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21 February 2013

This week in "Brussels"
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Articles from 14 February 2013 - 21 February 2013

Banking

ECON Committee: Banks dominate Draghi meeting with MEPs
Potential inflationary bubbles still exist in the eurozone economy, and the possible effects of euro exchange rates on inflation must be monitored, Draghi warned the ECON Committee. He also stressed that banks need not only a strong single supervisory system but also common crisis resolution rules.   View Article
Basel Committee issues final guidance for managing risks associated with the settlement of foreign exchange transactions
The guidance is organised into seven "guidelines" that address governance, principal risk, replacement cost risk, liquidity risk, operational risk, legal risk and capital for FX transactions.  View Article
ECB/Draghi: Introductory statement at the ECON hearing
Draghi addressed the impact of a low interest rate environment, and the establishment of a Single Resolution Mechanism, with a Single Resolution Authority at its centre.  View Article
Bruegel/Véron & Wolff: From supervision to resolution - Next steps on the road to European banking union
The aim of this Policy Contribution is to help clarify key policy options for the next steps towards banking union, including the possible objectives and timetable for the creation of a Single Resolution Mechanism.  View Article
Schoenmaker, Beck & Gros: On the design of a Single Resolution Mechanism
Even more important for the future of the banking system in Europe than the institutional design of the SRM will be the willingness actually to let banks fail, or at least bail in creditors before public funds are used to prop up institutions which cannot survive on their own.  View Article
CEPR, Eijffinger et al: Single Resolution Mechanism
It is important that the entity responsible for resolution has a broad set of tools available, and that it can use these when needed. The authors also conclude that a Single Point of Entry resolution strategy is to be preferred over a Multiple Point of Entry resolution approach.  View Article
Bankers' bonuses - Parliament gives Council one more week
The European Parliament's negotiation team regrets that a compromise deal with the Council was not possible at the trilogue yesterday, as the Council Presidency did not have a sufficient mandate.  View Article
Bloomberg: EU misses Basel bank rules deal, will revive talks next week
The European Union failed to seal a deal on Basel bank rules after disagreeing on bonuses, capital requirements for big lenders and disclosure of profit and tax at talks in Brussels yesterday.   View Article
FT: EU ready to set tough bank pay curbs
Talks on EU reforms to make banks safer are entering a potentially decisive week, with London heavily outgunned after almost a year of backroom diplomacy to blunt a bonus crackdown pushed by the European Parliament.  View Article
Open Europe: EU caps on bankers' bonuses - The perfect regulatory storm?
The EP is pushing for a stringent cap on bank bonuses of 1:1 ratio with fixed salaries, which could be increased to 2:1 with approval from a majority of shareholders. The UK argues against a firm cap, and is pushing for a focus on non-cash deferred bonuses.  View Article
UK Parliament: Banking executives' remuneration in the UK - Commons Library Standard Note
The level of 'boardroom pay', the way it is set, and its complexity have become significant issues ever since the financial crisis in 2007. The way in which executives had been rewarded was seen as a contributing factor to this crisis.  View Article
FT editorial: Bonus cap is a bad omen for Britain
Voters still angry at banks may applaud the EP's push to cap bankers' bonuses. But it is a defeat for common sense and for Britain, whose banking sector is in the line of fire.  View Article
ESBG position: ESMA/EBA Consultation Paper on principles for benchmarks-setting processes in the EU
ESBG welcomes the joint initiative and believes that the intervention/involvement of the European Supervisory Authorities in the Euribor benchmark-setting procedure can only be beneficial for all stakeholders in the current environment.  View Article
"The simpler the rules, the stronger the ring-fence" - Finance Watch response to PCBS
Public interest association Finance Watch published its submission to the UK's Parliamentary Commission on Banking Standards (PCBS) on whether to ban proprietary trading inside bank groups that contain ring-fenced entities.  View Article
Bruegel/Véron: Basel III: Europe's interest is to comply
The Basel III accord has been criticised from all sides of the financial regulatory debate. But third party studies suggest that bankers have been unduly crying wolf, and that the standards' negative impact on bank business will be more than compensated by the additional financial stability.  View Article
Douglas J Elliott: Higher bank capital requirements would come at a price
The primary intent of this paper is to underline the fact that there are trade-offs between higher capital and goals such as economic growth.  View Article
ECBC: "Covered Bond Label & Transparency Platform go live"
The Covered Bond Label Foundation, which was officially established in November 2012, announced that the Covered Bond Label and its Transparency Platform are both fully operational, with the first Labels issued being considered effective from 1st January, 2013.  View Article
EPC: Early movers on the demand side identify best practice – Part II (SEPA Direct Debit)
The European Payments Council published a two-part blog series which highlights best practice identified by early movers on the demand side handling major payment volumes, who reported on their successfully completed SEPA migration projects in the EPC Newsletter.  View Article
BoE/Weale: The balance of payments
Martin Weale reviewed two issues: what has happened to exports and imports in the aftermath of the 2007/08 depreciation; and what has happened to other components of the balance of payments, in particular investment income.  View Article
Andrew Bailey appointed as BoE Deputy Governor for Prudential Regulation and CEO of the PRA
Andrew Bailey has been approved to become Deputy Governor at the Bank of England responsible for Prudential Regulation, and the CEO of the Prudential Regulation Authority (PRA).  View Article
ECB: Eurosystem and Bank of Russia hold high-level seminar
The Eurosystem and the Bank of Russia met in Moscow for their seventh high-level seminar, with the aim of further strengthening the dialogue and enhancing their relations.  View Article

