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06 October 2011

This week in "Brussels"
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Articles from 29 September 2011 - 06 October 2011

Banking

President Barroso: Commission is proposing to Member States a coordinated action to recapitalise banks
As regards bankers' responsibility, Barroso said that the Commission will put forward proposals for personal responsibility by the leaders of financial institutions for wrong-doing that they may cause to society.  View Article
ECON Committee debate on CRD IV
Rapporteur Karas stressed that he will use the EP own initiative report on Basel III as the starting point for his draft report. He is also aware that the European Banking Authority lacks human resources to deal with all the details of CRD IV.   View Article
Commissioner Almunia: The impact of the crisis on the state aid regime for banks
Almunia stressed that the financial sector must be orientated first and foremost towards its core function of meeting the financing needs of firms and households. The Commission is in the process of changing the regulatory landscape for the financial industry. Recent steps include CRD IV and EMIR.  View Article
Tighter rules on capital: Bankers versus Basel
This FT Analysis reports that the industry is preparing a full-on assault on a deal regulators see as the best way to prevent future financial meltdown – and the question is whether the accord will be left with enough teeth.  View Article
BIS: Central banking post-crisis - What compass for uncharted waters?
Bank for International Settlements' Working Papers No 353 is based on tighter integration of the monetary and financial stability functions.  View Article
FT: EU ministers examine bank aid plans
Although the details of the plan are still under discussion, EU ministers meeting in Luxembourg had concluded that they had not done enough to convince financial markets that Europe's banks could withstand the current debt crisis.  View Article
Persaud: Basel III is an overdue step in the right direction
The financial crisis revealed substantive problems that need to be solved, especially in the banking sector. This column argues that Basel III, the new accord on international banking, is an overdue step in the right direction. It should be defended against attempts by bankers and their friends to cut it down, dilute it and postpone it.  View Article
EBA published Q&A report on Guidelines on Article 122a of the CRD
The Q&A document provides answers to technical and interpretive questions, but is also aimed at encouraging market participants to create a more transparent and uniform securitisation market.  View Article
EPC survey on existing direct debit schemes confirms: SEPA direct debit (SDD) model preferred by almost 75% of direct debit users today
The European Payment Council conducted a survey to identify mandate checking obligations of existing national direct debit schemes in SEPA.  View Article
ECRI: Review of the Payment Services Directive (PSD) - The question of surcharges
In the run-up to the review of the Directive, Elina Pyykkö asks in this European Credit Research Institute Policy Brief whether more could not be done to promote the use of efficient payment methods.  View Article
BBC: What went wrong with Dexia
Dexia is set to become the first European bank to fall victim to the eurozone debt crisis. A decision to split up its operations has been taken after investors sent its shares plunging to an all-time low.  View Article

