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07 February 2013

This week in "Brussels"
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Banking Securities Insurance
Asset Management Corporate Governance/Accounting Financial Services Policy
European Council/Parliament Graham Bishop’s Articles and Speeches Financial Services Month in Brussels - Report
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Articles from 31 January 2013 - 07 February 2013

Banking

ECB/Constâncio: Establishment of the Single Supervisory Mechanism; the first pillar of the Banking Union
Constâncio touched upon the different elements of the banking union and the underlying rationale for its establishment. He also reviewed the main features of the SSM and mentioned the immediate challenges for the ECB to prepare itself to assume its supervisory task.  View Article
Bank of Ireland/Elderfield: Single Supervisory Mechanism - Benefits and challenges from a practical supervisory perspective
Elderfield said that establishing operational parameters for the use of the ESM for direct recapitalisation, and agreeing a framework and set of national powers for resolution, were urgently-needed measures to make the banking union a success and to resolve the financial crisis.  View Article
Basel Committee publishes Report on the regulatory consistency of risk-weighted assets for market risk
This analysis of risk-weighted assets in the trading book is part of the wider Regulatory Consistency Assessment Programme (RCAP) initiated by the Committee in 2012.   View Article
Bank of Finland/Liikanen: Report on the HLEG on reforming the structure of the EU banking sector
Liikanen said that the HLEG's proposed bank structures should be viewed as strengthening the general conditions which are needed to reduce conflicts of interest and distorted incentives that could i.a. endanger financial stability.  View Article
HM Treasury: UK Government publishes Banking Reform Bill
The Government's banking reforms will fundamentally change the structure of the UK banking sector, to make banks more resilient to shocks and more resolvable in the event of a failure, and reduce the severity of future financial crises.  View Article
HM Treasury: Speech by the UK Chancellor of the Exchequer, Rt Hon George Osborne MP, on the Reform of Banking
"The Banking Reform Bill introduced in the House of Commons today will deliver the most radical reform to banking in this country in a generation." (Includes CBI response.)  View Article
Philipp Hildebrand: The missing word in Osborne's banking reform plan
The UK chancellor's speech contained sensible plans for change but nowhere did the word 'capital' appear, writes Hildebrand for the FT's A-List.  View Article
Bloomberg: German Banking Bill may affect up to 12 lenders, Schäuble says
Chancellor Merkel's Cabinet approved a draft bill today that would force deposit banks to separate proprietary trading, lending and guarantees to hedge funds as well as HFT, when associated activities exceed €100 billion or 20 per cent of the balance sheet.   View Article
Bloomberg: German push to accelerate bank bail-ins joined by Dutch
Germany, the Netherlands and Finland want to speed up European Union plans to force losses on senior bondholders of failing banks.  View Article
Bundesbank/Dombret: Credible threat
In an interview, Dombret said that policy-makers needed to issue a 'credible threat' to banks, to the effect that they would be restructured or resolved in the event of insolvency. "It must also be possible for systemically important banks to exit the market", he said.  View Article
Bruegel/Bijlsma: No ringfencing makes sense, but don't take off the gloves - Implementing the recommendations in the Liikanen report
Bijlsma writes that the benefits of ringfencing are quite uncertain, and puts forward two arguments against it.  View Article
Alistair Darling: A crisis needs a firewall not a ringfence
Ringfencing is a useful tool to help manage banks but it is certainly not a complete answer. Too many risks still remain, writes Darling in this FT article.   View Article
Bundesbank/Lautenschläger: Bankers' salaries must be capped
In a Handelsblatt interview, Lautenschläger discussed i.a. bankers' bonuses, the Libor scandal and the new European banking supervision.  View Article
BBA: A big change in bonuses
We are entering the annual banker bonus furore season, writes Anthony Browne on the BBA blog. "They are being paid obscene amounts", goes the cry. Top bankers have themselves said that pay has been "grotesque".  View Article
ECB releases final Recommendations for the security of internet payments, starts public consultation on payment account access services
The ECB released a comprehensive set of "Recommendations for the security of internet payments", following a two-month public consultation carried out in 2012. It is now consulting on draft "Recommendations for payment account access services". Deadline for comments is 12 April, 2013.  View Article
EPC: Early movers on the demand side identify best practice – Part I
The SEPA Regulation effectively mandates migration to SCT and SDD in the euro area by 1 February, 2014. This and the next EPC Blog deliver a 'best of best practice' identified by early SEPA movers on the demand side.   View Article
WSJ: EU aims to free flow of funds across borders
The EU has asked national bank regulators in the 27-nation bloc to explain policies that may be preventing free flows of funds across national borders, the first public step in a campaign by EU authorities to combat fragmentation of the region's financial markets.  View Article
FSA: Pilot findings on interest rate hedging products
This report sets out the FSA's findings from the pilot reviews completed by Barclays, HSBC, Lloyds and RBS. The regulator expects to announce its findings from the pilots of the other banks in the coming weeks. (Includes BBA statement.)  View Article

