban on acquisitions and a requirement to achieve certain margin profit levels in the private banking sector, where the bank has a strong position, in order to prevent the bank from using the aid to undercut competitors.   View Article

Securities

FT: High-speed traders asked to explain methods
The European Securities and Markets Authority (ESMA) has asked automated trading firms across the continent to divulge details about their trading strategies and computer algorithms used to drive share, derivatives and foreign-exchange transactions.  View Article
IMF publishes 'Sovereign Rating News and Financial Markets Spillovers: Evidence from the European Debt Crisis' report
The paper examines the spillover effects of sovereign rating news on European financial markets during the period 2007-2010. The main finding is that sovereign rating downgrades have significant spillover effects statistically and economically, both across countries and financial markets.  View Article
FT.com/Alphaville: An MEP out to risk-weight the eurozone
"To spot the next source of financial instability simply identify the assets currently considered 'safest'. At the moment we’d argue those are covered bonds, and of course, sovereigns. The first hasn’t gotten much regulatory scrutiny of late but the second, well, there are some capital games afoot."  View Article
Reuters: EU derivatives law change spurs competition hopes
European Union states want to extend a draft law curbing risk in privately negotiated derivatives to the whole sector, which could ultimately dent profitability of the world's first mega bourse merger.  View Article
FN: FSA widens insider trading net to derivatives market
The article claims the FSA has begun investigating the use of credit default swaps as a vehicle for insider trading, requesting information about the possibility of using the derivatives to carry out market abuse in the first instance of a crackdown on insider trading in these types of products.  View Article
OTC derivatives clearing roundtable
The Futures and Options World OTC derivatives clearing roundtable, sponsored by Eurex Clearing, is focused on delivering efficiency and protection to the marketplace.  View Article
Advanced Trading: Derivatives: OTC or exchange-traded -- good, bad or indifferent?
The article argues that by moving OTC derivatives to exchanges or SEFs, regulators are making it easier to trade these exotic instruments.  View Article
Ben Bernanke: Clearinghouses, financial stability and financial reform
Speaking at the 2011 Financial Markets Conference, Bernanke highlighted that clearinghouses around the world generally performed well in the highly-stressed financial environment of the recent crisis. However, policy-makers have to ensure their future resilience.   View Article
FN: Liddell says OTC is top priority for LCH.Clearnet
Chief executive, Roger Liddell, says the over-the-counter derivatives market is now the "number one" priority for LCH.Clearnet, as the Anglo-French clearing house comes to grips with major structural shifts in the European trading landscape that left it battered and bruised in 2010.  View Article
FT: US and Canadian clearers explore joint action
Canadian Derivatives Clearing Corporation (CDCC) and New York Portfolio Clearing (NYPC) are exploring ways to clear Canadian market swaps jointly in a potential cross-border agreement that could allow G20 countries to meet their commitment to clear over-the-counter (OTC) derivatives.  View Article
Bank of England published a paper on the Credit Rating Industry
The Bank of England published a Financial Stability Paper that describes the current role of rating agencies, examines the failures observed during the crisis, and considers the public policy response.   View Article
GlobeNewswire: NASDAQ Group and IntercontinentalExchange seek to acquire NYSE Euronext
ICE's acquisition of NYSE Euronext's European futures markets, Liffe, Liffe US and the over-the-counter clearing business, NYPC, would leverage its existing leading derivatives markets across futures and over-the-counter markets and clearing houses in the US and Europe.   View Article
Bloomberg: NY Fed says swaps industry failed to meet clearing promises
New York Federal Reserve Bank President, William Dudley, said that Wall Street’s largest banks and money managers failed to fulfil commitments made a year ago to enable swaps customers to use clearinghouses to back trades.  View Article

Insurance

Insurers urged EU Commissioner to correct Solvency II implementing measures
The CEA and three other pan-European insurance associations have urged Commissioner Barnier to ensure that the excessively conservative and prescriptive elements remaining in the draft implementing measures that will shape Solvency II are urgently addressed.  View Article
FT: German pensions upset by EU proposal on Solvency II
The German pensions industry has been upset by statements written by European Union commissioners László Andor, Michel Barnier and Olli Rehn, such as: “It is necessary to review the solvency rules for pension funds. In this context, the Solvency II rules could perhaps be a good starting point”.   View Article

