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17 November 2011

This week in "Brussels"
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Banking Securities Insurance
Asset Management Corporate Governance/Accounting Financial Services Policy
Financial Stability - Policy Analysis European Council/Parliament International/G20
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Articles from 10 November 2011 - 17 November 2011

Banking

Jürgen Stark: Towards a safer financial system
Stark, Member of the Executive Board of the European Central Bank, in his speech focused on what has been achieved regarding the financial market regulations agenda, on the Basel III framework and the priorities for the future, as well as on the role of finance for economic growth more generally.  View Article
Peter Praet: The (changing) role of central banks in financial stability policies
Peter Praet, Member of the Executive Board of the European Central Bank, pointed out that challenges are immense both on the technical side as well as on the governance side to safeguard financial stability. Central banks have an important role to play as coordinator/facilitator/initiator.   View Article
MEP Sharon Bowles proposes radical plan to make lending to SMEs more attractive
A way of stopping deleveraging would be some kind of flat capital charge, instead of a risk weighting approach to the banks' portfolio of SME lending. That might be better than reducing risk at a time when risk is actually increasing, and easier to measure.  View Article
BIS: Interpretive issues with respect to the revisions to the market risk framework
The Basel Committee on Banking Supervision ("the Committee") provides responses to interpretive issues regarding the Revisions to the Basel II market risk framework ("the Revisions") and the Guidelines for computing capital for incremental risk in the trading book ("the IRC Guidelines").  View Article
BBA: Effective risk management - vital shock absorber
The importance of effective risk management was discussed at a British Bankers' Association conference yesterday. Delegates considered how international standards in risk management might be applied at national level.  View Article
BBA: International coordination is best for recovery and resolution plans
Responding to the Financial Services Authority's recent consultation on recovery and resolution plans (RRPs), the British Bankers' Association restated its support for RRPs which minimise the impact of any future bank failure on financial stability and any need for public financial support.  View Article
ECB: EURO1 complies with CPSS core principles
The report, entitled EURO1 Oversight Assessment Report, was produced by the central banks of the euro area and was coordinated by the ECB, as part of their joint oversight mandate.  View Article

