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10 November 2011

This week in "Brussels"
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Articles from 03 November 2011 - 10 November 2011

Banking

The Basel Committee issues final rules for global systemically important banks
The rules set out the Basel Committee's framework to identify G-SIBs, the magnitude of additional loss absorbency that G-SIBs should have, and the arrangements by which the requirement will be phased in.   View Article
ESMA, EBA and EIOPA appoint members of Joint Board of Appeal
The three European Supervisory Authorities (ESAs), ESMA, EBA and EIOPA, appointed members and alternates of their Joint Board of Appeal. The Joint Board of the ESAs is independent from their administrative and regulatory structures, and will hear appeals from certain decisions taken by the ESAs.  View Article
Mario Draghi: ECB press conference - introductory statement
Mr Draghi said that "it remains essential for monetary policy to maintain price stability over the medium term, thereby ensuring a firm anchoring of inflation expectations in the euro area in line with our aim of maintaining inflation rates below, but close to, 2 per cent over the medium term".  View Article
EACT highlights European Union’s failure to consider real economic impact of financial regulatory proposals
The European Association of Corporate Treasurers has sent an open letter to the Commissioners of the European Union, expressing concern over how, in its development of financial regulatory proposals, Brussels takes account of their impact on employment, growth and stability in the real economy.  View Article
FBF: French banks will make every effort necessary to bolster their capital and continue to finance the economy
The chairmen of France's major banks reaffirmed their intention to implement the measures adopted by the European Council on 27 October 2011.   View Article
EMF: CRD IV Position Paper
The European Mortgage Federation (EMF) reiterated its support to the European Commission Proposal on CRD IV, designed to improve the resilience of the financial system by aligning EU financial regulatory reform with the proposals of the Basel Committee.  View Article
Deutsche Bundesbank/Weidmann: Managing macro-prudential and monetary policy – a challenge for central banks
In the event of a financial shock, a crucial factor for the severity of the crisis is to what extent the financial sector is stable. Therefore, one central question on the global political agenda is how better to ensure financial stability.  View Article
Klaus C Engelen: Jean-Claude Trichet - saviour or villain?
Giving an account of how Germans view Trichet's legacy, Engelen says that for some, Trichet is a European hero; for others he is a villain for having turned the ECB into Europe's “bad bank” for toxic assets.  View Article
Project Syndicate: The ECB's Risky Business
Daniel Gros comments that a central bank always has a crucial role to play in a financial crisis. But the European Central Bank's role within the eurozone nowadays is even more “central” than that of the Federal Reserve or the Bank of England.  View Article
Gillian Tett: Subprime moment looms for ‘risk-free’ sovereign debt - Pillar of the regulatory structure looks wobbly
In her FT column, Tett writes that when future financial historians look back at the early 21st century, they may wonder why anybody ever thought it was a good idea to repackage subprime securities into triple A bonds. So, too, in relation to assumptions about the “risk-free” status of western sovereign debt.   View Article

Securities

Council adopted Directive to strengthen supervision of financial conglomerates
The revision of the Financial Conglomerate Directive (FICOD) also amends the relevant legislation on banking and insurance supervision, namely the Capital Requirements Directive and the Directive on Supplementary Supervision of Insurance Undertakings in Insurance Groups.  View Article
ISDA publishes discussion paper on costs and benefits of mandatory electronic execution requirements for interest rate products
The International Swaps and Derivatives Association (ISDA) announced the publication of an in-depth discussion and analysis of the impact of electronic execution requirements on over-the-counter (OTC) derivatives markets that were mandated by the Dodd-Frank Act.  View Article
CEPS: MiFID 2.0 unveiled
This CEPS Commentary by Karel Lannoo explains how the original MiFID legislation has been amended with the principal aim of levelling the playing field, and examines its novel features.  View Article
FN: Race for the OTC derivatives market
Exchanges, brokers and technology providers are racing to establish electronic commodity trading venues, with up to 30 platforms set to be launched over the next two years, as efforts to benefit from new rules forcing greater transparency over derivatives products gather pace.  View Article
ISDA leads industry effort to standardise the Credit Support Annex
The International Swaps and Derivatives Association (ISDA) today outlined key provisions to the Standard Credit Support Annex (SCSA) proposal as part of its continuing efforts to increase efficiency and improve standardisation in the over-the-counter (OTC) derivatives markets.  View Article
FESE Response to ESMA Consultation Paper systems and controls in a highly-automated trading environment for trading platforms
FESE members support both global and European-wide competition on a level playing field as a means of achieving the most significant efficiency and reductions in trading costs.  View Article
ECB announced details of its new covered bond purchase programme (CBPP2)
The Governing Council has decided to make its CBPP2 portfolio available for lending, which will be voluntary and conducted through security lending facilities offered by central securities depositories, or via matched repo transactions with eligible counterparties.  View Article
Regulators elect Martin Wheatley to ESMA's Management Board
The Board of Supervisors (BoS) of ESMA today elected Martin Wheatley to the Management Board (MB) of ESMA.  View Article

