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18 July 2013

This week in "Brussels"
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Articles from 11 July 2013 - 18 July 2013

Banking

European Commission: Legislation on capital requirements for the banking sector enters into force
On 17th July, the so-called CRD IV package which transposes - via a Regulation and a Directive - the new global standards on bank capital (the Basel III agreement) into EU law, will enter into force.  View Article
EU Presidency amends BRRD compromise proposal
The Presidency has reflected on the concerns raised by delegations and has decided to amend its compromise proposal. An explanatory note of the main changes, detailed in Annex 2, addresses issues such as the scope of the bail-in tool, and resolution financing arrangements.   View Article
Single Resolution Mechanism: EFBS calls for the right priorities
To the European Federation of Building Societies, the current proposal for a regulation establishing a Single Resolution Mechanism is far too precipitated. EFBS also has objections with regards to the content of the current proposal.   View Article
Peterson Institute/Funk Kirkegaard: The EU Commission's latest proposals for troubled banks
Months of European political horse-trading lies ahead over such specifics as the number of banks to be included, the size and funding mechanism of the Single Bank Resolution Fund (SBRF), and the composition and powers of the Single Resolution Board (SRB).  View Article
Deutsche Bank: The SRM - Only starting shot for a long debate
The Commission's SRM proposal is logical and sound. But there is little support amongst Member States for ceding (resolution) powers to the EU level. Sadly, thus, it is likely that Banking Union will remain a torso and will not instil confidence.  View Article
Austria: New regime for the recovery and resolution of credit institutions
Austria's National Council (Nationalrat) adopted a draft bill proposed by the Government introducing a new statute regarding bank recovery/resolution (Bankeninterventions- und -restrukturierungsgesetz - BIRG) and an amendment to the Austrian Banking Act regarding early intervention.  View Article
Schäuble on Banking Union: We need a credible and legally viable solution
In an interview, German Finance Minister Wolfgang Schäuble referred to the Commission's proposal for Banking Union as a project with "feet of clay". He also excluded the possibility of a second haircut for Greece.  View Article
ECB/Constâncio: The role of Europe in global rebalancing
The ECB VP emphasised two specific channels where developments in the euro area could have an important impact on the global economy, saying that Banking Union would help the euro area banking sector to become more stable.  View Article
German saving banks: Banking Union is destroying European democracy
IFRI has published a critical study by Georg Fahrenschon, the Chairman of the German Savings Banks' Federation. Fahrenschon says that granting supervision to the ECB requires revision of the treaties, a strict separation of powers within the ECB, and specific European administrative law.  View Article
GBIC calls for rapid adoption of the DGS Directive; strict separation from bank resolution financing
The member umbrella organisations of the German Banking Industry Committee have called for a clear separation between the EU Commission's proposals for bank resolution financing on the one hand, and common European deposit guarantee standards on the other.  View Article
Simon Nixon: Eurozone chiefs face moment of truth in handling crisis
Brussels has thrown down a gauntlet to Berlin: Failure to complete the banking union would send a deeply damaging signal to the world that the eurozone is incapable of putting its financial system on a sustainable footing.  View Article
ICMA responds to consultation on reforming the structure of the EU banking sector
Noting the existence of other official initiatives concerning similar issues, the ICMA voices its concern that, given the inevitable elements of overlap amongst these initiatives, there is a risk that any final proposals which do emerge may not necessarily all fit neatly together.  View Article
ABBL comments on the Commission consultation on reforming the structure of the EU banking sector
