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21 July 2011

This week in "Brussels"
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Banking Securities Asset Management
Corporate Governance/Accounting Financial Services Policy Economic Crisis
European Council/Parliament International/G20 Graham Bishop’s Articles
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Articles from 14 July 2011 - 21 July 2011

Banking

Commission published CRD IV
The proposal contains two parts: a Directive governing the access to deposit-taking activities and a regulation governing how activities of credit institutions and investment firms are carried out. Both legal instruments form a package and should be considered together.   View Article
Commissioner Barnier on CRD IV: Europe is the first one implementing Basel III
The Directive and the regulation account for more than 600 pages in total. Commissioner Barnier stressed that CRD IV will have a fundamental impact on European banks and this is indeed the Commission's objective.   View Article
EBA published results of the 2011 EU-wide stress test
For the 2011 exercise, the EBA allowed specific capital increases in the first four months of 2011 to be considered in the results. Banks were therefore incentivised to strengthen their capital positions ahead of the stress test.   View Article
Commissioners Barnier and Rehn statement on the publication of EBA's stress test results
Barnier and Rehn said the results highlight that the great majority of European banks are now much stronger and better able to resist shocks. In anticipation of the test, many banks have already taken actions to strengthen the resilience of their balance sheet.  View Article
IMF statement on the European banks stress tests
Mr José Viñals stressed that the IMF considers it important that national authorities have promptly committed to address the pockets of vulnerability detected through the stress test exercise, and strongly advocates that the necessary measures are taken to address weaknesses effectively.  View Article
EBF statement on stress tests
The EBF stressed that the “pass-or-fail” results of the stress tests need to be adequately interpreted as the capacity of the banks to withstand a period of severe distress in the economy, and do not reflect current solvency situations.   View Article
FT: Spain and Italy top results in stress tests
Spain and Italy's leading banks were the strongest performers in last week's European stress tests, in a surprise result that could help relieve the funding pressure that had been building on them.  View Article
Commission recommends access to basic and affordable bank accounts for all citizens
The EC's recommendation on access to a basic payment account will promote financial and social inclusion for consumers across Europe. The EC invites Member States to ensure that such accounts become available at a reasonable charge to consumers, regardless of their country of residence in the EU.   View Article
BCBS consults on the methodology and the additional loss absorbency requirement for global systemically important banks
The assessment methodology for G-SIBs is based on an indicator-based approach and comprises five broad categories: size, interconnectedness, lack of substitutability, global (cross-jurisdictional) activity and complexity.  View Article
Commission approves restructuring plan of Hypo Real Estate (HRE) and clears the aid
Almunia said this decision brings one of the most significant financial crisis state aid cases to a constructive close. HRE and its core bank, pbb Deutsche Pfandbriefbank, are significantly downsizing to limit the competition distortions caused by the huge state support needed to survive the crisis.  View Article
FT: Bank tax proposed to help Greece bail-out
A proposal to tax eurozone banks to help pay for a Greek rescue has emerged as the possible central pillar of a new bail-out programme, according to officials involved in negotiations ahead of an emergency European summit on Thursday.  View Article
FSB launched consultation on measures to address systemically important financial institutions
The FSB's proposals include measures to remove obstacles to resolution arising from complex firm structures and business practices, fragmented information systems, intra-group transactions, reliance on service providers and the provision of global payment services.  View Article
EU to decide in autumn on new bank state aid rules
EU regulators will decide in the autumn whether to keep existing rules that specify how governments can aid troubled banks or adopt more stringent guidelines, the EU's antitrust chief said on Monday.   View Article