Securities

ESMA issues guidelines on market-making and primary dealer exemptions
The guidelines are aimed at providing market participants and national supervisors with clarity on the criteria to be met to benefit from a market-making exemption, and the conditions to be used in assessing the notifications.  View Article
Bloomberg: Barnier tells EU lawmakers in letter not to block swaps rules
Michel Barnier told lawmakers to drop a threat to block derivatives rules, saying the plan may harm the EU's credibility and give its global competitors a boost.  View Article
Euromoney: Derivatives market braced for regulatory onslaught
The two main pieces of regulation about to hit European financial markets and the derivatives market, in particular MiFID and EMIR, have sparked fears over their unintended consequences to collateral velocity, liquidity and transparency.   View Article
ISDA response to ESMA's Guidelines for establishing consistent, efficient and effective assessments of interoperability arrangements
ISDA supports the extension of interoperability for central clearing of derivatives, though wishes to emphasise the need for further consultation.  View Article
EACT/Raeburn: The EMIR confrontation between the European Parliament, Commission and ESMA
Raeburn offers some home truths on 'short-sighted' financial regulatory proposals.  View Article
FT: Crunch feared if collateral rules enforced
Regulators want more trades processed through transparent exchanges and cleared through "central counterparties", back office institutions that stand between two parties in a trade, ensuring they are completed even if one side defaults.  View Article
FSA/Lawton: Four building blocks of efficient capital markets
In his speech, Lawton provided an overview of some of the key areas the FSA is working on to support capital markets, both at a domestic and European level.  View Article

Insurance

Risk.net: Solvency II transitional measures come under fire
Measures to phase in Solvency II's capital requirements will increase the costs of implementation and load additional administrative burdens on insurers, experts say.  View Article
FT: Solvency II cost branded 'indefensible'
A senior British financial regulator has acknowledged insurance companies have been burdened by what he called the "shocking" costs of a planned overhaul of EU rules that has been subject to delays.  View Article
Risk.net: Solvency II delays limiting internal model growth, head of op risk warns
Reticence among certain insurers to quantify operational risk is also to blame for lack of progress in model development. Delays in Solvency II are leading to the stunted growth of internal models for the insurance sector, Axa's global head of operational risk has warned.  View Article
Risk.net: Solvency II capital tests not part of augmented ICAS regime, FSA confirms
UK insurers will not be required to adopt a Solvency II balance sheet in the first wave of changes to the FSA's insurer capital adequacy standards (ICAS) regime, the regulator has confirmed.  View Article
FT: Brokers warn over EU disclosure plans
UK insurance brokers say European regulators' plans to force them to tell customers how they are paid threatens their ability to compete with underwriters that sell directly to consumers.   View Article
FSA: Insurance conduct supervision newsletter
With a focus on conduct, this publication aims to update all retail life and general insurers and the London market on the work of FSA supervision departments, some of the key cross-sectoral regulatory initiatives that affect insurers, and relevant policy developments.  View Article
PropertyCasualty360: Bermuda will not adopt Solvency II requirements for captives, says BMA
Bermuda, the world's leading domicile for captive insurers, will not apply Solvency II equivalency to the captive businesses domiciled there, announced the Bermuda Monetary Authority on Tuesday.   View Article

Asset Management

IPE: Brussels releases early draft of Green Paper on long-term investing
According to a draft of the European Commission's Green Paper on long-term investing, the EU may seek preferential treatment for certain types of long-term asset classes in Solvency II and the proposed new solvency rules for occupational pension funds.  View Article
EFAMA response to ESMA's consultation paper on guidelines on key concepts of the AIFMD
EFAMA believes that ancillary investors – only required to set up the structure – should not be taken into account when determining whether or not an entity raises capital from a number of investors.  View Article
EFAMA response to ESMA's consultation paper on draft RTS on types of AIFMs
EFAMA understands that the proposed definition of "closed‐ended" and "open‐ended" funds should only apply in the context of the AIFMD. This definition does not apply to UCITS, for which the UCITS Directive also contains investment rules that distinguish open‐ended and closed-ended funds.  View Article
IPE: AIFMD must clarify 'day-to-day control' for real estate
According to INREV, the AIFMD must clarify the requirement for day-to-day control over portfolio assets to avoid penalising real estate joint ventures with an inappropriate structure.  View Article
Bloomberg: Cameron demands risk UK becoming hedge fund island for Merkel
In the German view, Cameron's determination to protect the financial services powerhouse in London and tame what he sees as the bureaucratic leviathan known as the European Union risks turning his country into an island of hedge funds. (Includes quote from Graham Bishop.)  View Article
IPE: Accounting rules could force pension funds to review hedging strategies
Changes in hedge accounting rules within the new IFRS 39 financial instrument standards could force pension funds to alter their hedging strategies.   View Article
IPE: Polish pension funds playing greater role in equity financing
According to a report by the KNF, the Polish financial sector regulator, which analysed the funds' investment activities over the three-year period to the end of the third quarter of 2012, Poland's 14 second-pillar pension funds (OFEs) are becoming increasingly important institutional investors.  View Article