In its response to the consultation on the Liikanen report, ABBL expressed its concerns about the impact of the proposed measures on the banking industry, which is absorbing an unprecedented wave of regulation constituting by itself a structural reform.  View Article
Finance Watch response to EC consultation on banking structure
Finance Watch published its response to the EC's consultation, calling for an ambitious reform of the structure of banks in Europe.  View Article
BoE/Tucker: Banking reform and macro-prudential regulation – Implications for banks' capital structure and credit conditions
Tucker looked at the implications for the credit system – from the micro regulatory regime and banks' capital structure to the introduction of new macro-prudential policies and their effect on credit conditions. He sketched the outline of a Capital Accord for the future.  View Article
CEPS/Gros: What's wrong with Europe's banks?
Europe's ailing banking sector is undercapitalised, too large and populated by too many players without a viable long-term business model, writes Gros. In his view, it is the combination of the last two factors that that constitutes the most serious and most difficult problem.  View Article
EBA publishes report on risks and vulnerabilities of the EU banking sector
This report analyses the main developments and trends affecting the sector in the current year and provides an outlook of the main micro-prudential risks and vulnerabilities, as well as related policy implications.   View Article
EBA presents data on high earners in EU banks
The EBA published a report featuring data on the remuneration of EU bank staff who received €1 million or more in total in 2010 and 2011. The report focuses on the gathering of numerical data and provides a first analysis of remuneration structures across the EU.   View Article
EBA consults on draft RTS on own funds requirements for investment firms
EBA launched a consultation on draft RTS on own funds requirements for investment firms based on fixed overheads. These RTS will be part of the Single Rulebook aimed at enhancing regulatory harmonisation in the banking sector in Europe. The consultation runs until 30 September, 2013.  View Article
EBA consults on draft ITS on the hypothetical capital of a central counterparty
EBA launched a consultation on draft ITS on the reporting of the hypothetical capital of a central counterparty (CCP). Comments on this consultation should be sent to the EBA by 30 September, 2013.  View Article
UK Government publishes consultation on Banking Reform Bill secondary legislation
The Banking Reform Bill will fundamentally reform the structure of the UK banking sector, making banks more resilient to shocks, easier to fix when they get into difficulty and reducing the severity of financial crises in the future. The consultation will close on 9 October, 2013.   View Article
PRA/Bailey: Capital and lending
The PRA's job is to promote the safety and soundness of banks, insurers and large investment firms by focusing on the problems they cause for financial stability. This is a new approach which was designed to counter the risk that policy is too accommodating in upswings and too harsh in downturns.  View Article
Bundesbank/Weidmann: The stability of the financial system within European monetary union
In his speech, Weidmann focused on banks, the no-bailout principle, the crisis and the role of monetary policy.  View Article
CEPR/Burda: Re-designing the ECB with regional rather than national central banks
Eurozone national central banks that take a national perspective risk politicising the ECB's monetary policy. This VoxEU column argues that this is a significant risk that should be overcome with a fundamental overhaul of the Eurosystem.  View Article
FT editorial: In praise of bank leverage ratios
There is a strong case for complementing the risk-weighted metric with a blunter tool: a leverage ratio, limiting how many assets can accumulate on given equity, regardless of their perceived risk. (Includes response from DG MARKT/Faull.)  View Article
IIF/Adams: Unwise to forgo a risk-sensitive capital framework
In a letter replying to an article by the editor of the FT, IIF President and CEO Tim Adams discusses the importance of a risk-sensitive capital framework.  View Article