Securities

ECON Committee: Exchange of views with ESMA, EBA and EIOPA
Steven J Maijoor, Chairman of the ESMA, said that so far there are 11 small CRAs registered. He also said that the registration process for the large CRAs has not been as smooth as it was supposed to be. However, one large CRA is going to register with ESMA very soon.   View Article
ECOFIN Council conclusions: Agreement reached on EMIR
The compromise proposal provides for venues of execution to have access to any CCP to clear OTC derivatives transactions and, subject to conditions, for CCPs to have access to the trade flows from trading venues.  View Article
Euractiv: Britain isolated on EU derivatives law
The UK government has found itself isolated in its opposition to draft EU derivatives rules, as finance ministers are expected to express their "unanimous" backing to the European Commission's proposal on 4 October.  View Article
Letter to Commissioner Barnier: Non-discriminatory clearing access to market infrastructure providers
Several associations wrote an open letter to Commissioner Barnier expressing doubts about the clearing access to the market infrastructure providers.   View Article
ESMA publishes its technical advice on possible delegated acts concerning the Prospectus Directive as amended by the Directive 2010/73/EU
The European Commission sent a formal request to ESMA on 25 January 2011 to provide technical advice on possible delegated acts concerning the Prospectus Directive as amended by Directive 2010/73/EU.  View Article
IFAonline: Independent firms singled out for commission ban in MiFID II draft
A draft copy of the European MiFID financial services reforms has singled out independent firms for the ban on commission, but stops short of confirming that the rules will also apply to other advisers.  View Article
FN: Short selling bans do more harm than good
The short selling bans imposed on financial stocks by European regulators this summer have proved ineffective, according to two reports that vindicate the swathe of market watchers who decried the controversial moves.  View Article
Consob short sales: Restrictive measures extended
Consob has evaluated the restrictive measures concerning net short positions on financial securities adopted in August 2011 and the evolution of market conditions. This took place in collaboration with the authorities of the other countries which adopted similar measures.  View Article
Hellenic Capital Markets Commission extends the short selling ban currently in force
The Hellenic Capital Markets Commission, in consultation with the other competent authorities that have adopted similar measures, under the coordination of ESMA, has decided today to extend the short selling prohibition until December 9, 2011.  View Article
WSJ: EU details antitrust hurdles for Deutsche Börse, NYSE
The European Union spelled out its concerns regarding the planned merger between German exchange operator Deutsche Börse AG and NYSE Euronext, delivering to the exchanges a formal statement of objections to the transaction.  View Article
NYSE Euronext and Deutsche Börse AG Statement on Statement of Objections
Deutsche Börse AG and NYSE Euronext issued a statement regarding the issuance of a Statement of Objections by the EU Competition Commission.  View Article
FN: Turquoise speech stirs up NYSE-Börse monopoly debate
Turquoise, the alternative trading platform majority owned by the London Stock Exchange, has hit out against the proposed merger between NYSE Euronext and Deutsche Börse, arguing that Europe's competition commission must act immediately to address the concerns created by the mega deal.  View Article
EDHEC-Risk Institute research shows benefits of using ETFs in a dynamic core-satellite investment approach
Dynamic risk budgeting methodologies such as Dynamic Core-Satellite strategies are used to provide risk-controlled exposure to different asset classes. There is extensive evidence that investment strategies based on momentum and value are attractive for portfolio managers who seek outperformance.  View Article
FT: BlackRock joins call for action on ETFs
The world's leading provider of exchange-traded funds has backed calls for tougher safeguards for the investment products, to deflect the rising tide of regulatory concerns about the systemic risk posed by the fast-growing market.  View Article
FT: UK faces defeat over derivatives clearing
Britain is bracing for defeat in Brussels on a critical piece of financial regulation, which would force it to cede control over the shape of key markets in the City of London, home to more than three-quarters of Europe's derivatives trading.  View Article

Insurance

IPE: Solvency II could cause 'massive' flight from equities by UK schemes
The Confederation of British Industry (CBI) has predicted that forcing Solvency II onto UK pension schemes will increase liabilities by €575 billion and force a "massive" flight from equities.  View Article
FT: UK insurers seek Solvency II start in 2013
The Financial Services Authority is expected to agree to an early start for Solvency II for British insurers, as the European council recommends delaying adoption of the new rules until January 2014.  View Article
Masaaki Shirakawa: Insurance companies and the financial system – a central bank perspective
Shirakawa, Governor of the Bank of Japan, stressed that insurance companies are an important player in the financial system. It is important that central banks take part in the discussion about the design of regulatory and supervisory frameworks for insurance companies.  View Article
FERMA vows to continue transparency battle with brokers
Europe's association of corporate insurance buyers has vowed to continue the push for the inclusion of improved transparency measures in the next version of the Insurance Mediation Directive (IMD), despite opposition from its broking counterpart.  View Article

Asset Management

IPE: New IORP Directive to focus on 'harmonising' pensions systems
According to Martin Merlin, head of the financial services policy unit of the Directorate-General for the Internal Markets and Services, the EU's new IORP Directive will focus on principles and harmonising existing pensions systems.  View Article
CBI says EU plans to regulate pensions would harm jobs and growth
The CBI urges the UK Government to resist plans by the European Commission to treat defined pensions schemes as insurance contracts.  View Article
IPE: France's CDC seeks to launch private equity fund, targets pension investment
Caisse des Dépôts et Consignations is seeking to launch a new private equity fund, hoping to secure funding from local institutional investors at a time when the country's small and medium-sized enterprises are suffering from lack of investment.  View Article