Insurance

EIOPA launched consultation on guidelines for the own risk and solvency assessment
The guidelines cover general issues such as the principle of proportionality, as well as specific issues, e.g. the assessment of the overall solvency needs or the continuous compliance with the requirements on regulatory capital and technical provisions underlying the SCR calculation.   View Article
Deloitte releases latest Insurance Market Update
In the light of the Solvency II Framework, Deloitte finds that it is imperative that risk professionals clearly communicate the rationale behind their calibrations to company management and the supervisory board, whose background may be predominantly non-technical.  View Article
S&P reviews effect of recent financial developments on European insurers' balance sheets
Many insurers had substantially rebuilt their balance sheets from their 2009 low point by mid-year 2011. However, the depletion they have experienced over the past quarter will cause many boards of directors to review carefully their third-quarter results and 30th September financial positions.  View Article
FSA launched a consultation on the transposition of Solvency II
Solvency II is mainly maximum harmonising, and the FSA has limited scope for discretion in its transposition and implementation. However, the FSA is obliged to undertake a cost benefit analysis and consultation on the changes to the FSA Handbook that will be required as a consequence of Solvency II.  View Article
FSA launched a consultation on Solvency II and linked long-term insurance business
The FSA's regulatory concern is the appropriateness of the Solvency II transfer of risk to different categories of policyholder. The FSA believes it is vital that it is able to continue to provide an appropriate level of protection to policyholders under Solvency II.   View Article
FTAdviser: FSA pledges to mitigate cost of Solvency II delay
The Financial Services Authority has said that it will seek to help insurers mitigate the expenses associated with a delay to the implementation of new European capital adequacy rules, by dropping, where possible, a requirement to run two separate capital models.   View Article

Asset Management

Hedgeweek: Pensions in Europe – how multinational companies are preparing their pensions in Europe for the future
The white paper, 'Pensions in Europe', looks at what multinational companies see as the major issues facing them today with their pensions in Europe, and also examines what the companies are doing now and what they intend to do in the future.  View Article
IPE: Debt crisis undermining pension fund sustainability worldwide
The eurozone sovereign debt crisis has seen the sustainability of pension systems across Europe decline, with a number of positive reforms undone by rising debt levels, according to Allianz Global Investors.  View Article
IPE: European pension funds kick EFSF investment into long grass
European pension funds have adopted a 'wait and see' approach on the possibility of investing in the European Financial Stability Facility (EFSF), as doubts grow over the fund's future.  View Article
IPE: EMIR Directive will increase collateral costs for pension funds
PGGM has warned that the new European Market Infrastructure Regulation (EMIR) Directive on over-the-counter derivative trades will oblige pension funds to post more collateral at a much higher cost.  View Article
FN: When pensions ain't broke, they don't need a fix
The current review by the European Commission of the Directive for pension funds - the IORP Directive – is more important to the UK than any other European country.  View Article