Securities

Commission wants better quality credit ratings
The Commission has put forward proposals to toughen the existing framework and deal with outstanding weaknesses. The draft regulation proposes that credit rating agencies will have to consult issuers and investors on any intended changes to their rating methodologies.  View Article
AFME's comment on the European Commission's proposals for credit rating agencies
AFME director, Richard Hopkin, said that while the slight relaxation of the draft rotation requirements is a step in the right direction, significant questions remain.  View Article
Statement by Commissioner Barnier following the incorrect rating of France by Standard & Poor's
Barnier stressed that this incident is serious and shows that in the current tense and volatile market situation, market players must exercise discipline and demonstrate a special sense of responsibility.  View Article
Plenary session: EP votes to ban credit default swaps
Rapporteur Pascal Canfin stressed that the approved regulation will define for the first time a European regime for short selling and CDS which has been proven to be highly needed during the current sovereign debt crisis. The regulation will enter into force in November 2012.   View Article
Parliament seals ban on sovereign debt speculation and short selling limitations
Parliament voted into law a regulation to curb short selling and trading in credit default swaps, a financial product for insuring against default. The rules will impose much more transparency and virtually ban certain CDS trades, thereby making speculation on a country's default more difficult.  View Article
MEP Markus Ferber: Tough EU standards on short selling
According to Markus Ferber, the MEP who is responsible for the Regulation on short selling and CDS for the EPP Group, Parliament has successfully fought for very strict conditions for short selling to contain destructive speculation. The new transparency rules will help stabilise financial markets.  View Article
S&D backs EU ban on sovereign debt speculation
S&D Euro MPs will tomorrow in Strasbourg back a deal to ban the riskiest forms of speculation on financial markets. The deal targets short selling practices and credit default swaps (CDS), used mainly to cover the risk of a potential loss that may occur on sovereign or corporate bonds.   View Article
FN: Don't shoot the messenger, listen to the message
This article argues that the European Union's introduction of new rules aimed at preventing speculation in sovereign CDS has completely missed the point.  View Article
FN: UK threatens legal action over EU short selling ban
The UK has announced it will consider taking legal steps to block a European Union proposal to give the European Securities and Markets Association the power to ban the short selling of shares and other securities.  View Article
Extension of the ban on the taking of net short positions in ten French securities of the financial sector
The Board of the Autorité des marchés financiers (AMF) reassessed in early November 2011 the ban on the taking of net short positions in ten French securities of the financial sector.  View Article
FT: Barnier backtracks on ratings reforms
Plans to ban sovereign credit ratings in “exceptional circumstances” have been shelved by Europe's top financial regulator after he came under pressure to retreat from the controversial measure to rein in the agencies that issue the assessments of national financial strength.  View Article
CEPS paper: Credit rating agencies - part of the solution or part of the problem?
This paper examines the major agencies' influence, independence and performance and explores whether a publicly-funded European agency would improve the situation.  View Article
Comments by EFFAS on rating procedure France
EFFAS claims that rating agencies normally should give guidance for investors, but this faulty action led to misleading market interpretations and ultimately served to confuse market participants.  View Article
FT: Brussels to unveil curbs on rating agencies
The reform package marks the most aggressive attempt yet by Brussels to bridle an unpopular industry that some European leaders have blamed for aggravating the sovereign debt crisis with erratic and “subjective” rating decisions.  View Article
EuropeanIssuers' comments on Prospectus Directive
In a letter to Barnier, EuropeanIssuers raised concerns that ESMA's technical advice on the Prospectus Directive will make raising equity and debt more difficult for issuers, rather than simplifying and making the process more efficient and effective, as intended in the amending Directive.  View Article
BIS: OTC derivatives market activity in the first half of 2011
After an increase of only 3 per cent in the second half of 2010, total notional amounts outstanding of over-the-counter (OTC) derivatives rose by 18 per cent in the first half of 2011, reaching $708 trillion by the end of June 2011.  View Article
Deutsche Bank published an update on the current regulatory initiatives - OTC derivatives markets
At the global level, OTC derivatives regulation is being undertaken by CPSS and IOSCO and focuses on efforts to update and strengthen standards for CCPs, CSDs, payment systems and the treatment of trade repositories.   View Article

Insurance

Barnier: Challenges and opportunities facing the insurance sector in the Single Market
Speaking at an EIOPA conference, Barnier said that Solvency II equivalence is in the mutual interest of the EU and third countries, since it will streamline cross-border activities by insurance and reinsurance companies and alleviate the burden on groups operating internationally.   View Article
EIOPA Chairman Bernardino: We are committed to making Solvency II a success
Speaking at EIOPA's first annual conference, Bernardino stressed that EIOPA is determined to remain true to its core objective of “protecting the public interest by contributing to the short-, medium- and long-term stability and effectiveness of the financial system”.  View Article
CEA sounds warning on Solvency II
CEA director general, Michaela Koller, has warned of a considerable adverse impact on consumers if a number of key issues in the development of the new Solvency II regulatory regime for insurers are not addressed.  View Article
IAIS Peter Braumüller: The traditional insurance business is of very little or no systemic concern
Braumüller also said that the financial crisis showed that certain non-traditional activities could lead to distress, for example the large-scale leveraging of assets – or so-called securities lending – to enhance expected investment returns.  View Article
IAIS released paper on Insurance and Financial Stability
The paper describes how insurance groups and conglomerates that engage in non-traditional or non-insurance activities are more vulnerable to financial market developments and thus more likely to amplify, or contribute to, systemic risk.  View Article
FT: Insurers face crunch time over Italian debt
Big European insurers have been able to watch the unfolding eurozone sovereign debt crisis almost from the sidelines so far. Italy is an entirely different story though. As crisis over the country's bonds hits its most acute phase, risks are rising for insurance company shareholders.   View Article

