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26 January 2012

This week in "Brussels"
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Articles from 19 January 2012 - 26 January 2012

Banking

ECON debate on the draft report on CRD IV/CRR
Rapporteur Karas stressed that since the adoption of Basel III there have been several developments that are relevant for CRD IV. The decision of increasing to 9 per cent the Tier one capital by June 2012 is one of the key elements that should additionally be considered when debating CRD IV/CRR.   View Article
EBA published responses to two consultation papers: The Incremental Default and Migration Risk Charge / Guidelines to the Stressed VaR
Certain respondents argue that for an international bank with many legal entities, the requirement to identify and calculate a separate Stressed VaR period for each legal entity puts a burden on system capacity, especially for institutions that calculate their Stressed VaR using full revaluation.  View Article
BIS: The need for effective international collaboration in times of financial stress
Collaboration between financial authorities has never been so testing and important. We face key coordination challenges in the area of financial regulation, with respect to the consistency of the calculations of risk-weighted assets, the treatment of sovereign exposures, and liquidity standards.   View Article
FSB completes peer review of Switzerland
The peer review examined the steps taken by the Swiss authorities to address FSAP recommendations on regulatory and supervisory issues in the following areas: banking and supervisory framework; banking supervision; (re)insurance regulation and supervision; and pension regulation and supervision.  View Article
FSA Martin Wheatley: My vision for the Financial Conduct Authority (FCA)
In a speech given at the BBA, future FCA CEO Wheatley focused on regulation in future, and movement away from a reliance on orthodoxies that have failed. He explained the cultural change that is needed in firms and at the regulator, and looked at how the new model may work in practice.  View Article
EDHEC-Risk Institute: 'Fundamental Indexation: Rebalancing Assumptions and Performance'
In this article, the authors investigate the impact of the choice of a rebalancing date on index performance. It is shown that the performance of fundamental indices is highly sensitive to the choice of the annual rebalancing date.  View Article
World Bank: Is the financial safety net a barrier to cross-border banking?
The results in this paper suggest that an international bank's cost of funds raised through a foreign subsidiary is 1.5–2.4 per cent higher than the cost of funds for a purely domestic bank.   View Article
FT: Paris and Berlin seek to dilute bank rules
A joint paper by Wolfgang Schäuble, German finance minister, and his French counterpart, François Baroin, will call for important elements of the Basel III rules to be watered down to mitigate any "negative effect" on growth.  View Article
EPC publishes version 6.0 of the SEPA Cards Standardisation Volume - Book of Requirements.
The work of the European Payments Council (EPC) and the Cards Stakeholders Group (CSG) continues to focus on a cards standardisation programme for a better, safer, more cost-efficient and functionally richer card services environment, whatever the card product or scheme may be.   View Article
Commissioner Almunia: Competition policy in the banking sector
According to the EC figures, since 2008 EU governments have used a total of €1.6 trillion to rescue their banks. Around three quarters of the total amount were guarantees, and the rest was given as public capital injections and treatment of impaired assets.  View Article

Securities

ECON Committee public hearing on CRAs
Stepping up supervision of credit rating agencies could help to eliminate their conflicts of interest, but obliging companies to "rotate" their use of them could actually reduce competition among agencies, argued experts at this public hearing.  View Article
EMIR: Political agreement on ESMA powers reached at ECOFIN
At the ECOFIN Council meeting, EU finance ministers reached a political agreement on ESMA powers paving the way for the final adoption of EMIR in February.  View Article
ESMA launches a consultation on short selling and CDS
ESMA published for consultation the draft technical standards, inviting comments by 13 February, 2012.  View Article
ESMA publishes a speech by Verena Ross on CRAs
Ms Ross stressed that ESMA might find itself in the uncomfortable position of pursuing possible conflicting objectives such as ensuring the stability and the competition of the securities markets at the same time.  View Article
Letter to Commissioner Barnier, ECON chair Bowles and ECOFIN chairman Corydon, regarding European Supervisory Authorities (ESAs)
AFME, AIMA, EACH, EBF, FOA, ICMA and ISDA wrote in the context of the leading role played by the addressees in the adoption of financial services legislation in each of the three main EU institutions.  View Article
IOSCO published follow-on analysis to the report on trading of OTC derivatives
The report describes the different types of trading platforms currently available for the execution of OTC derivatives transactions in IOSCO member jurisdictions. Where possible, it also notes the differences relating to participant, product and geographic coverage.  View Article
VoxEU: The fallacy of moving the OTC market to central counterparties
This article argues that current proposals for centralised counterparties are misguided. Instead of reducing risk in the notorious over-the-counter derivatives markets, they may simply shift it around. It calls for tax on the derivative liabilities of large banks to tackle the problem at its source.  View Article
Speech by the Financial Secretary to the Treasury, Mark Hoban MP, to the London Stock Exchange; MiFID
Mr Hoban talked about the European regulatory reform, MiFID and domestic regulation.  View Article
FT: Barnier provides hope for DB-NYSE
Deutsche Börse and NYSE Euronext have been given some hope of mustering support to save their merger after Europe's leading financial regulator moved to reserve his right to oppose a recommendation to block the tie-up of the German and US exchange operators.  View Article
Bloomberg: NYSE Euronext and Deutsche Börse said to lack support to overturn EU veto
NYSE Euronext and Deutsche Börse AG are unlikely to garner enough support from European Union commissioners to overturn a looming veto over their plan to create the world's largest exchange.  View Article
FN: Clearing industry embraces stress tests
Europe's clearing houses have published what is thought to be the first set of guidelines for stress-testing the sector, in a bid to ensure that these increasingly critical pieces of market infrastructure are able to withstand large-scale shocks to the financial system.  View Article
IMF Working Paper: 'Pricing of Sovereign Credit Risk: Evidence from Advanced Economies during the Financial Crisis'
The study investigates the pricing of sovereign credit risk over the period 2008-2010 for selected advanced economies by examining two widely-used indicators: sovereign credit default swap (CDS) and relative asset swap (RAS) spreads.  View Article
IMF investigation into the impact and accuracy of sovereign ratings
The study finds that credit rating agencies' opinions have an impact on the cost of funding of sovereign issuers, and consequently ratings are a concern for financial stability.  View Article

