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03 May 2012

This week in "Brussels"
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Graham Bishop’s Articles and Speeches About this email

Articles from 26 April 2012 - 03 May 2012

Banking

ECOFIN: Closing in on new capital requirements for banks
At yesterday's meeting, EU finance and economy ministers had a constructive discussion regarding the proposal for new EU rules on capital requirements for banks and investment firms, the so-called CRD IV package. The Council will review the dossier on May 15, subsequent to a technical verification.  View Article
Danish Presidency: New rules for capital requirements aim at securing healthy banks in Europe
On May 2, the EU's finance and economy ministers are to discuss the proposal for new EU rules on capital requirements for banks – one of the most important initiatives in securing healthy banks in the aftermath of the crisis.   View Article
Commissioner Barnier: Towards better regulation of the shadow banking system
In his speech, Barnier said that he considered shadow banking to be an integral part of the reinforcement of financial regulation. "What lessons have we drawn from the crisis if we allow risky activities to prosper alongside better regulated and more solid ones?"  View Article
Reuters: European Union to shine light on shadow banking
The European Commission pledged to tighten control of so-called shadow banking on Friday, answering central bank calls for stricter regulation of the sprawling €46 trillion ($61 trillion) sector which has been blamed for aggravating the financial crisis. (Includes quote from Graham Bishop.)  View Article
City A.M.: UK tables long list of demands in EU bank talks
Britain is worried that a new set of European banking rules will widen a "fracture at the [EU's] heart", and has marshalled the support of at least six other Member States for a long list of demands in the negotiations.  View Article
FT: EU set for clash on banking rules
Translating the "Basel III" international rules on bank capital into law has emerged as the most highly-charged financial regulation issue in Brussels – throwing up sharp disputes and creating unusual political bedfellows.   View Article
FSA/Bailey: Basel III – the big issues
Andrew Bailey, FSA Director of UK Banks & Building Societies, said the simple answer that wide-ranging reforms are being undertaken because we have had a major crisis, is not good enough as an explanation: it explains the timing of the reforms, but the substance of them requires more explanation.  View Article
Nicolas Véron: Making sense of the CRD4/CRR debate
As EU finance ministers continue to debate the EU legislation on bank capital requirements, Véron takes stock of some aspects of this policy debate, especially its global implications.  View Article
BBA: The regulatory reform programme must start paying more attention to its impact on economic growth
UK and Swiss bankers urged regulators to take into account the impact that regulatory reforms are likely to have on the global economic recovery and the international competitiveness of banks in the UK and Switzerland.   View Article
FT: Big banks seek regulatory capital trades
Big banks are aiming to help smaller lenders cut the amount of regulatory capital they need to hold against loans, in an attempt to make money from deals similar to those first created in the early days of securitisation more than a decade ago.  View Article
Commission acts to ensure implementation of EU rules on electronic money activities
Belgium, Spain, France, Cyprus, Poland and Portugal have been asked to notify the European Commission within the next two months as to the measures they are taking to update their national legislation in conformity with the latest Directive on e-money.   View Article
EPC Response to the European Commission Green Paper, 'Towards an Integrated European Market for Card, Internet and Mobile Payments
In its response, the European Payments Council outlines key policy considerations which, in its view, should be observed when determining the need for EU action to address 'gaps' perceived by the Commission with regard to competition, choice, innovation and other 'market integration drivers'.   View Article
Report on the fulfilment of the EBA Recommendation adopted on 15 July 2011
Following the publication of the 2011 EU-wide stress test results in July 2011, the EBA issued a Recommendation to national supervisory authorities (NSAs) to ensure that appropriate mitigating actions were put in place.  View Article
ECB: Results of the April 2012 bank lending survey for the euro area
The European Central Bank (ECB) published its report on the results of the April 2012 bank lending survey for the euro area. The bank lending survey was developed by the Eurosystem in order to enhance the understanding of bank lending behaviour in the euro area.  View Article
European Payments Council Newsletter: Issue 14 - April 2012
This edition focuses on information supporting, in particular, payment service users in the euro area to get ready for the Single Euro Payments Area (SEPA) by 1 February, 2014 - as effectively mandated by the SEPA Regulation which was recently adopted by the EU legislator.  View Article
EMF: Mortgage Info - April 2012
The April 2012 issue covers: UK's NewBuy Scheme Off to a Good Start; UK Retail Ring-fence Proposals; BSA Responds to UK FSA's Final Mortgage Market Review Consultation; Development of the Russian Covered Bond Market; News in Brief; and The Events Agenda.  View Article
Martin Wolf: After the bonfire of the verities
The new world of post-crisis central banking will create significant institutional and intellectual challenges, writes Wolf in his FT column.  View Article