Corporate Governance/Accounting

IASB: Hans Hoogervorst addresses ECON Committee of European Parliament
Hans Hoogervorst, Chairman of the IASB, addressed the Economic and Monetary Affairs (ECON) Committee of the European Parliament. He expressed the importance of the IASB's relationship with Europe, and provided some observations on the role of accounting standards and the financial crisis.  View Article
FT: PwC hits out at Brussels reforms on audit
Europe could be made less competitive if a proposed shake-up of the accountancy profession is imposed by Brussels, the chairman of PwC, the world's biggest accountancy firm by revenue, has warned.  View Article
FEE commented on the IAASB Consultation Paper on Enhancing the Value of Auditor Reporting: Exploring Options for Change
FEE released its comment letter on the IAASB Consultation Paper on Enhancing the Value of Auditor Reporting: Exploring Options for Change. FEE greatly appreciates the initiative to review auditors' communication.  View Article
EFRAG commented on the 3rd batch of IFRS for SMEs draft Q&As
EFRAG issued its draft comment letter in response to the third batch of draft Q&As related to the IFRS for SMEs. EFRAG recommends not issuing any of the Q&As. Comments on the letter are invited by 18 November 2011.  View Article
FASB: FAF seeks comments on plan to improve standard-setting for private companies
A new council with the authority to identify, propose and vote on specific improvements to US accounting standards for private companies is the centrepiece of a new private company plan released today for public comment by the Board of Trustees of the FAF.  View Article
FASB: Not-for-Profit Advisory Committee focuses on improvements to financial reporting
The FASB released recommended changes in accounting rules suggested by the Not-for-Profit Advisory Committee, an advisory group to the FASB. The changes would enable not-for-profit organisations to report and explain their finances to donors and other interested parties better.  View Article
EFRAG commented on the IASB's ED Investment Entities
EFRAG has issued its draft comment letter on the IASB's ED Investment Entities. Comments are invited on the letter by 27 December 2011.  View Article
IASB invites comments on five draft Q&As for the IFRS for SMEs
The SME Implementation Group (SMEIG) published five draft Questions & Answers (Q&As) on the IFRS for SMEs. These draft Q&As are open for comment until 30 November 2011.  View Article
FEE commented on the PCAOB Rulemaking Docket Matter No 34
FEE released its comment letter on the PCAOB Rulemaking Docket Matter No 34: 'Concept Release on Possible Revisions to PCAOB Standards Related to Reports on Audited Financial Statements and Related Amendments to PCAOB Standards'.  View Article
ACCA in process of consultation on EC's proposal on statutory audit
While ACCA will not make any formal public comment on the Commission's proposals until they are actually made, ACCA has, during the process of consultation which has already taken place, made clear its position regarding the future of audit policy in Europe.   View Article
FEE: Reaction on media reports regarding European Commission proposals on audit policy
FEE would support proportionate regulation aimed at enhancing audit quality and audit services supply, but warns against overregulation and unintended consequences.  View Article
FRC: ASB welcomes the publication of FSA Guidance Paper 'Forbearance and Impairment Provisions - Mortgages'
The ASB notes that the Financial Services Authority (FSA) published a Guidance Paper 'Forbearance and Impairment Provisions – Mortgages'. The ASB welcomes the publication of this paper, which it believes to be a contribution towards the continued development of better financial reporting in the UK.  View Article