Securities

ESMA issues first risk report on EU securities market
The report looks at the performance of securities markets in 2012, assessing both trends and risks in order to develop a comprehensive picture of systemic and macro-prudential risks in the EU that can serve both national and EU bodies in their risk assessments.   View Article
Basel Committee and IOSCO issue near-final proposal on margin requirements for non-centrally cleared derivatives
BCBS and IOSCO have published a second consultative paper which represents a near-final proposal on margin requirements for non-centrally cleared derivatives. Comments should be submitted by 15 March, 2013.  View Article
IPE: No evidence EU ban on naked CDS will work
Credit default swap (CDS) spreads are a poor proxy for sovereign default risk, according to new research by Imperial College London, and therefore there is little evidence to suggest the EU-wide ban on naked CDS positions will achieve its aims.  View Article
FESE: Nordic and German broker-dealers and FESE sign joint letter against OTF for equities
A joint letter was sent to the Irish Presidency, with copy to Commissioner Barnier and MEP Ferber, to draw their attention to some major concerns FESE has with the current direction of the MiFID/R discussions on the Organised Trading Facility trading venue category for equities in Council.  View Article
ISDA response to CPSS, IOSCO & FSB regarding Qualifying Central Counterparties
Without a centrally-held and internationally-agreed list of Qualifying CCPs or CPSS-IOSCO-compliant regimes, it is unclear how the CPSS-IOSCO Principles for Financial Market Infrastructures (PFMI) could be consistently assessed for CCPs, including for capital purposes.  View Article
FT: Securitisation finds new support in Europe
This article says that financial markets, and innovative products such as asset-backed securities, are seen by eurozone policymakers as a way out of the region's crisis.  View Article

