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29 September 2011

This week in "Brussels"
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Articles from 22 September 2011 - 29 September 2011

Banking

Commission requests Spain and The Netherlands to implement capital rules (CRD II)
The Directives must be implemented in all Member States to ensure that the same high standards are applied across the EU, and that no banks or investment firms operating in the EU benefit from any unfair competitive advantage. The deadline for implementing these rules was 31 October 2010.  View Article
EBF: European banks call for solutions least detrimental to the European economy
The European Banking Federation (EBF) is calling for further dialogue over the proposals published today by the European Commission to raise a significant amount of new revenue by taxing the financial transactions of all operators located in the EU.  View Article
FT: EU to speed bank recapitalisation
The Financial Times reported that several mid-tier banks were found to be close to EU stress test limits, although no UK or French banks were affected.  View Article
FT: Italy's haircut reprieve looks temporary
The margins required on French and Italian bonds were raised two weeks ago by LCH.Clearnet, which meant lenders would receive less cash when using those bonds as security for repo funding.  View Article
MEP Vicky Ford: EU banks would be threatened by weaker Capital Requirements Directive
Ford (ECR, UK) said that a US bank had recently given her a spreadsheet showing 52 differences between the Commission's text and the Basel agreement, with the Basel text appearing to be stronger in 34 cases. She warned that the EU should not try to hide differences or embed bad practices.  View Article
ABBL: Commission opens investigation into e-payment market
The European Commission has opened an antitrust investigation into the standardisation process for payments over the internet ('e-payments') undertaken by the European Payments Council (EPC).  View Article
FT: LCH poised to choose between rival bids
The battle for control of LCH.Clearnet, London's biggest clearing house, is expected to move closer to resolution, as the clearer's board meets to decide between rival bids from the London Stock Exchange and Markit, a financial data and derivatives post-trade company.  View Article
FN: Basel panel likely to reaffirm extra capital ratio proposal for big banks
The Basel Committee on Banking Supervision is said to be set to rebuff heavy lobbying by banks and stick with a proposal requiring 28 big global banks to hold between 1 and 2.5 per cent of extra capital as a percentage of their "risk-weighted assets".  View Article
BIS: Outcome of the September 2011 Basel Committee meeting
The Basel Committee agreed on a range of measures to finalise key elements of its policy agenda and to put in place a strong implementation assessment framework.  View Article
The EBA published its Guidelines on Internal Governance (GL44)
The European Banking Authority (EBA) has published its Guidelines on Internal Governance, aiming at enhancing and consolidating supervisory expectations and ultimately at improving the sound implementation of internal governance arrangements.  View Article

Securities

Polish Presidency published new compromise text on EMIR
Article 8a has been deleted from the Compromise text. Article 8a provided that “venue of execution shall provide trade feeds on a non-discriminatory and transparent basis to any CCP that has been authorised to clear OTC derivative contracts traded on that venue of execution upon request by the CCP”.  View Article
CEA comments on proposals for OTC derivatives regulation
The European Insurance Federation has reacted to the European Council Presidency compromise of 23 September on the proposal for regulating OTC derivatives, central counterparties and trade repositories  View Article
BIS published report on high-frequency trading in the foreign exchange market
The report examines the facts about high-frequency trading in foreign exchange, including its definition, effect on other market participants, behaviour in normal and stressed times, and key differences compared with HFT in equities. It also identifies areas that may warrant further investigation.   View Article
ESMA continues to coordinate action on short positions in countries where bans are currently in place
Acting in close cooperation, following evaluation and discussions conducted under the coordination of ESMA, those European regulators whose measures on short positions were meant to expire on 30 September have published statements setting out details of their decision to renew the temporary ban.  View Article
The CNMV temporarily extends the preventive ban on transactions on short positions on Spanish stocks
The CNMV has been assessing the impact of the measures restricting short positions on financial stocks adopted in August 2011 and the market conditions since then. This has been carried out in cooperation with the other authorities that adopted similar measures and under the coordination of ESMA.  View Article
FT: LSE wins battle for LCH.Clearnet
The London Stock Exchange has succeeded in its attempt to take over LCH.Clearnet, after the clearer's board favoured the UK bourse over Markit, the rival bidder.  View Article
FN: NYSE-Börse to grant Euroclear reprieve
Roland Bellegarde, a director of NYSE Euronext, said that the combined entity that will emerge from the merger between NYSE Euronext and Deutsche Börse will allow users to choose their preferred settlement provider.  View Article