Financial Services Policy

ECON Committee: Last monetary dialogue with the ECB under the Presidency of Jean-Claude Trichet
Trichet presented his views on current economic and monetary developments, and discussed current economic and financial developments. He assured MEPs that from its side the ECB will continue to guard the euro, and deliver price stability to Europe's citizens.   View Article
ECOFIN Council approves the economic governance package.
The measures are designed to ensure the degree of coordination necessary to avoid the accumulation of excessive imbalances and to ensure sustainable public finances, thus enabling the EU's monetary union to function properly in the long term.  View Article
No treaty taboos for German Chancellor Angela Merkel facing euro crisis
Asked about Parliament's role in a new economic governance system for Europe, Merkel responded that this was the EU's job when it concerned the single market. "But there have always been areas of national responsibility - taxes, social systems, salaries - here we should coordinate better”, she said.  View Article
EurActiv: Europeans working on bank 'recapitalisation' plan
Germany stands ready to help recapitalise its banks if necessary, German Chancellor Angela Merkel said, providing relief to financial markets amid speculation that policymakers were working on plans to boost bank capital to contain the eurozone debt crisis.  View Article
Liberals and Democrats maintain pressure for action plan on economic governance
Following last week's State of the Union debate in Strasbourg, the ALDE group will follow up on commitments made by President Barroso to strengthen economic governance in the Union and propose concrete measures to deepen economic and fiscal integration.  View Article
Bruegel: Rules and risk in the euro area
With a unique data set summarising the quality of rules-based fiscal governance in EU Member States, Anna Iara and Guntram B Wolff show that stronger fiscal rules in euro area members reduce sovereign risk premia, in particular in times of market stress.  View Article
ECON Committee: Semeta stressed that FTT will change trading practices
Mr Semeta told MEPs that it was time to make the financial sector contribute more and at the same time reduce risky practices. Speaking specifically about the contentious practice of high-frequency trading, Mr Semeta also said that the FTT could force firms to rethink this model of trading.  View Article
Persaud: EU's financial transaction tax is feasible, and if set right, desirable
This column argues that taxes such as the FTT or 'Tobin' tax are more feasible than most think when they are linked to legal enforceability, and that the burden would be disproportionately borne by high-frequency traders that provide liquidity only when the markets don't really need it.  View Article
Bruegel: Financial transaction tax - Small is beautiful
In light of recent developments, Bruegel draws attention to its Policy Contribution, originally published in February of last year, covering the merits of the much-discussed financial transaction tax.  View Article
Association of German Banks warns against financial transactions tax
"The decision to introduce a European financial transactions tax is a mistake. A tax of this kind will damage the European financial industry and, in the final analysis, even threaten economic growth", said Michael Kemmer, General Manager of the Association of German Banks.  View Article
MoneyMarketing: Can FSA win the European RDR commission fight?
If, according to a leaked draft MiFID II document, a ban on commission for independent advice but not for restricted advisers were to be adopted in final legislation, the FSA would need to secure an exemption from MiFID in order to extend the commission ban to all advisers under the RDR.  View Article

Financial Stability - Policy Analysis

CEPS: Will the financial transaction tax (FTT) enhance stability?
Emrah Arbak comments that the FTT, while in all likelihood raising sizeable tax revenues, fails to address the key factors that contributed to the global financial crisis. In the absence of global or even EU-wide cooperation, many of the transactions subject to a tax will relocate to non-cooperating countries, thereby reducing revenue prospects and the effectiveness of supervision.  View Article

Economic Crisis

Verhofstadt: Merkel's legacy will be judged by her ability to resolve the eurocrisis
Guy Verhofstadt, leader of the Liberal and Democrat group, called on German chancellor Merkel to show decisive leadership at the next European Council in backing further economic and fiscal integration in Europe as the only means definitively to get on top of the crisis which threatens to spiral out of control.  View Article
IMF: Implementation of strong action needed to restore growth in Europe
Growth in Europe has slowed significantly as a result of global shocks, and of the escalation of the euro area sovereign debt crisis, which has shaken confidence and curbed domestic demand.  View Article
Kathimerini: Nightmare scenario of a return to the drachma
In a hypothetical exit from the euro and a return to the drachma, the new Greek currency would have to be devalued by a gigantic 120 per cent against the euro in order to play any part in reducing the country's deficit, according to a study by New York-based financial analysis firm, Roubini Global Economics.  View Article
Verhofstadt: Lessons still not learned from post-Lehman bank crisis
After months of repeated alarms of another crisis affecting the European financial sector, EU Ministers of Finance indicated yesterday in Luxembourg that a new bank rescue plan was on the way through a national coordinated recapitalisation.  View Article
WSJ: Europe considers wider Greek write-down
Greece is missing its budget-deficit target and will likely need additional rescue money to plug the gap. Demanding more pain from private bondholders could be a way to do that.  View Article
FT: Ireland stakes claim to eurozone rescue fund
Eamon Gilmore, Ireland's deputy prime minister, has said that Ireland should be allowed to tap the eurozone's financial rescue fund to cut the cost of its bank bail-out and boost its chances of becoming Europe's recovery success story.  View Article
Moody's downgrades Italy's government bond ratings to A2 with a negative outlook
Moody's Investors Service has today downgraded Italy's government bond ratings to A2 with a negative outlook from Aa2. The rating action concludes the review for downgrade initiated by Moody's on 17 June, 2011.  View Article
FT: Eurozone ministers reset Greece's goals
Eurozone finance ministers gave a clear indication they were preparing to paper over Greece's failure to hit international lenders' mandated budget targets for 2011, saying they would now evaluate Athens' performance based on goals that combine both this year's and next year's finances.  View Article
FT: Greek cabinet approves budget cuts
Greece's cabinet on Sunday approved large cuts in next year's budget – including the immediate dismissal of thousands of public sector workers – under intensifying pressure from its international creditors.  View Article
FT: Greece unveils draft budget for 2012
The draft budget revises this year's deficit projection upwards to 8.5 per cent of GDP against a target of 7.6 per cent of GDP, mainly because of a deeper than forecast recession and weak revenue collection.  View Article
WSJ: Finland backs boost to bailout fund
Finland's parliament approved changes to Europe's temporary bailout fund, clearing a potential hurdle to boost funds available to insolvent eurozone governments even as the country continued to insist on collateral for further aid to Greece.  View Article
Euractiv: German ratification turns spotlight on Slovakia
In Finland, where ratification had raised much public debate, the parliament ratified the changes on 28 September, approving at the same time the country's contribution to the second bailout plan for Greece.  View Article
Crisis could erode UK sovereignty, expert warns
A more unified eurozone could damage Britain's economy and strain its relations with the European Union (EU), if Graham Bishop, a guest speaker at Centaur's Investment Summit is to be believed.  View Article