Insurance

EIOPA/Bernardino: IMD2 and Solvency II – The road to better policyholder protection and financial stability
Bernardino reflected on the current challenges in revising the regulatory framework in the insurance area (IMD2 and Solvency II), and pointed out some strategic reflections on the way to achieving further consistency of EU regulation and supervision.  View Article
CRE: PwC survey highlights need for insurers to change strategy
Change may be afoot in the insurance industry, with 70 per cent of CEOs planning a shift in strategy to cope with difficult market conditions. The poor state of the global economy, a growing regulatory burden and the longer-term challenge of regaining public trust all pose a threat to insurers.  View Article
Risk.net: Banks hunt for asset-backed securities as liquidity swap market stagnates
Lloyds Bank is one of a number of banks sourcing assets from smaller institutions to meet demand from insurers. Banks are sourcing illiquid assets from other financial institutions to use as collateral for liquidity swaps with insurers.  View Article
FSA/Adams: What are the lessons for insurance supervisors from the recent financial crisis?
In his speech, Adams looked at the practical challenges the financial crisis has raised for prudential regulators of insurance companies, as well as some of the implications for the PRA's supervisory approach.  View Article
Risk.net: Insurers ramp up commercial loan portfolios in response to Solvency II delays
Insurers are ramping up their investment in short-dated loans to small to medium-enterprises (SMEs) to take advantage of the expected delay to Solvency II.  View Article
Risk.net: Hedge funds grapple with Solvency II look-through test
Hedge funds need to address transparency and risk reporting standards to avoid punitive capital treatment under Solvency II, as European insurance companies are keen to increase the current 1 per cent allocation.  View Article
Swedish regulator plans to implement a Solvency II-based discount rate for insurance companies
The Swedish financial regulator Finansinspektionen plans to implement the discount rate of the Solvency II regulations. The new discount rate will be in place by the turn of the year. Until then, the floor on discount rate will remain in effect.   View Article
BMA director: Bermuda moving towards EU equivalency standard despite Solvency II questions
Despite some emerging concerns regarding implementation of European Union Solvency II requirements, the Bermuda Monetary Authority will continue its efforts to meet an EU equivalency standard that is part of the Directive, said Shelby Weldon, BMA director of insurance, licensing and authorisation.   View Article

Asset Management

ALFI response to ESMA discussion papers on guidelines on key concepts of the AIFMD and draft RTS on types of AIFMs
ALFI commented on ESMA's interpretation of: the concept of raising of capital; the concept of collective investment undertaking; and the redemption period for the AIFs.   View Article
AEIP demands EIOPA clarification ahead of next QIS
AEIP asserted that the QIS has proved that the HBS is not a workable tool. If the European institutions stick to the concept of the HBS, AEIP would find it crucial that at least further impact studies are run and alternative approaches are investigated.  View Article
IPE: EIOPA likely to submit QIS data before publishing recommendations
EIOPA is likely to send preliminary data on the first quantitative impact study (QIS) for the revised IORP Directive to the European Commission before finalising its recommendations, an EIOPA spokeswoman has said.  View Article
IPE: Pension funds at significant risk from holistic balance sheet complexity
The Dutch Pensions Federation has warned that high levels of complexity around the holistic balance sheet (HBS) approach in the revised IORP Directive, and Member States' varying assumptions in testing the new supervisory tool, could lead to "significant" risks.   View Article
IPE: Pension funds to fall under scope of financial transaction tax
The European Commission has confirmed pension funds will fall under the scope of the controversial financial transaction tax (FTT) but argued the impact on their activities would be extremely limited.  View Article
IPE: Dutch government withdraws support for financial transaction tax
The Dutch pensions industry has responded positively to the government's decision to withdraw its support for the controversial financial transaction tax (FTT), as updated proposals make no provision for exempting pension funds.  View Article

