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18 April 2013

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

Banking

Plenary Session: Parliament votes reform package to strengthen EU banks
Changes voted by Parliament on Tuesday will cap bankers' bonuses to curb speculative risk-taking, step up capital provisions to help banks cope better with crises, and stiffen supervision.  View Article
ECON Committee: EU Bank Capital Requirements Regulation and Directive
This background note looks i.a. at why the new rules have been set out in two legal instruments - a regulation and a directive - and how they have changed compared to the previous rules in force. (Includes link to further explanatory note by EPP/Köster.)  View Article
President Barroso/Commissioner Barnier: Statement following EP's approval of new rules to impose stronger prudential requirements on banks
"The new framework will make EU banks more solid and will strengthen their capacity to manage properly the risks linked to their activities, and absorb any losses they may incur in doing business while still preserving the financing of the real economy", said Barnier.  View Article
EP President Schulz: New bank rules will help avert future crises
"Today's vote marks a milestone in our efforts to make the financial system more secure and transparent. It is good news for hundreds of millions of savers in Europe and across the world."  View Article
EBF: Europe's banks say EU capital requirements fall short of fully achieving a Single Rulebook
EBF welcomes the adoption by the EP of the compromises previously agreed with the Council over the final shape of CRR/CRD IV. The EBF understands that the Parliament is aiming for an entry into force of the new regime on 1.1.2014, once the Council has formally given its approval.  View Article
ALDE/Bowles: Strengthening EU banks and curbing excessive bonuses
"After more than 30 rounds of negotiations, this agreement will make our banking sector more resilient and brings us in line with international standards."  View Article
EPP: Banking Regulation - No more taxpayers' money to prop up banks
"The new single rule book for all 8,200 banks in the EU is the foundation on which the house of the Banking Union is to be built. The single supervisory mechanism will be the roof. As walls to the house, we must now feed in the resolution framework for banks and the deposit guarantee schemes", said CRD rapporteur Karas.  View Article
Greens/Lamberts: EP caps bank bonuses and improves accounting transparency with new legislation
"The legislation will also provide for additional capital requirements for banks deemed 'too big to fail'. In addition to the minimum requirements (10.5 per cent), these bloated banks will be required to maintain additional capital of up to 3.5 per cent."  View Article
Basel Committee reports to G20 Finance Ministers and Central Bank Governors on Basel III implementation
BCBS has today published its Report to G20 Finance Ministers and Central Bank Governors on monitoring implementation of Basel III regulatory reform. The report will be considered at the meeting of G20 ministers and governors in Washington DC on 18-19 April.   View Article
FCA Statement on CRD IV
The FCA sets out its planned timetable for implementation of the legislative package, and is intending to undertake two consultations on elements of the framework.  View Article
Joint Committee report on risks and vulnerabilities in the European Union's financial system
The near-term risks to the EU financial system from the euro area debt crisis, especially bank funding, have generally abated with improving market confidence. On the other hand, financial institutions, in particular banks, remain vulnerable to a sudden switch in sentiment.  View Article
IOSCO consults on Principles for Financial Benchmarks
IOSCO published a consultation paper on Principles for Financial Benchmarks, which seeks public comments on a set of high-level principles for benchmarks used in global financial markets. The closing date for responses is 16 May, 2013.  View Article
EBF publishes recommendations on EBA Stress-Testing exercises
EBF sees stress-testing as a tool that should deliver additional information as to the resilience of the banking system, without raising unnecessary doubts on the continued progress shown by the industry on the way to stability.  View Article