Securities

Polish Presidency published compromise text on EMIR
The Polish Presidency has included in brackets the word “OTC” through the entire regulation, which means the issue is still under discussion. Apparently the Council is still split on the scope of EMIR.  View Article
FN: Ratings agencies find favour with investors
Investors are continuing to back rating agencies, despite a continuing barrage of criticism from top European Union officials over their alleged role in exacerbating the sovereign debt crisis.  View Article
EuropeanIssuers' comments on ESMA's Prospectus Consultation
ESMA's advice fails to achieve the aim of reducing administrative costs and burden to issuers when raising capital, as set out in the Commission's mandate and as supported by the European Parliament.  View Article
EU still sees lengthy review for Deutsche Börse-NYSE Euronext deal
The EU's antitrust chief reiterated on Monday that the proposed merger of Deutsche Börse and NYSE Euronext is likely to face a lengthy regulatory review that could take until the end of the year.   View Article
Graham Bishop book review: "Running the World’s Markets: The Governance of Financial Infrastructure" by Ruben Lee
This book supplies all the right questions about governance and regulation. It illustrates some of the pitfalls already experienced and thus at least some “answers” to be avoided in the future. But the canvas of the future still seems to have plenty of scope for new and original thinking.  View Article

Asset Management

Luxemburg prepares for AIFMD
A Law on Specialised Investment Funds is to be adapted in Luxemburg. The bill of law will be submitted to Parliament for approval and is expected to enter into force at the end of this year, in time for the beginning of the AIFMD transposition process into the Luxemburg law.  View Article
AIMA creates forum for smaller managers
The Alternative Investment Management Association (AIMA), the global hedge fund association, has created the AIMA Smaller Managers' Group.  View Article
FN: Investors abandon Europe as crisis escalates
Mutual funds investors abandoned Europe in droves last week, with withdrawals from continental equity funds hitting the highest level since March, and outflows from bond funds nearing $17bn over the year to date, as fears over the continent's sovereign debt crisis hit a new high.  View Article
FN: Schemes need a Plan B – that Plan A renders redundant
How do pension funds clear their deficits and reduce risk at the same time? Over the past few years, consultants and asset managers have come up with a good Plan A, but as we all know, sometimes things don't turn out as we hope. We all need to start thinking about Plan B.  View Article
IPE: Pensions regulation - convergence over harmonisation
Niels Kortleve, Barthold Kuipers and Wilfried Mulder offer reasons why the European Commission should focus on convergence of EU pension regulation rather than harmonisation.  View Article

Corporate Governance/Accounting

EFRAG TEG meeting summary in July EFRAG Update
EFRAG published the July 2011 edition of its Update that summarises the discussions held at the recent EFRAG TEG meeting.  View Article
FRC highlights importance of true and fair view in UK GAAP and IFRS
The ASB and APB of the FRC reconfirm that the true and fair view remains of fundamental importance in both UK GAAP and IFRS. A paper published for preparers and auditors explains the continuing primacy of the true and fair requirement and its relevance.  View Article
BUSINESSEUROPE: Consultation on the EU corporate governance framework
BUSINESSEUROPE submitted its response to the consultation on the EU corporate governance framework. BUSINESSEUROPE believes that many of the issues raised by the green paper pertain to national corporate governance codes.  View Article
FEE Alert: Sovereign Debt Exposures - Key Issues for consideration in the half-year financial reporting
The Alert reports that half-year financial statements and related disclosures on exposures to eurozone countries with stressed financial positions are of particular importance. The current eurozone situation creates an unprecedented level of focus on the work of the European accountancy profession.  View Article

Financial Services Policy

IFAonline: FSA responds to TSC's RDR concerns
The Treasury Select Committee (TSC) has called for a 12 month delay to the RDR to enable more advisers to reach Level 4, among a series of other concessions, but the FSA has flatly refused any negotiation on a change to its plans.  View Article
IFAonline: FSA's latest thinking on the RDR
The Financial Service Authority's (FSA) evidence to the Treasury Select Committee (TSC) offers a look at the regulator's most up-to-date thinking on the shape of things pre- and post-RDR.  View Article