Securities

European Commission and the CFTC reach a common Path Forward on derivatives
European Commissioner Michel Barnier and US CFTC Chairman Gary Gensler announced a Path Forward regarding their joint understandings on a package of measures for how to approach cross-border derivatives.  View Article
CFTC staff issues four no-action letters providing relief in connection with issues relating to swaps regulation
CFTC issued four no-action letters that address certain issues relating to swaps regulation, following the announcement by Commissioner Barnier and CFTC Chairman Gensler of a Path Forward regarding their understandings on a package of measures for how to approach cross-border derivatives.  View Article
Commissioner Barnier: Interdependent swaps markets need interactive cross-border rules
Speaking at the GFMA/Brookings discussion, Barnier said: "Regulatory reform in Europe has been swift and solid. But it will only reach its full potential if our rules work seamlessly with similar laws beyond our borders". (Includes SIFMA statement.)  View Article
Deloitte: CFTC and EU OTC derivatives regulation - An outcomes-based comparison
The purpose of this paper, commissioned by SIFMA and AFME, is to examine whether a difference in the approach leads to a difference in outcomes if over-arching regulatory objectives are met.  View Article
ESMA consults on non-EU counterparties OTC derivatives
ESMA launched a consultation on draft RTS aimed at implementing the provisions of EMIR related to OTC derivative transactions by non-EU counterparties in certain cases, and aimed at preventing attempts by non-EU counterparties to evade EMIR's provisions. The closing date is 16 September, 2013.  View Article
ESMA begins detailing central clearing of OTC derivatives
ESMA has launched a Discussion Paper to prepare the regulatory technical standards (RTS) which will implement provisions of the EMIR regarding the obligation to clear OTC derivatives centrally. The Discussion Paper is open for feedback until 12 September, 2013.  View Article
Commission adopts Delegated Regulations on TR fees / Exempted entities under EMIR
On 12th July, the Commission adopted: 1) a Delegated Regulation on the fees to be charged to trade repositories; 2) a Delegated Regulation on the list of exempted entities under EMIR.  View Article
Pierides & Charleton: Reconciliation + regulation = complication
Comparing the key terms of OTC derivatives trades against the data held by a CCP is standard practice for many participants. But incoming regulation on both sides of the Atlantic will change some of the requirements, make it a compliance issue for the first time and – crucially – force many smaller players to put completely new processes in place.  View Article
ECB publishes study comparing collateral eligibility requirements
The ECB has published a report, entitled 'Collateral eligibility requirements: a comparative study across specific frameworks today'. The report provides a comparison of the rules for the eligibility of collateral. (Includes links to speeches by Benoît Cœuré.)  View Article
EBF Trilogue position on MiFID II/MiFIR
The EBF has taken a great interest in the MiFID review (MiFID II) and has engaged with policymakers at all stages of the co-legislative procedure.  View Article
ICMA: European organisations aim to boost triparty repo settlement interoperability by 2015
The ICMA European Repo Council signed a Memorandum of Understanding with Clearstream, Euroclear and Eurex Clearing, which engages the three post-trade infrastructure providers in a joint project enabling their systems to work together to increase the efficiency of the repo market.  View Article
Reuters: CME wants out of US SEC's plan to reduce trading glitches
CME Group Inc, the world's largest futures exchange, is asking US securities regulators to be excluded from proposed rules that would require exchanges and clearing agencies to conduct testing and be better prepared to handle trading glitches or natural disasters.  View Article
FT: US outstrips Europe in post-crisis securities deals
In the year before the 2008 financial crisis, US issuance of asset-backed securities – financial instruments blamed by many for sparking the crisis – totalled $1.5 trillion in the US and $440 billion in Europe. That gap has since widened to become a chasm.  View Article

Insurance

PRA/Bailey: Early-warning indicators needed to address failings in Solvency II
Bailey said that the introduction of capital early-warning indicators was necessary to make up for the failings in Solvency II, and that the regulator needed to act now to introduce "sensible backstops" for insurers, in order to prevent capital models being used to push capital levels too low.  View Article
Risk.net: Denmark to introduce Solvency II shocks to insurer capital requirements
The Danish insurance regulator is set to tighten the rules for calculating insurers' solvency capital requirements, in a move to aid the transition to the Solvency II regime.  View Article
Risk.net: New Dutch capital requirement 'conceptually flawed', warn insurers
Dutch insurers are railing against a proposal to introduce an additional solvency rule to bring life insurers' solvency capital requirements more in line with the long-delayed risk-based Solvency II regime.  View Article
CRE: Excess reinsurance capital may spark innovation in primary market
Excess capital and stiff competition from capital markets will see reinsurance rates come under pressure throughout 2013, according to reinsurance broker Guy Carpenter & Company.  View Article
Risk.net: Insurers face tighter infrastructure spreads as banks ramp up allocations
The return of banks to commercial loan financing is squeezing the yields available on short-term infrastructure deals, say insurers.  View Article
DerivSource: Pension funds & insurance companies - Considerations for CCP clearing
Marco Diolosa of Pension Insurance Corporation talked to DerivSource about how the insurance company is preparing for CCP clearing, and explained the barriers of entry faced by its pension fund clients as they consider how to engage with the newly-reformed derivatives landscape.  View Article