Cerutti & Schmieder: Ringfencing and consolidated bank stress tests
This column discusses research into the shortcomings that arise from 'ringfencing', i.e. the implicit or explicit regulations that hope to favour domestic markets. Notably, ringfencing could significantly increase some banks' capital needs.  View Article
Framework on monitoring tools for intraday liquidity management issued by the Basel Committee
BCBS, in consultation with the Committee on Payment and Settlement Systems, issued its final version of the document, 'Monitoring tools for intraday liquidity management'.   View Article
EPC launches public consultation: Improving the Efficiency of the Handling of Cash - Cash Cycle Models
The objective of the consultation is to ensure that the document 'Improving the Efficiency of the Handling of Cash - Cash Cycle Models' correctly describes existing practices established between commercial cash cycle participants and national central banks. Responses are invited by 14 July, 2013.  View Article
ECB/Cœuré: Harmonising cashless payments - The SEPA experience
In his speech, Cœuré said that SEPA and Europe's retail payments integration were affecting initiatives for integration at global level, and that international initiatives such as the IPFA saw SEPA as a blueprint for developing multi-currency schemes for non-urgent cross-border payments.  View Article
Speaking points by VP Rehn at the press conference of the informal ECOFIN Council
Rehn reiterated the importance that the Commission as a whole attaches to Banking Union, and stressed that Banking Union also encompasses the possibility for direct recapitalisation of banks by the ESM. (Includes link to speaking points following the Eurogroup meeting.)  View Article
Irish Times: Berlin open to medium-term treaty change on banking union
Mr Schäuble insisted that banking union – the plan for an integrated financial landscape to avoid another European crisis – would not be possible without further changes to European treaties.  View Article
ALDE/Verhofstadt: "Merkel and Schäuble are condemning the eurozone to death by a thousand cuts"
The ALDE group leader expressed his disbelief at remarks by the German finance minister that, despite agreeing to let the Single Supervisory Mechanism go ahead, no further progress on banking would be possible until the EU has overhauled its Treaties.  View Article
CEPS/Gros: The meaning of Cyprus - Moving towards banking union?
While acknowledging that Cyprus is too small to matter for global financial markets, this Commentary finds that its case could turn out to become a very important precedent for the way European policy-makers deal with future banking problems and the plans for a 'banking union'.  View Article
ECB opinion on the Deposit Guarantee Fund in Spain
The ECB has criticised Spain's plans to use a deposit guarantee fund intended to back up savers to compensate investors in some risky bank debt for losses made when the financial sector was bailed out.  View Article
CEPS/Gros: Principles of a two-tier European Deposit (Re-)Insurance System
This note proposes to apply the principles of subsidiarity and re-insurance to deposit insurance: Existing national DGSs would continue to operate much as before, but they would be required to take out re-insurance against risks that would be too large to be covered by them.  View Article
Paul N Goldschmidt: Reforming the banking market
It is both necessary and equitable to impose further limits on Deposit Guarantee Schemes, writes Goldschmidt.  View Article
Bruegel: Europe's banks need to be recapitalised – now
Comprehensive action is needed to break the mutually reinforcing links between limited productivity, slow deleveraging, weak banking sectors and distorted relative prices.  View Article
Simon Wren-Lewis: The ECB as a Lender of Last Resort to governments
Wren-Lewis looks at how OMT conditionality should operate. One possibility is that the ECB imposes at least as harsh conditions as the current Troika. Alternatively, the ECB passes responsibility for imposing conditions to the Troika, and the Troika continues to do what it has already done.  View Article
AGB/Fitschen stresses strength of the universal bank
"We will continue to campaign for the preservation of the universal bank - at national and international level", said Jürgen Fitschen, the new President of the Association of German Banks.  View Article