Insurance

EIOPA Chairman’s speech on risk management at SUERF lecture
The chairman of the European Insurance and Pensions Authority (EIOPA), Gabriel Bernardino, gave a speech on the supervisor's approach to risk management at the European Money and Finance Forum (SUERF) annual lectures in Helsinki.  View Article
CEA writes to Polish EU perm rep on VAT exemption
The European Insurance Federation (CEA) has written to the Permanent Representative of Poland to the European Union (EU) on the VAT treatment of financial and insurance services.  View Article
CBI: Pension schemes are not insurance contracts
The Confederation of British Industry has urged the UK government to resist plans by the European Commission to treat defined pensions schemes as insurance contracts. The CBI said imposing inappropriate and costly solvency standards on pensions would harm sponsor companies' ability to invest.   View Article

Asset Management

EVCA says implementation of AIFMD 'third country rules' must avoid concentrating risk for investors
EVCA has warned against the implementation of such rules relating to non-EU managers and funds going beyond the intention of the AIFM Directive, which could unduly jeopardise investor choice and their ability to diversify risk.  View Article
IMA: ESMA's advice on third countries should reflect AIFMD Level 1
At ESMA's open hearing yesterday, the IMA questioned the scope of the proposed measures and warned of the potential impact for EU institutional investors.  View Article
AIMA expresses concerns over ESMA's AIFMD 'third country' proposals
The Alternative Investment Management Association has expressed concerns over how the Alternative Investment Fund Managers Directive would apply to non-EU managers and funds under proposals by a task force of the European Securities and Markets Authority.  View Article
ALFI defines ambition for Luxemburg Fund Centre
The Association of the Luxemburg Fund Industry (ALFI) set out its ambition for the Luxemburg Fund Centre to be a global centre of excellence for the asset management industry, thereby creating opportunities for investors, fund professionals and the global community as a whole.  View Article
ESMA publishes responses received to Discussion paper on ESMA's policy orientations on guidelines for UCITS ETFs and structured UCITS
In July, ESMA published a discussion paper (ESMA/2011/220) setting out policy orientations on guidelines for UCITS Exchange-Traded Funds (ETFs) and structured UCITS. The responses were published today.  View Article
ALFI response to the discussion paper - ESMA’s policy orientations on guidelines for UCITS ETFs and structured UCITS
ALFI does not believe that UCITS ETFs or structured UCITS should be singled out from other UCITS products as the UCITS framework foresees liquidity, negotiability, high risk management standards but also limitations on the risk of losses for investors.  View Article
IMA says all retail investment products must be subject to the same requirements
The IMA questioned ESMA's rationale for singling out certain types of UCITS products while excluding others, such as non-UCITS exchange-traded products.  View Article
IOPS publishes 'Pension Fund Use of Alternative Investments and Derivatives' working paper
IOPS has published a Working Paper: 'Pension Fund Use of Alternative Investments and Derivatives: Regulation, Industry Practice and Implementation Issues'.  View Article
IPE: Slovakian parliament shakes up investment rules for pension funds
Under the terms of the bill, second-pillar pension schemes will become mandatory for new employees, some schemes will lose their guarantees, and others will be forced to allocate a minimum 20 per cent to risky assets.  View Article

Corporate Governance/Accounting

EFRAG commented on IAS 12 Income Tax - rebuttable presumption to determine the manner of recovery
EFRAG published its draft comment letter on the IFRS Interpretations Committee's tentative rejection decision on IAS 12 Income tax – rebuttable presumption to determine manner of recovery.  View Article
S&D Group back radical reform of audits and better market transparency
"Commissioner Barnier's draft reform of the audit market is ambitious and goes in the right direction", said Antonio Masip, who drafted a report on audit policy adopted by the European Parliament on 13 September.  View Article
FT: Big audit firms face Brussels onslaught
The business model of the Big Four accounting firms is under attack from the European Commission, which is pushing for tough rules that would force the firms to abandon their consultancy businesses and share audit work with smaller rivals.  View Article