Asset Management

EIOPA publishes Final Report on the Peer Review on Occupational Pensions
In the evaluation reports, the Review Panel identified practices in NCAs that could benefit from development, using (where relevant) the practices of other NCAs to illustrate potential improvements, even if these practices did not constitute a best practice.  View Article
EIOPA/Bernardino: QIS for pensions
Bernardino said that the quantitative impact study was the first truly European assessment to provide a comprehensive and comparable view of the financial situation of occupational pension funds.  View Article
IPE: UK's OFT questions prospect of DC funds achieving scale
The lack of scale among defined contribution (DC) funds in the UK was once again the focus of concern by a regulator, as the Office of Fair Trading (OFT) noted that some schemes had no "realistic prospect" of achieving the size required to benefit members.  View Article
IPE: Dutch Cabinet unveils proposals for new financial assessment framework
Dutch pensions funds are facing a new financial assessment framework (FTK) for both their existing nominal pension contracts and new contracts under real terms, according to proposals released by the Cabinet.  View Article
IPE: Unions dismiss Irish leader's suggestion state should be pensions 'paymaster'
Unions have continued their criticism of Ireland's current pension system, insisting they are not in favour of state support for insolvent schemes but rather seek an outcome that allows for assets to be distributed on a "fair basis".  View Article
Towers Watson: Liability hedging de-risking and de-stressing
Pension funds do not need to be told that they currently face a multitude of challenges and risks. Towers Watson believes liability hedging (also known as liability matching) is an effective way to help de-risk the scheme.  View Article
FSB consults on Principles for an Effective Risk Appetite Framework
The Principles will enhance supervisory oversight of firms, in particular of systemically important financial institutions (SIFIs), by establishing minimum expectations for the key elements contained in an effective risk appetite framework. Responses should be sent by Monday 30 September, 2013.  View Article
IOSCO publishes principles for financial benchmarks
IOSCO published the final report on Principles for Financial Benchmarks, which provides an overarching framework of principles for benchmarks used in financial markets.  View Article
FCA: Review of the client assets regime for investment business
This paper consults on material changes to the rules in relation to client money, custody assets and mandates. Comments are requested by 12 August, 2013 (Chapter 8) and 11 October, 2013 (all other proposals).  View Article
The implementation of the AIFM Directive in Germany – What third country managers should know
While the AIFMD aims at creating a harmonised regulatory framework and an internal market for the managers of AIFs, the German legislator implemented the AIFMD in the new German Capital Investment Act, creating a cohesive set of rules for all open and closed-end funds and their managers in Germany.  View Article
Peter Montagnon: Our shrinking equity markets
European markets are relying too heavily on overseas investors to provide long-term investment, writes the FRC's Montagnon for European Voice.  View Article
Deutsche Bank: Private equity in times of monetary normalisation
This paper examines the main macro-economic and financial market drivers of private equity to see what lies ahead for this asset class given an improving macro-economic outlook and gradually tighter monetary policy.  View Article