Securities

Hedgeweek: Basel 2.5 and III derivatives regulations to increase costs of capital
Corporate interest rate derivatives users participating in the most recent Global Interest Rate Derivatives Study believe that new Basel 2.5 and III derivatives regulations in Europe and the US will result in wider spreads in derivatives markets, and ultimately increase their costs of capital.  View Article
ISDA 2012 Margin survey results: Collateralisation continues to increase in OTC derivatives markets
The 2012 Margin Survey reveals that market participants continue to expand their use of collateral to mitigate over-the-counter derivatives credit exposures.  View Article
ISDA Paper examines three-year history of the ISDA Credit Derivatives Determinations Committees
The Determinations Committees (DCs) were formally established approximately three years ago in March 2009 with the publication of the DC Rules and the March 2009 Supplement to the Credit Derivatives Definitions and the Big Bang Protocol.   View Article
IPE: OTC derivatives and the law of unintended consequences
Cecile Sourbes says that the law of unintended consequences has never been truer than in the regulatory sphere, with the latest example coming from the need to post variation margins in cash for over-the-counter derivatives trades.  View Article
EBF proposal for a Regulation on insider dealing and market manipulation
EBF members submitted initial comments to the draft report on the proposal for a Regulation of the European Parliament and of the Council on insider dealing and market manipulation.  View Article
IFR: Clearing houses to participate in CDS trigger decisions
Central counterparties will participate in decisions on whether credit default swaps have triggered or not, ISDA co-chair Athanassios Diplas said, in a sign of the increasingly important role clearing houses now play in the over-the-counter derivatives markets.  View Article
Richard Portes: Credit default swaps - Useful, misleading, dangerous?
This column argues that the market has become overwhelmed by 'naked CDSs' that allow speculators to make bets on the future of corporates and sovereigns – bets that can be wildly destabilising. The column calls for a ban on naked CDSs.  View Article
Proposal for a Regulation of the EP and of the Council on amending Regulation (EC) No 1060/2009 on CRAs - Presidency Compromise
This text is a Presidency compromise text of the Commission's credit rating agencies proposal.  View Article
ESMA approves credit ratings from Brazil for use in the EU
ESMA announced that it considers the regulatory framework for the credit rating agencies of Brazil to be in line with European Union rules. This allows European financial institutions to continue using credit ratings issued in Brazil for regulatory purposes after 30 April, 2012.  View Article
FSA/Lawton: Liquidity and the regulation of markets
David Lawton, FSA Acting Director, Markets, gave a speech at the TradeTech Liquidity Conference on why liquidity matters to regulators and how regulators think about it. "Liquidity is clearly an important element of a well-functioning market, but it is not a regulatory goal in itself."   View Article
ISLA response to the Kay Review on the effect of UK equity markets on the competitiveness of UK business
ISLA believes that regulators are comfortable with the concept of securities lending, which, when properly regulated, is positive for all markets and market participants.  View Article
FSB publishes report: 'Securities Lending and Repos: Market Overview and Financial Stability Issues'
The report describes the segments, operations and practices of these securities financing markets, which may constitute an important element of the shadow banking system.  View Article
ESMA Chair Steven Maijoor speaks at the CBI Stakeholder Conference
Steven Maijoor gave a speech on "How the new regulatory and supervisory framework protects Europe's markets and consumers" at the Stakeholder Conference organised by the Central Bank of Ireland, where he spoke about strengthening markets and improving consumer protection.  View Article
BATS Chi-X Europe completes technology migration
BATS Chi-X Europe, the largest pan-European equities market operator by market share and notional value, announced it had successfully completed the transition of the Chi-X Europe order books to the BATS technology platform.  View Article
Hedgeweek: Deutsche Börse completes Eurex takeover
Deutsche Börse Group has completed its full acquisition of Eurex Zürich AG. Deutsche Börse is to pay €295 million and transfer approximately 5.3 million Deutsche Börse AG shares to the SIX Group.  View Article
CFTC votes to clarify indemnification and confidentiality provisions in the Dodd-Frank Act
The proposal generally exempts foreign regulators from the indemnification and confidentiality provision in the Dodd-Frank Act, and ensures that foreign regulators have access to data in Swap Data Repositories (SDRs).  View Article