Economic Crisis

President Barroso's statement ahead of the EU summit on the eurozone debt crisis
Barroso stressed that the current situation is very serious and it requires a response now, otherwise the negative consequences will be felt in all corners of Europe and beyond. The situation requires full engagement by everyone at the summit.  View Article
Lorenzo Bini Smaghi: Avoiding the next eurozone crisis - how to build an EU that works
Europe's union has no modern precedent. It demands original thinking, as much as, if not more than, that of the United States' Founding Fathers. It also requires similar political courage and leadership.  View Article
IMF: The solution is more, not less Europe
Antonio Borges writes that it is hard to hold the course in the middle of a storm, but European policymakers need to if they want European integration to succeed. The sovereign debt crisis is a serious challenge which requires a strong, coordinated effort by all involved to put it finally behind us.  View Article
IMF: Greek reform agenda is essential for growth
Amid continued market turmoil in Europe, the IMF's Executive Board approved the disbursement of about €3.2 billion to Greece as part of the three-year lending arrangement that was agreed in May 2010.  View Article
Bruegel published an action plan for the European Leaders
Bruegel's paper presents a triple-mission to be accomplished by EU leaders which includes paving the way to restoring solvency in Greece by initiating debt reduction. Bruegel also warns more ambitious reforms are necessary down the road.  View Article
FT: Eurozone - an elusive debt resolution
European leaders have been drawn into one of the most agonised debates seen since the eurozone debt crisis erupted nearly two years ago. It has caused confusion in financial markets and pushed borrowing costs for Italy and Spain to 6 per cent, levels some analysts believe are not sustainable.   View Article
WSJ: In defence of the ECB
Simon Nixon writes in the WSJ that the ECB has already shown considerable flexibility in its efforts to prop up the eurozone. It has widened the range of collateral eligible for its liquidity arrangements and provided unlimited funds to the banking system.  View Article

International/G20

FSB meeting: Vulnerabilities in the financial system
The FSB met in Paris to address the risks posed by global systemically important financial institutions. Members also assessed vulnerabilities affecting the financial system, and the progress of initiatives in a variety of policy areas to address them.   View Article
FSB published report on 'The Financial Crisis and Information Gaps'
The report updates on progress by FSB Secretariat and IMF staff in implementing the 20 recommendations in the report 'The Financial Crisis and Information Gaps' endorsed by the G20 in November 2009.   View Article
FT: Little to celebrate on Dodd-Frank’s birthday
Hal Scott argues in the FT that the Dodd-Frank Act made some useful corrections in the regulation of American financial markets, but it has failed to respond effectively to the root causes of the financial crisis and its impact on the global financial system.   View Article

Graham Bishop’s Articles

Responding to the bank stress tests: Eurozone's leadership – not the bankers - on trial
The EU's bank stress tests have proved one thing beyond all reasonable doubt: on the central scenario, the EU's banks are in good shape. Even on the “adverse” scenario, the general problems appear quite manageable – until the rampant fears about sovereign defaults are factored in.   View Article
Graham Bishop's blog: 24 hours to go
24 hours to go and eurozone political leaders still do not seem to have grasped the historic magnitude of the problem they face.   View Article
Graham Bishop's blog: Responding to the bank stress tests - eurozone’s leadership, not the bankers, on trial
Leaders must show vision: take a bold political step and grant massive, but conditional, loans that eliminate the risk of sovereign defaults once economic policies are agreed by Eurogroup. Spirits will rise, yields will fall, banks can lend, consumers consume and industrialists invest.  View Article

Commentaries

Nicolas Véron: Stress tests fail to rescue Europe's banks
Véron argues that the EU must now go beyond the publication of stress test results. It must partly sever the link between governments and banking systems and establish the institutional basis for a credible, EU-level banking policy. One option would be to empower the EFSF.   View Article
Wolfgang Münchau: Plan D stands for default . . .  and the death of the euro
Wolfgang Münchau argues in his Financial Times column that the biggest danger to the eurozone right now is that events are moving at a faster pace than Europe's lethargic policymakers. Italy, in particular, must be considered insolvent at present interest rates.  View Article
Paul N Goldschmidt: The bank stress tests - risks associated with the publication of the results
Later today, July 15th, the EBA will release the keenly-awaited results of the stress tests applied to 91 banks representing 65 per cent of EU banking assets.  View Article
Paul N Goldschmidt: The NVA, Belgium and the European Union - comment on the Belgian political stalemate
The Flemish nationalist party, NVA, is performing a valuable service to the country by opposing categorically the draft proposals of Mr Di Rupo, president of the socialist Party charged with forming a government. It is now high time to question the NVA on its concept of Europe and to call its bluff.  View Article




© Graham Bishop

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