Corporate Governance/Accounting

EBA: Response to IASB on financial instruments (Expected Credit Losses)
The EBA published its comment letter on the IASB's exposure draft Financial Instruments: Expected Credit Losses (ED/2013/3).  View Article
IFAC's comment letter to IIRC on the international integrated reporting framework
IFAC believes that high-quality reporting lies at the heart of strong and sustainable organisations, financial markets and economies, as the disclosure of useful information is crucial for stakeholders.  View Article
FEE's comment letter to IIRC on the international integrated reporting framework
This response should be seen in light of FEE's continued support for integrated reporting and its appreciation for the gradual transition towards integrated reporting.  View Article
ACCA: Long-term value creation focus in integrated reporting framework is a positive step
In its response to the IIRC's consultation on the way ahead for integrated reporting, ACCA says that the IIRC framework is on the right path but some areas need to be fleshed out. Investors will benefit from the move towards integrated reporting.  View Article
EFRAG commented on the IASB's proposals for limited amendments to IAS 19
EFRAG has issued its comment letter in response to the IASB's Exposure Draft ED/2013/4 Defined Benefit Plans: Employee Contributions (Proposed amendments to IAS 19).  View Article
Deloitte comments on the IASB's proposals for limited amendments to IAS 19
Deloitte published its comment letter on IASB's Exposure Draft ED 2013/4, 'Defined Benefit Plans: Employee Contributions'. In its letter, Deloitte deals with reduction in service cost and attribution of negative benefit.  View Article
EFRAG's final endorsement advice and effects study report on the amendments to IAS 39
EFRAG has completed its due process regarding novation of derivatives and continuation of hedge accounting (Amendments to IAS 39) ('the Amendments'), and has submitted its Endorsement Advice Letter and Effects Study Report to the European Commission.  View Article
EFRAG's final endorsement advice and effects study report on the amendments to IAS 36
EFRAG has completed its due process regarding the amendments to IAS 36 on Recoverable Amount Disclosures for Non-Financial Assets ('the Amendments'), and has submitted its Endorsement Advice Letter and Effects Study Report to the European Commission.  View Article
Getting a good understanding of EFRAG's and National Standard-Setters' field work initiatives
Constituents have expressed the need to understand the common rationale for EFRAG's and the National Standard-Setters' field work initiatives and how they relate to the work of the IASB. To address these requests, EFRAG has decided to formalise its field work policy and make it publicly available.   View Article
IFAC signs strategic agreement with the IIA
This collaboration further strengthens IFAC's and the IIA's commitment to restore confidence to the general public in business reporting and enhancing governance processes in the private and public sectors.  View Article
IFAC: Interview with IESBA Chair Jörgen Holmquist
Holmquist answered questions on i.a. the Code of Ethics for Professional Accountants, auditors' responsibility for the financial crisis, and the role of the European Union.  View Article
FCA publishes Code of Practice for the relationship between the external auditor and the supervisor
The aim and focus of the FCA's Code is to enhance the regulatory process and contribute to high-quality external auditing by promoting an effective relationship between the auditor and supervisor in the context of particular regulated firms.  View Article
Audit&Risk: The IIA's code of guidance – A great leap for internal audit
The Institute of Internal Auditors announced the launch of the first code of guidance specifically aimed at enhancing the application of the institute's international standards in the financial services sector. This is a milestone for the sector.  View Article
FASB: PCC proposes changes to consolidation of variable interest entities
The PCC voted to expose a proposed alternative within US GAAP for applying consolidation guidance for leasing entities under common control. The PCC and the FASB also voted to finalise the Private Company Decision-Making Framework.  View Article
DBIS discussion paper: Company ownership - Transparency and trust
This paper considers a range of proposals to enhance the transparency of UK company ownership and increase trust in UK business. The consultation closes on September 16, 2013.  View Article
IASB: FEI Canada's study of transition costs from Canadian GAAP to IFRS
FEI Canada published the findings of its research into the costs borne by Canadian companies in their transition from Canadian GAAP to IFRS. The research was jointly funded by the Canadian Accounting Standards Oversight Council and the IFRS Foundation.  View Article

Financial Services Policy

EU and US conclude first round of TTIP negotiations in Washington
The first week-long round of talks for an EU-US Transatlantic Trade and Investment Partnership (TTIP) came to a close in Washington on 12th July. The next round of TTIP negotiations will take place during the week of 7 October in Brussels.  View Article
Commissioner Barnier: Time for a new transatlantic partnership
Barnier stressed that the TTIP was the biggest trade and investment negotiations ever. "It is now up to us to turn this ambition into reality", he said. The EU has also taken the unprecedented step of making available to the public some of its initial position papers on the negotiations.  View Article
Protecting taxpayers' money against fraud: Commission proposes European Public Prosecutor's Office and reinforces OLAF procedural guarantees
The Commission is taking action to improve Union-wide prosecution of criminals who defraud EU taxpayers by establishing a European Public Prosecutor's Office. This will be an independent institution, subject to democratic oversight. (Includes links to comments by Commissioner Šemeta and VP Reding.)  View Article
IBT: IMF has doubts on trading tax, suggests other levies
The IMF raised doubts about a tax on financial trading a group of European states is due to bring in next year, saying other levies may be more efficient ways of obtaining revenues from the financial sector.  View Article
CEO: Robbing the "Robin Hood" tax - The European Central Bank weighs in
The ECB is "helping" the Commission and the Council design a future Financial Transaction Tax for Europe. According to this article by Corporate Europe Observatory, this should be of major concern to its proponents, as the ECB can only be expected to side with the financial lobby.  View Article
Commissioner Barnier: The single market in financial services - We need the UK on board
Barnier said he believed the UK would lose out on many of its interests if it were to leave the single market, and that in the interest of stability on the continent, it would make sense for the UK to support the Banking Union even if it did not want to belong to it.  View Article





© Graham Bishop

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