Securities

ESMA finds divergence in national supervision of money market funds
ESMA has published a peer review report examining whether EU securities supervisors correctly apply ESMA's guidelines on money market funds (MMFs).  View Article
IMF: A new look at the role of sovereign credit default swaps
The IMF has released a damning report criticising the European ban on purchases of naked sovereign CDS (SCDS). It not only questions the fundamental premise that CDS trading contributes to market volatility, but asserts that even if it does there are more effective ways to mitigate this.  View Article
FT: Naked CDS ban fuels bank funding fears
Six months on from the ban on buying naked sovereign CDS protection – where the investor does not own the underlying government bond – it is clear that negative bets against large financials have emerged as a partial replacement.  View Article
IPE: OTC derivative margins cause imperfect hedging
Margin requirements set for derivatives trades could result in imprecise hedging arrangements if fund managers were to take measures to counteract the extra costs they would entail, a new report by Moody's has warned.   View Article
Reuters: European authorities tussle over securitisation
European regulatory authorities are tussling over whether to revise rules on securitisation, as tensions over financing the real economy, SME lending and a seven-year old crackdown on the insurance industry play out.  View Article

Insurance

European Commission: Strengthening Europe's preparedness against natural and man-made disasters
The European Commission presented a package consisting of two parts. This public consultation launches a wide debate on the adequacy and availability of existing insurance options. The Green Paper public consultation is open until 30 June, 2013. (Includes Insurance Europe comment.)  View Article
Risk.net: Van Hulle: Long-term investment agenda must not side-track Solvency II
Solvency II should not be side-tracked by politicians' efforts to encourage insurers to invest in infrastructure projects and other long-term assets, warns Karel Van Hulle, the former head of insurance at the European Commission.  View Article
Risk.net: 'Flawed' standard formula currency risk calibration needs revision - Insurance Europe
Current specification is ‘counter-intuitive’, say industry experts. Insurance Europe, the pan-European industry trade body, is lobbying policy-makers to revise the standard formula's calibration for currency risk in light of evidence that the present methodology is not fit for purpose.  View Article
Risk.net: Solvency II set for inconsistent soft launch, lawyers warn
Absence of legal powers to enact guidelines in some jurisdictions threatens EIOPA's objectives. Unequal powers of national regulators and legal limits to enforcement are likely to result in a patchy implementation of the interim rules for Solvency II, legal experts are warning.  View Article
Risk.net: Insurers fear non-recognition of equivalence under Solvency II interim reporting requirements
European insurance groups with third-country operations have expressed concerns that reporting requirements featured in draft Solvency II interim measures may not allow them to take proper account of equivalence assumptions.  View Article

Asset Management

Commissioner Barnier: Meeting the challenge of Europe's long-term financing needs - a pre-requisite for jobs and growth
Speaking at the Eurofi High Level Seminar, Barnier said that banks would continue to play an important financing role in Europe but a more diversified system needed to be ensured, with higher shares of direct capital market financing and greater involvement of institutional investors.  View Article
EDHEC-Risk Institute study illustrates that short-term risk control is not incompatible with long-term investment performance
The publication, "Hedging versus Insurance: Long-Horizon Investing with Short-Term Constraints", demonstrates that failing to separate long-term risk-aversion and short-term loss aversion may lead to poor investment decisions.   View Article
ALFI: Principles for sound stress-testing practices
At the occasion of the ALFI - ALRiM Risk management conference on 17th April in Luxembourg, ALFI published its guidelines on Principles for sound stress-testing practices.  View Article
IPE: Brussels unlikely to base IORP on any of three QIS scenarios
Towers Watson has said that Brussels is unlikely to draft a revised IORP Directive using any of the three scenarios set for the holistic balance sheet approach (HBS), as it would lead to an economically unaffordable regime for European occupational pensions.  View Article
PEGCC releases whitepaper highlighting the interdependence between private equity and pension funds
This report highlights the significant amount of capital that pension funds commit to private equity, and the financial gains they receive from the outperformance of these investments.  View Article
NAPF: EU pension rules could send UK pension funds £450 billion into the red
The National Association of Pension Funds warned that moving to Solvency II-type rules for pensions would put a huge burden on remaining UK final salary pension schemes and the businesses that run them.  View Article
FT: UK pension deficits set to rise by £100 billion
UK companies reporting annual results are expected to report an increase of more than £100 billion in their aggregate pension scheme deficits.  View Article
IPE: Cyprus may revoke deposit protection for institutional clients
According to consultancy Aon Hewitt, provident funds and pension funds in Cyprus are highly unlikely to be given full security by the country's government and are bound to sustain some damage following the high price of the recent €10 billion bank bailout.  View Article
Stewart Fleming: Funding crisis for Europe's SMEs threatens recovery
Credit continues to contract, starving the small and medium-sized businesses that are vital to the European recovery, writes Fleming in this European Voice article. (Includes quote from Graham Bishop.)  View Article