Corporate Governance/Accounting

ESMA publishes feedback statement to its consultation on considerations of materiality in financial reporting
A majority of respondents considered that the concept of materiality is generally well understood, but many respondents expressed the view that there is diversity in application.  View Article
FASB proposes improvements to recognition and measurement of financial assets and liabilities
The FASB issued for public comment a proposal to improve financial reporting by providing a comprehensive measurement framework for classifying and measuring financial instruments. Stakeholders are asked to provide written comments on the proposal by May 15, 2013.  View Article
FRC: Presentation of market risk disclosures
The FRC issued a Financial Reporting Lab project report on 'Presentation of market risk disclosures'. The Lab explored investors' views on the benefits of presenting risk developments and actions taken in the reporting period separately from policy-related information.  View Article
FEE: Analysis of common practices on the preparation of combined and carve-out financial statements in compliance with IFRS
With this publication, FEE intends to enhance expert debate, knowledge dissemination and sharing of common practices.  View Article
ACCA: Whistleblowing laws and audit independence must be promoted to build trust in public services
According to ACCA's updated report, 'Setting high professional standards for public services around the world', finance professionals have a critical role to play in building public trust by championing the cause of developing anti-corruption procedures and cultures.  View Article
IFAC: Outgoing CEO calls on Russian Presidency of G20 to advance adoption and implementation of IPSASs
IFAC's outgoing CEO, Ian Ball, called on Russia to use its G20 Presidency to strengthen global financial stability by supporting adoption and implementation of IPSASs.  View Article
EFRAG: Final comment letter on the IASB ED/2012/2 Annual Improvements to IFRSs 2011-2013 Cycle
EFRAG published its final comment letter on the IASB's ED/2012/2 Annual Improvements to IFRSs 2011-2013 Cycle, issued by the IASB on 20 November 2012. EFRAG agrees with most proposals in the ED but is concerned about two issues – amendment to IAS 40 and to IFRS 1.  View Article
EFRAG: Endorsement advice and effects study report on investment entities
EFRAG has completed its due process regarding Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27), and has submitted its Endorsement Advice Letter and Effects Study Report to the EC.  View Article
EFRAG: Keeping European constituents informed of the debate on Conceptual Framework
Following issuance of their strategy, the project partners EFRAG, ANC, ASCG, OIC and FRC have decided to produce regular newsletters to keep European stakeholders informed of all project developments.  View Article
ASCG: Consultation on the transition from IAS 39 to IFRS 9 for macro-hedging practices
The Accounting Standards Committee of Germany published its comment letter on EFRAG's Consultation on the transition from IAS 39 to IFRS 9 for macro-hedging practices - issued by EFRAG on 22 January, 2012.  View Article

Financial Services Policy

SIFMA supports US-EU Trade Agreement, offers recommended framework for financial services provisions
SIFMA and AFME believe it is essential to liberalise financial services trade and pursue compatible regulatory regimes within a US–EU agreement.  View Article
FSA publishes final RDR Newsletter
This is the regulator's final Retail Distribution Review (RDR) newsletter, as the policy is now largely in place and compliance will be monitored through the FSA's supervision work.  View Article

European Council/Parliament

ECON Committee: Lawmakers and EU countries reach deal on EU fiscal rules [two-pack]
The next batch of EU economic governance legislation should do more to deliver growth, and the Commission's new powers to vet eurozone countries' budgets will be better democratically controlled, thanks to a draft "two-pack" deal struck by EP/Council negotiators today. (Includes VP Rehn statement.)  View Article

International/G20

Statement by IMF Managing director Christine Lagarde on G20 ministerial meeting in Moscow
Ms Lagarde welcomed the G20 resolve to achieve a lasting reduction in global imbalances through joint actions to avoid persistent exchange rate misalignments, and the group's commitment to refrain from competitive devaluation, to resist protectionism in all forms, and to keep markets open.  View Article
ECB/Draghi: G20 priorities 
under the Russian Presidency
Draghi said the main objective of the G20 Presidency this year was to stimulate economic growth and create jobs. "As premier forum for international economic cooperation, the G20 indeed plays a central role in supporting policies aimed at strong, sustainable and balanced growth globally."  View Article
OECD: Structural reforms more important than ever for a strong and balanced economic recovery
According to the OECD's latest Going for Growth report, structural reforms offer governments a powerful tool to boost economic growth, create jobs and bring about a strong and balanced economic recovery.  View Article

Graham Bishop’s Articles and Speeches

Graham Bishop's Blog: '2-pack' agreed between Council and Parliament
Finally, a compromise has been reached on the '2-pack'! This should have happened months ago but the timing is fortuitously good for the euro.  View Article





© Graham Bishop

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