Corporate Governance/Accounting

FRC consults on proposals to improve the auditor's report
The FRC responded to criticism that auditors' reports are uninformative by issuing a Consultation Paper: Revision to ISA (UK and Ireland) 700. The Consultation period ends on 30 April, 2013.  View Article
Telegraph: Audits may need to flag risks and disagreements
Accountancy firms could be forced to warn investors of risks at the companies they audit, as part of a comprehensive overhaul proposed by the industry's regulator.  View Article
FEE publishes paper on auditor independence provisions
In the Paper, FEE provides a summary of key differences between the EU frameworks of Auditor Independence provisions (in the 2006 Statutory Audit Directive and the 2002 EC Recommendation on Statutory Auditor's Independence in the EU) and global independence standards of the Code of the IESBA.  View Article
EFRAG/National Standard-Setters: Strategy on the revision of the IFRS Conceptual Framework
EFRAG and the National Standard-Setters of France (ANC), Germany (ASCG), Italy (OIC) and the UK (FRC) are collaborating to investigate aspects of the Conceptual Framework they believe are particularly significant to European constituents.  View Article
IASB/IFRS Foundation publishes feedback statement following public consultation on creation of the ASAF
The responses to the consultation revealed a high level of support for establishing the Accounting Standards Advisory Forum, as a means of securing a more streamlined and effective dialogue between the IASB and the global accounting standard-setting community.  View Article
EFRAG: Draft Comment Letter on sale or contribution of assets between an investor and its associate or joint venture
EFRAG issued its draft comment letter on the IASB's Exposure Draft, Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Proposed amendments to IFRS 10 and IAS 28). Comments are invited on the letter by 20 March, 2013.  View Article
ACCA: New EU Action Plan on company law and corporate governance
ACCA asks if we are moving towards a more modern set of rules for more engaged shareholders and sustainable companies; or if we are seeing the death of European IPO markets, being overtaken by the emerging economies.  View Article
FASB: Post-implementation review of FASB standard on accounting for income taxes
The FAF will conduct the next post-implementation review (PIR) of a 1992 accounting standard focusing on accounting for income taxes.  View Article
FASB issues ASU dealing with reporting reclassifications out of accumulated other comprehensive income
The FASB issued Accounting Standards Update No 2013-02, 'Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income', to improve the transparency of reporting reclassifications out of accumulated other comprehensive income.  View Article
FASB: Clarification of disclosures that apply to balance sheet offsetting of assets and liabilities
The FASB issued an Accounting Standards Update, 'Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities'. The Update clarifies the scope of transactions that are subject to the disclosures about offsetting.  View Article

Financial Services Policy

VP Šefčovič: "Regulatory burden - Why Europe needs to get smarter to do better"
"We need to be smart in the way we regulate – to see what works and what does not, to understand that one size does not necessarily fit all, and to embrace the modern technological advances that allow us to do things better."  View Article

European Council/Parliament

President Van Rompuy Report: "The European Council 2012"
In this publication, President Herman Van Rompuy looks back at the European Council's activities in 2012 and provides his personal account of the main decisions taken by European leaders during the past year.  View Article

Graham Bishop’s Articles and Speeches

Financial World: Bumps on the EU road (Graham Bishop article)
From deadlock over the 'two-pack' to the debate over 'Brexit'... Graham Bishop sees plenty of potential upsets on the EU agenda.  View Article

Financial Services Month in Brussels - Report

January 2013 Financial Services Month in Brussels - Report
The incoming Irish Presidency set out its plans for the next six months, including enhanced economic governance and policy coordination, and taxation. The EP in Plenary voted for a "careful pooling of sovereign debt" - their options include the possibility of 'Bishop Bills'.  View Article





© Graham Bishop

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