Financial Services Policy

President Barroso: EU faces its greatest challenge
Barroso stressed that Greece will stay in the eurozone, but warned that the EU was facing its "greatest challenge". On the financial transactions tax, he said the financial services sector must "make a contribution".   View Article
Rehn: The economic governance package will pave the way for creating a real economic union
Rehn also stressed that the adopted package represents a fundamental change in the way the Economic and Monetary Union is governed. It will ensure fiscal discipline and facilitate economic stability, which is crucial for sustainable growth and job creation.  View Article
President of the European Council, Herman Van Rompuy, welcomes today's agreement on the economic legislative package
Van Rompuy said the so-called "six-pack" will strengthen economic governance in the EU – and more specifically in the euro area – as part of the EU's response to the current turmoil on sovereign debt markets.   View Article
Commission published state of play on the EU economic governance "six pack"
The legislative package contains the most comprehensive reinforcement of economic governance in the EU and the euro area since the launch of the Economic and Monetary Union. The EP has given it final agreement and voted to adopt the package.   View Article
Sharon Bowles MEP: New economic governance rules give EU hope for future stability
The Chair of the European Parliament's Economic and Monetary Affairs Committee, Sharon Bowles MEP, welcomes Parliament's approval of the economic governance package - legislation which will bring about tighter rules on economic policy coordination across the EU.  View Article
ECON Committee - MEP Wortmann-Kool: Economic governance pillar of EU's competitiveness
Reining in spendthrift governments and making sure macro-economic imbalances do not undermine economic growth are the two main goals of the economic governance package on which the Parliament and the Council tentatively agreed on 20 September, and which are due to be voted in plenary.   View Article
EPP Group: The adoption of the economic governance is a major success
The EPP Group finds the behaviour of the S&D Group and the Left of the European Parliament, who voted against the package, politically irresponsible. MEP Jean-Paul Gauzès said that the vote is an historic step towards a real economic governance.   View Article
S&D MEPs: Austerity alone will not resolve the eurozone crisis
The S&D monetary affairs spokesman, Udo Bullmann, said that the approved eurozone reform will have drastic consequences for Europe. The S&D group rejected most of the proposals negotiated by the conservatives and liberals, who form a majority in both the Council and the European Parliament.  View Article
Commissioner Šemeta: The European Union should take the lead on the FTT project for the benefit of all
Šemeta also said that the FTT will generate revenue of €57 billion a year, an amount to be shared between the European and national budgets. Member States will have the double dividend of receiving new resources much needed in their consolidation efforts.  View Article
Financial transaction tax: Making the financial sector pay its fair share
The Commission has presented a proposal for an FTT in the 27 Member States of the European Union. The tax would be levied on all transactions on financial instruments between financial institutions when at least one party to the transaction is located in the EU.   View Article
IMA: Proposed financial transactions tax will penalise savers
Following the Commission's adopted proposal to introduce a tax on financial transactions today, the Investment Management Association (IMA) expressed its conerns that this would be a tax on savers, not banks.  View Article
BBA: Statement on European Commission proposals for a financial transactions tax (FTT)
The British Bankers' Association issued a statement on the European Commission's proposals for an FTT today, saying financial transaction taxes are not taxes on banks - they are taxes collected for governments by banks.  View Article
BBC: European Commission financial tax opposed by UK
The UK has said it would "resist" a financial transaction tax on EU members proposed by the European Commission. The tax would raise about €57 billion ($78bn; £50bn) a year, and would come into effect at the start of 2014.  View Article
TheCityUK comments on European Commission proposals for a financial transactions tax
Chris Cummings, CEO of thinktank TheCityUK, issued a comment on the European Commission's adopted proposals for a financial transaction tax, saying they need careful scrutiny.  View Article
Global Financial Centres Index: The eurozone languishes and the Nordic Centres shine through
According to an index of 75 financial centres compiled by think tank Z/Yen Group, capital cities of the weaker euro economies are clearly suffering. Examples include Madrid which is down 11 places in the rankings, Dublin down 10 and Milan down nine. Paris fell four places and Frankfurt slipped two.  View Article
UK Government response to EC Green Paper on Modernising the Professional Qualifications Directive
The UK Government welcomes the review of the Recognition of the Professional Qualifications Directive (2005/36/EC), as one of the European Commission's 12 levers to boost growth in the single market.  View Article
FSA gives accredited bodies go-ahead to issue adviser SPSs (RDR)
The Financial Services Authority (FSA) has formally accredited six professional bodies, meaning they can begin issuing Statements of Professional Standing (SPS), a mandatory form of practising certificate for advisers.  View Article