Insurance

EIOPA/Bernadino: Converging ideas - Building a European-wide supervisory culture in insurance and pensions
In this CII Thinkpiece EIOPA Chair, Gabriel Bernadino, provides a perspective on the Authority's first year of operation.  View Article
Reuters: Europe postpones new insurer capital rules
The European Union is to put back by six months the deadline for member countries to enshrine new capital rules for insurers into national legislation.  View Article
Risk.net: Slow progress on Solvency II internal model validation threatens approval, FSA warns
Insurers are at risk of their Solvency II internal capital models not being approved because they are falling behind in their model development plans, the UK Financial Services Authority (FSA) has warned.  View Article
Risk.net: Dutch regulator to begin Solvency II test on insurers
A parallel test with Solvency I assessments could challenge smaller insurers, experts warn. The Dutch financial regulator, De Nederlandsche Bank (DNB), is to begin assessing insurers' readiness for Solvency II.  View Article
FT: US blow to Brussels over insurance rules
Brussels' hopes of persuading the US to adopt sweeping insurance reforms have been dealt a blow by a leading US regulator. Mr McCarty, president of the National Association of Insurance Commissioners, warned it was "kind of silly" for Brussels to try to influence US policy on insurance regulation.  View Article
CRE: EU to create risk committee to encourage risk-based regulation
The European Union will create a Risk Committee this September to promote risk-based policy decisions across the territory.  View Article
Risk.net: The extrapolation conundrum
One of the most fundamental points of Solvency II still remains one of the most contentious. Blake Evans-Pritchard reports on how the risk-free rate has moved from the technical to the political  View Article
Finextra: On regulation... Solvency II
While Solvency II is of European origin, it has global implications, and while it is primarily targeted at the insurance industry, it has ramifications that reverberate deeply into the global asset management community.  View Article
Reuters: Internal model key to insurers' infrastructure investment, says Fitch
The future ability of insurance firms to invest in infrastructure projects is likely to depend heavily on whether they use internal models to determine their Solvency II capital requirements and can persuade regulators that infrastructure investment merits lower capital reserves, Fitch Ratings says.  View Article
CII: From Brussels with love - A perspective on developing insurance regulation at the EU level
The author, Karel van Hulle, provides some personal reflections on the issues facing the post-financial crisis insurance market, and the responses with the European financial regulatory architecture. He also summarises some principles underpinning insurance regulation at the EU level.  View Article