Corporate Governance/Accounting

IASB responses to G20 conclusions
The IASB published an updated summary of its response to the G20 conclusions. The IASB details its progress in the area of off balance sheet financing, fair value measurement, financial instruments accounting, Memorandum of Understanding with the FASB, and stakeholder engagement activities.  View Article
IFAC: Sovereign debt crisis demands financial management reform by governments
IFAC applauds Europe's focus on resolving the current financial crisis. However, IFAC warns that — in addition to addressing the symptoms — the underlying causes must also be addressed, by reforming governments' substandard financial management practices.  View Article
FASB added new agenda projects to improve financial reporting by not-for-profit organisations
The FASB announced the addition of two agenda projects - a standard-setting project and a research project - intended to improve financial reporting of not-for-profit organisations.   View Article
FASB published proposal to defer changes to presentation of reclassification of other comprehensive income
The FASB issued a proposed Accounting Standards Update to defer the specific requirement to present items that are reclassified out of accumulated other comprehensive income to net income alongside their respective components of net income and other comprehensive income.  View Article
FASB published proposal for improving financial reporting of consolidations
The FASB issued a proposed Accounting Standards Update intended to increase transparency and consistency of financial reporting about consolidations. Comments on the proposal are requested by January 17, 2012.  View Article
ACCA: Women accountants are more critical of economic crisis responses around the world
The study, 'Female perspectives in the global economy', compares ACCA's female and male memberships' responses to confidence and recovery indices in ACCA's quarterly Global Economic Conditions (GECs) survey which began in February 2009.  View Article
IASB and ASBJ held biannual meeting
Representatives of the IASB and the ASBJ held their fourteenth biannual meeting in London on 31 October and 1 November 2011. The boards discussed the joint work of the IASB and the FASB to improve IFRSs and US GAAP and to bring about their convergence.  View Article
ACCA: EU company reporting - simplification must not be done at the expense of transparency and accountability
ACCA shares the EC's aim to remove unnecessary red tape, especially on SMEs, and supports the 'Think Small First' approach adopted in the new proposal. The approach is welcome but the deregulation agenda for financial reporting must be tempered by the wider social value of accounting and auditing.  View Article

Financial Services Policy

Commissioner Barnier: There is no evidence that EU rules undermine the City's competitiveness
Speaking at the Conference on Financial Regulation in London, Barnier stressed that accusations that his regulatory reforms are aimed at undermining London are “nonsense”. He also said that there cannot be a return to business as usual in the financial sector.   View Article
Economic governance: Council adopts legal texts
Adoption of the so-called "six-pack" of governance measures follows a political agreement at the Council's meeting on 4 October on the basis of a compromise reached with the European Parliament. The texts were approved by the Parliament on 28 September.  View Article
Barroso: Further European economic integration will be needed
During an EPP debate on the future of the euro, President Barroso called on those who support a global FTT firstly to support the EU FTT because this will be the starting point to achieve the global FTT.   View Article
ECOFIN Council conclusions on the Financial Transaction Tax
Finance ministers asked the Council working groups to analyse the Commission proposal on the FTT. The Commission considers that its proposal will enable the financial industry, currently under-taxed in relation to other sectors, to make a fair contribution.  View Article
Commissioner Šemeta: There is huge momentum behind the idea of a financial transactions tax (FTT) that cannot be ignored
Šemeta stressed that fairness is at the very core of the Commission's FTT proposal. The financial sector was largely responsible for the crisis, it benefited from considerable support from governments and taxpayers, and yet it is paying proportionately less tax than other sectors.   View Article
Nick Clegg: The UK cannot support the FTT that has been proposed
Clegg stressed that the FTT would have a massively disproportionate impact on the City of London, responsible for more than half of the revenues that would be taxed. And, according to the Commission's own analysis, it would also reduce EU GDP as a whole.  View Article
IMA: FTT is a tax on UK savers
In its submission to the House of Lords EU Committee's call for evidence on the Financial Transactions Tax (FTT), the IMA said that the FTT is a tax on UK savers, who will pay a disproportionate amount of the tax levied across Europe.  View Article
TheCityUK's Autumn Debate discussed the future of financial services across Europe
TheCityUK, the independent body promoting UK-wide financial and related professional services, today hosted its Autumn Debate entitled: "EU Strategy in a Global Context – Creating a Policy Framework for Growth".  View Article
EDHEC-Risk Institute research on corporate bond indices finds index construction methodologies unreliable
Research at EDHEC-Risk Institute has concluded that corporate bond index construction methodologies tend to be sub-optimal.  View Article
FSA published PS11/14 Product disclosure: Retail investments - changes to reflect RDR
This Policy Statement reports on the main issues arising from Consultation Paper 11/3 (Product Disclosure: Retail investments – changes to reflect RDR Adviser Charging and to improve pension scheme disclosure), and publishes final rules.  View Article
European Commission suggests MiFID II "compatible" with RDR
The European Commission says it expects the RDR to be compatible with MiFID II, despite the current draft of the new Directive only focusing its proposed commission ban on the independent sector.  View Article
FSA refuses TSC calls to delay the RDR
The Financial Services Agency has rejected Treasury Select Committee calls for the RDR to be delayed by 12 months but says it will continue to monitor industry progress towards higher qualifications carefully.  View Article
Commons Select Committee published Government and FSA responses to its RDR Report
The Treasury Committee of the House of Commons published its 20th Report on the Retail Distribution Review: Government and Financial Services Agency Responses to the 15th Report from the Committee.  View Article
UK's battle with Brussels is intensifying on financial regulation
The FT reports that London fears Mr Barnier's backers on the mainland are using this regulatory marathon to sap London's strength as Europe's pre-eminent financial centre.   View Article
Parliament may shield pensioners from FTT
Sharon Bowles said that the EP may exempt pension funds from the FTT draft proposal. Pension funds have previously warned that an FTT on derivatives, an instrument widely used by the funds to insure against any losses, would depreciate the value of savers' pensions.  View Article