Corporate Governance/Accounting

FEE comments on corporate governance framework in the EU
FEE issued a comment letter to the EC on the Main Initiatives of the Action Plan: European company law and corporate governance - a modern legal framework for more engaged shareholders and sustainable companies.  View Article
IFAC: IPSASB publishes Public Sector Conceptual Framework ED
The IPSASB released for comment the fourth ED related to its project to develop a Conceptual Framework for the general purpose financial reporting of public sector entities. Comments on the ED are requested by August 15, 2013.  View Article
EFRAG: Joint Bulletins in relation to the revision of the IFRS Conceptual Framework
EFRAG and the National Standard-Setters of France, Germany, Italy and the UK published the first three Bulletins on the IFRS Conceptual Framework, dealing with Prudence, Reliability of financial information, and Uncertainty. Comments are invited by 5 July, 2013.  View Article
FEE comments on IPSASB ED on the conceptual framework
FEE issued two comment letters on the IPSASB's ED on the Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities. The first letter deals with measurement of assets and liabilities, the second relates to elements and recognition in financial statements.  View Article
IFAC applauds release of International Integrated Reporting Framework
IFAC welcomed the release of the proposed International Integrated Reporting Framework by the IIRC. The Framework is expected to be a critical tool for businesses as they create integrated reports and drive integrated thinking in their organisations.  View Article
FASB seeks public comments on private company decision-making framework
The FASB, along with the PCC, issued an Invitation to Comment: 'Private Company Decision-Making Framework: A Guide for Evaluating Financial Accounting and Reporting for Private Companies', seeking stakeholder input on the proposed private company decision-making framework by June 21, 2013.  View Article
BUSINESSEUROPE: Corporate social responsibility must remain business-driven
BUSINESSEUROPE does not share the European Commission's assessment that there has been a market and regulatory failure in the area of CSR reporting, which would justify obliging companies to disclose non-financial information.  View Article
EIOPA publishes response on classification and measurement according to limited amendments to IFRS 9
EIOPA commented on the IASB's ED 'Classification and Measurement: Limited Amendments to IFRS 9'. EIOPA's view is generally supportive of the proposals in the ED.  View Article
EFRAG commented on classification and measurement under limited amendments to IFRS 9
EFRAG published its comment letter in response to the IASB's ED Classification and Measurement: Limited Amendments to IFRS 9 (ED/2012/4).   View Article
EFRAG: Final comment letter on novation of derivatives and continuation of hedge accounting
EFRAG published its final comment letter on the IASB's ED Novation of Derivatives and Continuation of Hedge Accounting (Proposed Amendments to IAS 39 and IFRS 9).  View Article
EBF: Joint statement in view of the EP JURI vote on the draft report on the proposed regulation on audit
EBF, BUSINESSEUROPE, AFME, ecoDa, ESF, AMCHAM EU and TBC urged the EP to support changes to the Commission's proposals that respect the global nature of the capital markets and the international marketplace in which companies subject to the proposed Regulation are operating.  View Article
FEE comments on the role of the audit committee in external auditor oversight
FEE issued a comment letter to the CICA on the CICA-CPAB Discussion Paper, "Enhancing Audit Quality: Canadian Perspectives - The Role of the Audit Committee in External Auditor Oversight".  View Article
FT: Banks lobby against auditor rotation
Lloyds Banking Group and Royal Bank of Scotland are campaigning to retain their audit firms for as long as they like, in the face of regulatory proposals that could limit the relationship to as little as seven years.  View Article
Anthony Catanach: It is time to audit our auditors
Investors can view today's global capital markets as secure only if they trust the financial statements issued by publicly traded companies, writes Catanach in this FT article.  View Article
FEE comments on acquisition of an interest in a joint operation
FEE issued comments to EFRAG on EFRAG's comment letter on IASB ED on Acquisition of an Interest in a Joint Operation.  View Article
EFRAG's final comment letter on sale or contribution of assets between an investor and its associate or joint venture
EFRAG published its comment letter on the IASB's ED 2012/6 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Proposed amendments to IFRS 10 and IAS 28).  View Article
EFRAG: Final comment letter on equity method - share of other net asset changes
EFRAG published its final comment letter to the IASB on the IASB's ED/2013/3 'Equity Method: Share of Other Net Asset Changes'. EFRAG disagrees with the proposed amendments and believes the IASB should clarify the principles underlying the application of the equity method.  View Article
EFRAG call for information: Rate-regulated regimes
EFRAG is asking European constituents to share with EFRAG, by 30 May 2013, their practical experiences with rate-regulated regimes currently in force in Europe.  View Article
EFRAG: Final comment letter on acceptable methods of depreciation and amortisation
EFRAG published its final comment letter to the IASB on its ED Clarification of Acceptable Methods of Depreciation and Amortisation (Proposed Amendments to IAS 16 and IAS 38).  View Article
EFRAG's draft comment letter on financial instruments - expected credit losses
EFRAG has issued its draft comment letter to the IASB on its ED 'Financial Instruments: Expected Credit Losses', seeking feedback from its constituents. Comments are invited on the letter by 17 June, 2013  View Article
EFRAG: Joint field test on the IASB's expected credit losses model for financial instruments
EFRAG, ANC, ASCG, FRC and OIC launched a field test on the IASB's expected credit losses model for financial instruments. Additionally, the following European associations have agreed to encourage their members to participate: EBF, ESBG, EACB, Leaseurope and BusinessEurope.  View Article
FASB seeks public comments on recognition and measurement of financial assets and financial liabilities
The FASB issued an ED: 'Financial Instruments—Overall (Subtopic 825-10) Recognition and Measurement of Financial Assets and Financial Liabilities as proposed amendments to the FASB Accounting Standards Codification'. Deadline for comments is May 15, 2013.  View Article
ACCA: Transparency on public spending
The Whole of Government Accounts (WGA), published by the Treasury, shine a spotlight on public spending in the UK, but ACCA believes this important financial document can bring better benefits for financial decision-making across Government.  View Article