Insurance

Reinsurance trade groups warn of damage caused by protectionist regulations
Protectionist reinsurance regulations which try to impose limits on global risk distribution via reinsurance, such as those recently introduced in Argentina and Brazil, will backfire, according to a coalition of international reinsurance trade groups.  View Article
ICMA AMIC Solvency II Working Group submits response to EIOPA Consultation Paper
The working group believes that Solvency II requirements should take into account the global context in which the asset management industry works in and would urge EIOPA to consider international convergence of regulatory requirements with any other European legal or regulatory requirements.   View Article

Asset Management

IMA says UK is a major domicile of alternative investment funds
Responding to the FSA discussion paper, IMA said that the UK is a major domicile of AIFs: the IMA estimates around 2,000 AIFs in the UK, and a similar number sold from outside the EU into the UK. These funds deploy a wide range of investment strategies, investing across asset classes and regions.  View Article
FSA Discussion Paper: Implementation of the Alternative Investment Fund Managers' Directive
The FSA prepared the discussion paper to set out some provisional thinking in its approach to implementing the Alternative Investment Fund Managers Directive (the Directive or AIFMD) in the UK.  View Article
UCITS in Ireland
Ireland presents the international investment funds industry with an unparalleled set of attractions, both as a domicile for UCITS and for the enterprises providing services to them.  View Article
ALFI annual review
There was also a heavy regulatory agenda in 2011, with a number of new rules coming into being, including UCITS IV and AIFMD. Luxembourg was well prepared and the process of transposing each into national law is either already completed or well underway.   View Article
IPE: Institutionals warming to hedge funds, but raising standards
Institutional investors' appetite for hedge funds has grown in recent years, but they have taken more time to allocate to the asset class as their expectations of asset managers increases.  View Article
IPE: European institutionals 'immature' in assessing high-yield bond risk
European investors are still "immature" when assessing risk in the high-yield bond sector, but their rapid move into investment-grade debt should help them to "think rationally" about the asset class, according to Threadneedle.  View Article
FT: Private equity profits called into question
Private equity has proved better at enriching its own managers than producing investment profits for US pension funds over the past decade, according to a study prepared for the Financial Times by academics at Yale and Maastricht University.  View Article
IPE: EIOPA unveils timetable for 'holistic balance sheet' impact studies
The European Insurance and Occupational Pensions Authority, just six weeks after it received 3,000 pages of submissions from 170 bodies, is set to make a decision on the next stage of assessment on its 'holistic balance sheet' proposal for many of Europe's 100,000+ occupational pension funds.  View Article
FN: Pension funds fear EU political snub
German pension funds last week joined the opposition to the EU's proposed new rules for the industry on insolvency, but fear their politicians will ignore the protests in order to please their allies in France.  View Article
Government consults on GMP equalisation - NAPF comment
The National Association of Pension Funds (NAPF) commented on the Department for Work and Pension's launch today of a consultation on equalising for the effect of the Guaranteed Minimum Pension.  View Article