Financial Services Month in Brussels - Report

August/September 2011 Economic Crisis Month in Brussels
The economic crisis section of our traditional monthly monitoring of financial services for August and September 2011.   View Article
August/September 2011 Financial Services Month in Brussels Report - Graham Bishop's personal overview of events in August and September
Given the unexpected and huge volume of events over the summer - especially relating to the economic crisis - we have decided to separate that category from our traditional monitoring of financial services regulation for this publication.  View Article

Think Tanks

CER: Eurozone crisis - Higher inflation is part of the answer
Chief Economist, Simon Tilford, argues that the ECB must guard against excessive inflation, but it is a big problem when its fear of inflation blinds it to the much more serious threats confronting the eurozone economy. Indeed, somewhat higher inflation may be part of the solution to the crisis facing Europe.   View Article

Commentaries

Wolfgang Münchau: Eurozone fix a con trick for the desperate
The latest crazy idea, which is being pursued by officials, is to turn the eurozone's rescue fund into an insurance company, or worse, a collateralised debt obligation, the financial instrument of choice during the credit bubble. This is the equivalent of putting explosives into a can, before kicking it down the road.   View Article
OMFIF: Hurdles lie ahead on EFSF leveraging
David Marsh writes that last week's German parliament vote on expanding the powers and scope of the €440 billion euro rescue fund does little more than bring the Germans up to the point many thought they'd already reached on 21 July when European leaders agreed to broaden the EFSF.   View Article
European Voice: Say it louder - the EU is still a transfer union
This editorial poses the questions: Is the EU still about the distribution of wealth? Who still believes that the European Union is a transfer union, in which wealth is redistributed from richer countries and regions to poorer countries and regions, and from the well-off parts of society to the less well-off?   View Article
Presseurop: Beware the saviours of the euro
If the European project is to be saved, then it's time to stand up to the likes of Chancellor Merkel and President Sarkozy who are promoting a union of democracy deficit, tax competition and social dumping, argues a German author.   View Article
Martin Wolf: How to keep the euro on the road
Writing for the FT, Wolf asks how, then, did the eurozone fall into its plight? A part of the answer is that it lacked mechanisms for handling crises, that its members have diverged hugely and that it was blighted by its early successes.  View Article
John Kay: What Europe can learn from Kissinger-style ambiguity
To expect that one entity will underwrite another's debts is a dangerous form of ambiguity, writes John Kay for the FT. It is likely that the status of the guarantee will be put to the test and that the guarantor will ultimately pay. This encourages irresponsible borrowers and lenders to explore the limits of the patience of the guarantor.  View Article
FT Editorial: Curing Europe's banking ills
Liquidity scare is merely a symptom of the sovereign debt crisis. Someone, somewhere has to take the pain. The honest solution is for the banks to own up to all of their losses now.  View Article
Rosselin: Everything is possible, even a burst of energy - 30 days to change Europe
On the eve of two key meetings, the European Summit of October 18 and the G20 summit in November, the founding principles of Europe are shifting. The crisis has the merit of advancing the union – but time is running out, warns the managing editor of La Tribune.  View Article




© Graham Bishop

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