Financial Services Policy

Spanish Government creates Independent Fiscal Responsibility Authority
The Vice-President of the Government, Ms Sáenz de Santamaría, said that the new legislation introduces supervisory and transparency mechanisms in the fiscal policies of Spanish public authorities and complies with the European Directive establishing the need to have independent fiscal institutions.  View Article
Reuters: Bankers count on watered-down EU trading tax
Bankers are confident they can persuade the European Union that its proposed financial trading tax poses enough risks to struggling economies and banks to warrant being watered down.   View Article
Citigroup: European Financial Transaction Tax - No time to procrastinate
Citigroup believes the FTT holds the potential to rock European financial markets to the core, with arguably the most concerning aspect of the proposal being also the most obscure: its effect on the repurchase agreement, or repo, market.  View Article
EACT/Raeburn: Financial Transaction Tax - Will the politicians ever get it?
Amidst all the fire and brimstone associated with political debate about the FTT, what the politicians have chosen to overlook is what is arguably a much more serious aspect of the banking system: much of the economic behaviour of banks looks distinctly oligopolistic.  View Article

European Council/Parliament

Plenary Session: Bolder and more accountable ECB needed to fight eurozone crisis
The ECB should do more to ensure that its cheap loans to banks are being passed on to the real economy, and the ECB itself must become more transparent and accountable in line with its growing role in the eurozone crisis, says a resolution adopted by MEPs on Wednesday.   View Article
Plenary Session: MEPs push for a different ECB to tackle the eurozone crisis
The ECB must do more to help the real economy, a majority of MEPs urged its President Mario Draghi on Tuesday. Some even advocated revising the EU Treaty to enlarge the ECB's scope for action.   View Article
ECON Committee: Public consultation on the coherence of EU financial services legislation
The ECON Committee is launching a public consultation on ways to enhance further the coherence of EU financial services legislation. Deadline for comments is 14 June, 2013.  View Article





© Graham Bishop

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