Asset Management

ESMA details future rules for alternative investment fund managers
The rules will establish a comprehensive framework for alternative investment funds, their managers and depositaries. They are also designed to help achieve the AIFMD's objective of increased transparency and tackling systemic risk, ultimately contributing to a more sound protection of investors.  View Article
ESMA's technical advice to the European Commission on possible implementing measures of the AIFMD
This paper sets out ESMA's technical advice on the content of the implementing measures for the Alternative Investment Fund Managers Directive.  View Article
EFAMA: Decline in net outflows from equity funds suggests resilience from investors in September
The European Fund and Asset Management Association (EFAMA) has today published its latest Investment Fund Industry Fact Sheet, which provides investment sales and asset data for September 2011.  View Article
FN: Hedge funds consider political risks
Some macro funds are faring better than other strategies because they are used to taking political risks into consideration when making investment decisions.  View Article

Corporate Governance/Accounting

IFAC: PAIB Committee's guidance for predictive business analytics
The PAIB Committee published its new International Good Practice Guidance, 'Predictive Business Analytics: Improving Business Performance with Forward-Looking Measures'. This is designed to help professional accountants in business working in commerce, industry, financial services and the public.  View Article
FASB: FAF commented on the SEC staff paper, 'Exploring a Possible Method of Incorporation'
The FAF Board of Trustees (Trustees) has refined its views on the appropriate path forward for financial accounting and reporting standard-setting for the US capital markets. The Trustees support the incorporation of IFRS into US GAAP.  View Article
IASB and FASB: Revised proposal for revenue recognition
The IASB and the FASB published for public comment a revised draft standard to improve and converge the financial reporting requirements of IFRSs and US GAAP for revenue (and some related costs) from contracts with customers.   View Article
FT: US support for accounting harmonisation
The US accounting standards-setter has expressed cautious support for plans to incorporate international requirements into the country's rule book, ahead of a decision by the Securities and Exchange Commission on harmonisation of global standards.  View Article

Financial Services Policy

Commission published 2012 work programme: Delivering European renewal
In early 2012, the Commission will propose the remaining pieces of legislation focusing on the protection of investors. A revision of the rules governing collective investment schemes (UCITS) will aim to enhance investor protection and strengthen the internal market.  View Article
Deloitte: RDR - Shaking up investment management?
This paper finds that in particular the FSA's focus on reducing the cost of retail investment product supply poses a real risk that much of that reduction will be suffered by investment managers.   View Article
FSA issues CP11/25: Distribution of retail investments - RDR Adviser Charging and Solvency II Disclosures
The Financial Services Authority issued their Consultation Paper CP11/25 entitled 'Distribution of retail investments - RDR Adviser Charging and Solvency II disclosures'. The FSA invites comments on this Consultation Paper by 10 January 2012.  View Article
IFAonline: Two months left before the ‘real RDR deadline’
According to the Institute of Financial Services, existing financial advisers who have not yet started their journey towards obtaining a Level 4 qualification and RDR compliance should not be thinking about 31 December 2012: the real RDR deadline is 3 January 2012.  View Article
IFAonline: FSA sticks to guns over legacy commission ban (RDR)
The Financial Services Authority has confirmed its proposed ban on legacy commission in a widely-expected move.   View Article
IFAonline: Revealed - The FSA's nine RDR 'success indicators'
The Financial Services Authority (FSA) has outlined how it will measure the success of the retail distribution review (RDR), presenting nine key indicators and setting baselines for the post-implementation review.  View Article

Financial Stability - Policy Analysis

Swedish Financial Supervisory Authority published report on “Risks in the Financial System 2011”
Sweden has remained stable in a turbulent period but during this time the risk level in the financial system has also risen. The uncertainty in surrounding markets has meant that banks' liquidity risks and the impact of low interest rates on life insurance undertakings remain in focus.   View Article




© Graham Bishop

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