Corporate Governance/Accounting

EFRAG's letter to the European Commission on IFRS 13 adoption
EFRAG completed its due process regarding IFRS 13 Fair Value Measurement (as issued by the IASB in May 2011), and submitted its Endorsement Advice Letter and Effects Study Report to the European Commission.  View Article
IASB: Hans Hoogervorst's address at Ernst & Young IFRS seminar in Moscow
On 23 January 2012, Hans Hoogervorst, Chairman of the IASB, addressed the Ernst & Young IFRS seminar in Moscow, Russia. He focused on the IFRS roadmap, prospects for global standards, and support for emerging economies.  View Article
ACCA: Financial discipline should be accompanied by growth-boosting policies for the eurozone
The main challenge for economic governance policy is to strike the right balance between discipline, accountability, growth and solidarity, says the global accountancy body.  View Article
EFRAG's letter to the European Commission on amendments to IAS 12
EFRAG completed its due process regarding the Amendments to IAS 12 Deferred Tax: Recovery of Underlying Assets (‘the Amendments’), and submitted its Endorsement Advice Letter and Effects Study Report to the European Commission.  View Article
FASB's proposal for impairment of indefinite-lived intangible assets
The FASB issued for comment a proposal on indefinite-lived intangible asset impairment testing that is intended to simplify impairment assessment and reduce the recurring costs, to comply with existing guidance while improving the consistency of testing methods among long-lived asset categories.  View Article
EFRAG expects to issue an invitation to comment on its initial assessments of IFRS 10, IFRS 11 and IFRS 12
EFRAG expects to approve an invitation to comment on its initial assessments of IFRS 10, IFRS 11, IFRS 12, IAS 27 (amended 2011) and IAS 28 (amended 2011) at a conference call meeting on 31 January 2011, and issue its assessments for public consulation with a comment period until 8 March, 2012.  View Article
EFRAG: Draft comment letter on the IASB's ED Revenue from Contracts with Customers
EFRAG published its draft comment letter on the IASB's ED 'Revenue from Contracts with Customers'. Comments are invited on the letter by 9 March, 2012.  View Article
FT: No accounting by taste
FT published a remedy for the deep flaws in how banks' worth is measured that could be caused by banks' pressure on the accounting standards boards to relax rules on “fair-value accounting”.   View Article
EFRAG: Draft comment letter on the IASB ED Transition Guidance
EFRAG published its draft comment letter on the IASB Exposure Draft 'Transition Guidance (Proposed amendments to IFRS 10)'.  View Article
EFRAG: Final comment letter on the ED Government Loans (Proposed Amendments to IFRS 1)
EFRAG published its comment letter to the IASB on the Exposure Draft 'Government Loans (Proposed Amendments to IFRS 1)'.  View Article
EFRAG: Final comment letter on the IASB's ED Investment Entities
EFRAG acknowledges that the accounting for investment entities has been a significant concern expressed on several occasions by the private equity and venture capital industry. EFRAG supports the IASB's efforts to address these concerns.  View Article
EFRAG's letter to the European Commission on amendments to IFRS 1
EFRAG completed its due process regarding the Amendments to IFRS 1 'Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters', and has submitted its Endorsement Advice Letter and Effects Study Report to the European Commission.  View Article

Financial Services Policy

ECOFIN Council conclusions
The Council updated its position on a draft regulation on OTC derivatives, with a view to concluding negotiations with the European Parliament in first reading. The Council also adopted a decision deeming action taken by Hungary to correct its excessive deficit to be insufficient.  View Article
Commissioner Barnier: The EU needs the UK and the UK needs the EU
Speaking at the City of London, Barnier presented all the legislative initiatives that will be published during the course of 2012. He also said that European leaders were right to reject the so-called "safeguards" in financial services the UK asked for.  View Article
Lib Dem MEP Sharon Bowles re-elected Chair of European Parliament’s Economic and Monetary Affairs Committee
Amid fears that David Cameron's veto had isolated the UK in Brussels, MEPs from across Europe and the political spectrum have today re-elected Liberal Democrat MEP, Sharon Bowles, as Chair of the European Parliament's Economic and Monetary Affairs Committee.  View Article
Eurofinas published a unique report on fraud in consumer lending and data protection
The report examines the different types of fraud in consumer lending, discrepancies between national regulations, how lending institutions detect and fight fraud, the role of databases in this process, the size and extent of the fraud problem, and the data protection obstacles faced.  View Article

European Council/Parliament

ECON Committee: Consideration of draft report on the quality management for European Statistics
MEP Scicluna remarked that the Greek situation had triggered awareness within the EU of the quality of statistics, adding that many of the shortcomings identified were also reflected in the accounting systems of other states that were trying to show their situation in a more positive light.  View Article

Graham Bishop’s Articles

E!Sharp: Time for citizens to curb their government's deficits? (Graham Bishop article)
This is the challenge for 2012: bind into national legislation sensible constraints on elected euro area ministers of finance, or face imminently a future that will probably be very unpleasant.  View Article




© Graham Bishop

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