Financial Stability - Policy Analysis

IIF stresses need to restore confidence as key global challenge - strengthened policy coordination is seen as vital
At a press conference today, the leadership of the IIF's Board of Directors highlighted key sovereign debt issues, financial regulatory reform decisions, as well as the outlook for emerging markets. In a new report, the IIF forecast that net private capital flows to emerging markets will continue at strong levels at over an annual one trillion dollars this year and in 2012.  View Article

Economic Crisis

BBC: German parliament approves expanded EFSF
A large majority in the German parliament has approved expanded powers for the EU's main bailout fund. As Europe's largest economy, Germany's commitment to the European Financial Stability Facility (EFSF) would rise from €123 billion to €211 billion.  View Article
S&D: Fiery Schulz calls for EU unity to meet challenges
S&D leader, Martin Schulz, today set out a combative approach to the crisis and called for resolute action at EU level to safeguard the prosperity of future generations.  View Article
FT: Split opens over Greek bail-out terms
A split has opened in the eurozone over the terms of Greece's second €109 billion bail-out, with as many as seven of the bloc's 17 members arguing for private creditors to swallow a bigger writedown on their Greek bond holdings.  View Article
FT: Greece creditors in bail-out backlash
Greece's private creditors have reacted angrily to suggestions that some eurozone countries want bondholders to suffer bigger losses than those agreed in the second bail-out of Athens.  View Article
Bloomberg: Geithner to Europe - Get on with crisis response
US Treasury Secretary, Timothy F Geithner, predicted that European governments will step up their response to their region's debt crisis after a chiding from counterparts around the world.  View Article
Euractiv: Europeans mull bigger bail-out fund for Italy, Spain
European policymakers began discussing new ways of boosting the capacity of their €440 billion bail-out facility, in the clearest sign yet that the eurozone is getting ready to rescue a big country such as Italy or Spain from the unfolding debt crisis.  View Article
WSJ: Europe split on rescue plan
European officials are debating ways to boost the firepower of their financial bail-out fund after the world's finance ministers, worried about the potential for a market meltdown, ratcheted up pressure on eurozone officials to act.  View Article
Reuters: Under fire, Europe works to bolster debt crisis fund
European policymakers began working on new ways to stop fallout from Greece's near-bankruptcy from inflicting more damage on the world economy after stinging criticism for failing to stem the debt crisis.  View Article
FT: Europe thinks the unthinkable to solve crisis
Eurozone governments, many facing growing public disquiet, must now address three overlapping policy discussions for stepping up their response to the crisis.  View Article
IMF members vow to confront crisis, prevent escalation
Determined to prevent the global economy worsening further and plunging into stagnation, IMF members vowed collectively to do whatever it takes to tackle a “precarious situation” and restore both confidence and financial stability.  View Article
Bloomberg: G20 vows to tackle renewed global risks
Group of 20 finance chiefs pledged to address rising risks to the global economy and pushed Europe to contain its sovereign debt crisis, after concern that the world is on the brink of another recession sent stocks tumbling.  View Article
Reuters: ECB's Knot admits to chance of Greece defaulting
A situation where Greece cannot pay back its public debt can no longer be excluded, European Central Bank Governing Council member Klaas Knot said on Friday.  View Article
G20 Communiqué after meeting in Washington
The G20 is committed to a strong and coordinated international response to address the renewed challenges facing the global economy, notably heightened downside risks from sovereign stresses, financial system fragility, market turbulence, weak economic growth and unacceptably high unemployment.  View Article