International/G20

Communiqué G20: Leaders' Summit in Cannes on 3-4 November 2011
The leaders welcomed the euro area's comprehensive plan and urged rapid elaboration and implementation, including of country reforms. They are also ready to ensure additional resources on a range of various options, including bilateral contributions to the IMF.   View Article
FSB issued International Standard for Crisis Resolution Regimes
The "too-big-to fail" concern requires effective national resolution regimes and recovery and resolution planning at global level. The FSB published a new internationally-agreed standard that sets out the instruments and powers that national resolution regimes should have to resolve a failing SIFI.   View Article
FSB announced policy measures to address SIFIs and named initial group of global SIFIs
At the Cannes Summit, the G20 Leaders endorsed the implementation of an integrated set of policy measures to address the risks to the global financial system from systemically important financial institutions (SIFIs), and the timeline for implementation of these measures.  View Article

Graham Bishop’s Articles

Graham Bishop: The greatest danger to the euro - Greece or Merkel/Sarkozy?
A great battle is underway to save the EU's flagship "Euro" but, as in any battle, the fog of war sometimes clouds the vision of the generals.   View Article

Think Tanks

Bruegel: Europe must unchain itself to save itself
Jean Pisani-Ferry writes that Europe has enough resources to resolve its current crisis but an extraordinary series of constraints means it has to turn to emerging economies for help. For all of its troubles and mediocre growth prospects, Europe is still remarkably rich by world standards.  View Article
Bruegel: Greece after the referendum
Zsolt Darvas observes that since Papandreou's call for a referendum on the new EU bailout deal, policymakers have been holding emergency meetings, markets are falling, and commentators are envisioning not just the departure of Greece from the euro area and possibly from the EU, but a collapse of the single currency as well.  View Article
CER: Why stricter rules threaten the eurozone
In the latest CER essay, Philip Whyte and Simon Tilford say that to restore confidence in the eurozone, leaders must fix its institutional flaws and stretch some rules in the interim. Instead, they are doing the opposite.  View Article
Debate: Should we feel sorry for Greece?
CER's Simon Tilford writes that Greece is at the eye of the storm gathering over the world economy, and threatening to tear the eurozone apart. But should the rest of us be sorry for Greece, or angry? Here, two experts present opposing arguments for and against sympathy.  View Article
CEPS: What is holding Italy back?
This contribution by CEPS Director Daniel Gros lays the blame for Italy's poor growth, which presently poses an existential threat to the entire eurozone, squarely on the country's abysmal record on such governance factors as corruption and the rule of law. Reversing this political decline will take years of national commitment – of which he sees little sign.  View Article
CEPS: China's assistance could do more harm than good in the eurozone
Contrary to the high hopes being attached to the proffer of Chinese assistance at the G20 in Cannes this week, CEPS Director Daniel Gros warns that a large inflow of funds from China and other 'investors' could in fact do more harm than good. In his view, the incoming capital would strengthen the euro and thus make a recovery in the periphery even more difficult.  View Article