Asset Management

IMA says there is no evidence that asset managers are short term
Responding to the European Commission’s Green Paper, ‘The EU Corporate Governance Framework,’ IMA welcomes the consultation that addresses how the corporate governance of European companies can be improved, but says there is no evidence that asset managers are short term.  View Article
ALFI publishes Risk Management brochure
It is the intention of the publication to assist the market players in the pragmatic opera­tional implementation of these regulations.  View Article
FN: Regulation favours venture, while buyouts suffer
Lobbyists have been arguing for years that private equity and venture capital are different and should be treated as such. Two key announcements last month suggest that to some extent regulators may satisfy their wish.  View Article
FN: Regulatory fears hang over private financial industry
Regulatory uncertainty remains the biggest concern for the financial sector, with over a third of firms still lacking any idea how new regulations will affect their business, according to the CBI/PwC quarterly survey of the financial industry.  View Article
EFRP CEEC Forum meeting
The European Union has been criticised for "short-sighted" policies that threaten the sustainability of pensions on the continent, following a meeting of Central and Eastern European (CEEC) pension experts.  View Article
NAPF: New state pension sets a clear foundation for retirement
Joanne Segars, the National Association of Pension Funds (NAPF)'s Chief Executive, said: “The current system is not only unfair, it’s a complex mess. Even pension experts struggle to calculate their own state pension from a jigsaw of payments and credits”.  View Article
IPE: Irish government funds new bailout with NPRF funds
Ireland's National Pension Reserve Fund (NPRF) will provide €10bn towards a new €24bn recapitalisation of banks. The €24bn forms part of last year’s €85bn bailout package agreed with the International Monetary Fund and the European Union.  View Article
IPE: Solvency II risks 'weakening' German occupational schemes
Towers Watson Germany has warned that forcing German occupational pension funds to comply with incoming Solvency II fails to recognise unique aspects of the German system and risks weakening it.  View Article
IPE: Fitch forecasts further shift to alternatives for pension funds
Mainstream asset classes are "under threat" from alternatives, as risk-averse European pension schemes diversify into more exotic asset classes in a bid to mitigate market volatility, according to ratings agency Fitch.  View Article

Corporate Governance/Accounting

ECGI: Corporate governance and the new Financial Regulation: Complements or Substitutes?
The EBA submitted its comments on the joint supplementary document that the IASB and the FASB published for consultation on impairment.   View Article
Commission consults on European companies' corporate governance
The consultation covers a number of issues, such as how to improve the diversity and functioning of the boards of directors and the monitoring and enforcement of existing national corporate governance codes, and how to enhance the engagement of shareholders.  View Article
ACCA: New lessons need to be learned from the financial crisis
ACCA published a collection of essays from experts in the public and private sectors assessing the role of ethical corporate behaviour in risk management and governance in the paper 'Risk & Reward: Shared Perspectives'.  View Article
FASB Chairman Seidman: The role of the accountancy profession in preventing another financial crisis
In his testimony before the US Senate Banking, Housing and Urban Affairs Subcommittee on Securities, Insurance and Investment, Seidman outlined the manner in which accounting standards are developed, and discussed some of the changes made to them by the FASB in response to the financial crisis.  View Article
FASB 'Improved Financial Reporting About Troubled Debt Restructurings'
The FASB published Accounting Standards Update (Update) No. 2011-02, Receivables (Topic 310): 'A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring'.  View Article
EFRAG commented on IFRS for SMEs Draft Q&A
EFRAG issued its comment letter on the IFRS for SMEs Draft Q&A - Use of the IFRS for SMEs in parent's separate financial statements.  View Article
FRC: ASB´s publication on cutting clutter from annual reports
The ASB of the FRC published a report – 'Cutting Clutter: Combating clutter in annual reports'. The publication deals with investigating clutter, the barriers to cutting clutter, addressing common areas containing clutter, as well as further opportunities.  View Article

Financial Services Policy

EU/US dialogue on the Foreign Account Tax Compliance Act
In a letter sent to the US tax authorities, the Hungarian Presidency and the Commission invited the US authorities to engage in a dialogue on how best to achieve the objectives of the US Foreign Account Tax Compliance Act (FATCA).   View Article
IOPS: Belgium introduces a new supervisory architecture
In line with international developments, and building on the recommendations formulated by a national working group, the Belgian government opted, in the Law of 2 July 2010, to develop the supervision of the financial sector towards a bipartite model known as the "Twin Peaks" model.  View Article
IMF: Reform and strengthen housing finance
The IMF examined recent US housing policies, and the report agrees with recent government proposals slowly to wind down mortgage lending giants Fannie Mae and Freddie Mac, together with better defined and more transparent government participation in the housing market.   View Article

Economic Crisis

Portugal asks Europe for bailout
Caught in a political crisis and facing refinancing hurdles, Portugal has come under intense pressure to join Greece and Ireland in seeking a bailout.  View Article

International/G20

IMF develops framework to manage capital inflows
The framework will help countries to determine the appropriate circumstances to consider taxes, certain prudential measures and capital controls, which together comprise “capital flow management” measures.   View Article
IMF Chief called for new approach to globalisation
Strauss-Kahn singled out three areas for improvement: a new approach to macroeconomic and financial sector policies, a new approach to social cohesion, and a new approach to cooperation and multilateralism.   View Article

Offshore financial centres

FT: Time to black-list the tax haven whitewash
The FT reveals that the biggest purveyors of financial secrecy are also the largest recipients of illicit flows: the US, the UK, the Cayman Islands, Ireland, Luxemburg and Switzerland.   View Article

Financial Services Month in Brussels - Report

March 2011 Financial Services Month in Brussels
Graham Bishop's personal overview.  View Article




© Graham Bishop

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