International/G20

Bruegel: Transatlantic relations and globalisation in time of crisis?
Vitor Gaspar commented on some long-term trends leading to shifting patterns of power at global level. He also argued that the current crisis will likely accelerate these trends. Finally, he suggested that transatlantic cooperation is crucial for a smooth transition at the global level.  View Article

Think Tanks

Nicolas Véron: Testimony on the European debt and financial crisis
The European crisis is entering a critical phase because policy initiatives undertaken so far have not prevented systemic contagion. Véron concentrates his remarks on the role of Europe's banking system in the crisis, the steps needed at the European level for the crisis to be resolved, and the short-term outlook.  View Article
CEPR: Reforming the international monetary system
This CEPR report presents concrete proposals aimed at improving the international provision of liquidity in order to limit the effects of individual and systemic crises and decrease their frequency.  View Article
CER bulletin: Sticking to the rules will not rescue the eurozone
Philip Whyte comments that countries in the eurozone's core increasingly give the impression that rules should be obeyed at almost any price. Why? The answer is that rules are a substitute for fiscal union.   View Article
CER: Europe doesn’t lack funds, just political will
Simon Tilford writes that the current strategy for addressing the crisis has failed and the International Monetary Fund's official support for that strategy is a threat to the organisation's credibility.   View Article
CEPS: Debt reduction without default
In light of continued difficulties on the part of the Greek government to implement the promises it gave to its creditors and convince its own population of the need for further rounds of tough reforms, this CEPS Commentary reiterates the authors’ earlier proposal to take advantage of the low prices of Greek debt to implement a market-based approach to debt reduction.  View Article
Josef Ackermann of Deutsche Bank announces his departure from Chair of IIF Board of Directors
Dr Ackermann today announced that he will be stepping down from his Institute of International Finance (IIF) position on June 6, 2012, at the time of the Institute's Spring Membership Meeting in Copenhagen. Douglas Flint of HSBC is to become the next Chairman of the Institute's Board of Directors.  View Article
S&D Euro MPs set out a different agenda to reform the eurozone
S&D Euro MPs are requesting a new economic governance scheme, saying the current package is economically misguided and will lead Europe on the path to austerity instead of recovery.  View Article

Commentaries

Guy Verhofstadt: Only a finance minister and full fiscal union will do
In this FT Opinion article, Verhofstadt says that whatever the outcome from the current Greek difficulties, it is clear that the future of the euro, if not the European Union itself, is at stake. For an exit from the crisis there is no alternative but to move closer and quickly towards fiscal union.   View Article
Wolfgang Münchau: Zero hour for the euro
The world's inability to shake off the economic downturn and contagion in Italy has changed the nature of the eurozone crisis. What was once a debt problem of small peripheral countries is now threatening the euro's existence.  View Article
OMFIF: Gold standard test looms as Greek debt worries swirl at IMF meeting
80 years ago, Britain's relinquishment of the gold peg, while giving much-needed stimulus to the domestic economy, piled up pressure on the main gold-adhering countries of the Continent (Germany and France) to follow suit. Nowadays we'd call it “contagion risk”. Scroll forward to the present, and you see some dark similarities in today's dilemmas for European governments.   View Article
Ian Wishart: A long way behind the curve
Writing for European Voice, Wishart is concerned that warnings about the severity of the economic situation do not seem to be getting through to some senior EU officials.   View Article
Martin Wolf: Fear and loathing in the eurozone
In his FT column, Wolf comments that a positive feedback loop between banks and weak sovereigns is emerging, with a potentially calamitous effect on the eurozone and the global economy: the eurozone is no island.  View Article
Quentin Peel: Germany and the eurozone - besieged in Berlin
Writing from Berlin for FT Analysis, Peel comments that Angela Merkel's actions are crucial to finding a solution to the eurozone crisis. The chancellor faces global calls to show political leadership and restore the trust of the markets.  View Article




© Graham Bishop

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