Commentaries

Wolfgang Münchau: Summitry again proves its own irrelevance
In his FT column, Münchau observes that last week's G20 summit proved almost comically irrelevant to the future of the global economy.  View Article
Paul N Goldschmidt: The financial crisis - the moment of truth is fast approaching!
Goldschmidt writes that he has been relatively silent over the last few weeks as he has witnessed with horror some of his worst fears – described in earlier papers – become the subject of daily media debate, and acquire progressively outright acceptance of their inevitability.   View Article
European Voice: A two-speed Europe where the 'slow' outrun the 'fast'
This article suggests it is the 'old' Member States, not the 'new', who are to blame for the EU's current problems.   View Article
Simon Nixon: Don't bank on ECB rescuing Italy
Commenting in the WSJ, Nixon says that given the eurozone's inadequate bailout facilities, many argue only an unlimited ECB commitment to buy Italian bonds can prevent the debt crisis spiraling out of control. But investors shouldn't bank on the ECB doing the market's bidding.   View Article
Tony Barber: Europeans clutch at technocratic fixes
In this article for the FT, Barber writes that the deeper Europe's debt crisis becomes, the more European policymakers are clutching at solutions that substitute technocratic government for democracy. It looks like a desperate throw of the dice rather than a rational attempt to reorganise the eurozone into a genuine economic union.  View Article
German Council of Economic Experts: A European Redemption Pact
This column proposes a novel solution to the crisis – the European Redemption Pact and an associated European Redemption Fund. This would – like eurobonds – create a joint debt vehicle, but unlike eurobonds it would be temporary, say 25 years.   View Article
Douglas J Elliott: Italy - definitely too big to fail, maybe too big to bail
We may be nearing the finale of the euro crisis that has been building for at least a year and a half. What Italy does now, and how governments and markets respond, may determine whether we have been watching a tragedy or something less serious. Whatever it is, it definitely has elements of both.  View Article
Simon Nixon: Merkel and Sarkozy have lost credibility
Writing for the WSJ, Nixon comments that nothing of substance was agreed on the French Riviera to aid the cause of euro survival, but one giant decision was taken that could hasten its demise. Angela Merkel and Nicolas Sarkozy's announcement that Greece is free to leave the euro has transformed the nature of the euro.  View Article
Jan-Werner Mueller: What does Germany want?
Writing for Project Syndicate, Mueller comments that by now, everyone knows that Germany is calling the shots not just in the eurozone, but across all of Europe. Now, the “Berlin Republic” is very secure about its identity – and seemingly at sea in its dealings with the world.   View Article
John Wyles: In uncharted territory
In his European Voice article, Wyles lists six features in Europe's new political landscape that could determine whether we emerge safely from the eurozone crisis.   View Article
Stefan Collignon: European catharsis
Writing for Social Europe, Collignon says that the moment of truth has come. The euro crisis has shown the limits of austerity, nation states, and the dictates of undemocratic institutions. It is time to re-think Europe.  View Article
Jean-Claude Piris: An EU architect calls for two-speed union
In this FT Opinion article, Piris says that if, as William Hague suggests, the eurozone is a burning house with no exits, the first task is to put out the fire. But this is not enough. The house must be repaired, albeit on existing foundations, because it is the entire European Union that is becoming less efficient and less relevant.   View Article

Graham Bishop's Webinars

Graham Bishop's Webinar: Review of October 2011
Graham was joined online by Javier Arias (BBVA), Jon Hogan (KPMG), Anthony Belchambers (FOA) and Prof Dirk Schoenmaker (DSF). Our thanks go to these outstanding co-hosts.  View Article




© Graham Bishop

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