Asset Management

IMA: Asset management industry crucial to well-functioning capital markets
In its response to the interim report of the Kay Review, IMA welcomes the report's emphasis on the role of the asset management industry, and on the importance of stewardship.   View Article
IOSCO consults on money market fund systemic risk analysis and reform options
IOSCO has published a consultation report which provides a preliminary analysis of the possible risks that money market funds (MMFs) could pose to systemic stability, and consults on an exhaustive range of policy options to address those risks.  View Article
IFA Online: Alternative funds business focus for Jersey
Jersey will be well positioned to grow its alternative funds business when the Alternative Investment Fund Managers' Directive (AIFMD) comes into place.  View Article
Towers Watson: Hedge fund investing - opportunities and challenges
This report aims to provide insights for institutional investors with direct hedge fund portfolios, or those considering investing directly in hedge funds. It offers practical analysis and advice about how to structure investments, as well as about the investments themselves.  View Article
Regulator's help for final salary pensions - NAPF comment
The National Association of Pension Funds (NAPF) commented on the statement published by the Pensions Regulator today to help Defined Benefit (typically final salary) pension schemes, in the current difficult economic environment.  View Article
OECD: Sweden needs an independent committee to oversee National Pension Funds
Sweden should establish an independent committee of experts to oversee its National Pension Funds and set a clear, measurable financial objective for investments to ensure their long-term viability, according to a new OECD report.  View Article
IPE: EU countries requesting 'radical, intrusive' advice on pensions reform
More than half of EU Member States have requested "radical and intrusive" pension reform recommendations from the European Commission to improve public budgets, according to one of the authors of the White Paper on pensions.  View Article
FSA: Pension transfer value analysis assumptions
The Financial Services Authority has published new rules and guidance, following consultation, to strengthen the protection for members of defined benefit pension schemes who are considering moving their money into personal pensions.   View Article
IPE: UK pensions regulator outlines DB funding expectations
The UK Pensions Regulator has outlined how it will account for increased deficits within UK defined benefit schemes in the wake of quantitative easing (QE), stressing it will monitor whether the flexibility granted in negotiating funding proposals has been used appropriately.  View Article
IPE: The difficulty of building an efficient pensions system
Liam Kennedy writes about the British pensions system and says that sometimes it takes a downturn to tackle inefficiencies that are easy to overlook when times are good.  View Article
IPE: Forcing pension funds to make return guarantees a mistake
Pensions experts have warned regulators against requiring pension funds to make minimum-return guarantees, due to the extra costs they would entail.  View Article
ACCA: Facilitating access to equity finance – from trusted advisers to active intermediaries
In a conference about equity finance for SMEs, one of the outcomes was that with the reliance of the European economic recovery on innovative, high-growth firms, improving the SME access to equity finance will be crucial in ensuring European long-term competitiveness.  View Article

Corporate Governance/Accounting

EFRAG commented on the IASB ED Revenue from Contracts with Customers
EFRAG welcomes the IASB's decision to re-expose the proposals, and notes that significant concerns that were raised in EFRAG's comment letter in response to the 2010 ED have been addressed in the revised proposals.   View Article
UK Commons Select Committee: Terms of reference for corporate governance and remuneration inquiry
The UK Parliament Treasury Select Committee published the terms of reference for a new inquiry into corporate governance in systemically important financial institutions. The deadline for submissions is 24 May, 2012.  View Article
IFAC: IAASB's 2011 Annual Report - Foundations for the Future
The IAASB released its 2011 Annual Report, Foundations for the Future. The annual report highlights the IAASB's work in the public interest to strengthen audits globally and build robust standards for audit, assurance and related services.  View Article
IASB: Recommendations of IFRS Trustees on efficiency and effectiveness of IFRS Interpretations Committee
The Trustees of the IFRS Foundation have published their findings following a review of the efficiency and effectiveness of the IFRS Interpretations Committee. The conclusions of the review are consistent with recommendations of the Trustees' strategy review, completed in February 2012.  View Article
ACCA: Building a better business through finance diversity
The ACCA report, 'Building a better business through finance diversity', identifies five key steps for businesses to take in order to harness diversity within their finance teams, and give them a cutting edge in a competitive business world.  View Article
Investors missing from global financial reform process, find ACCA/Grant Thornton roundtables
Investors should be placed at the heart of global financial and accounting standards, say ACCA (the Association of Chartered Certified Accountants) and Grant Thornton in a new report. However, the pair warns that investors' views on shaping future standards are not being heard.  View Article

Financial Services Policy

ECON Committee: Financial markets should be organised, transparent and fair for investors
Investor protection, better organisation of markets, new trading platforms and algorithmic trading emerged as the key issues for MEPs in draft financial market legislation discussed in the Economic and Monetary Affairs Committee on Wednesday.  View Article
Commissioner Šemeta: Tax challenges and opportunities in an ever-closer Union
Commissioner Šemeta said that tax policy had evolved to become an important element in the reinforced economic governance framework. "Working together as a Union gives us strength in numbers in fighting tax evasion and tax fraud."  View Article
House of Lords EU Committee slams plans by European Commission to use a Europe-wide FTT to fund the 2014-20 EU budget
The Committee report says the Commission has 'failed to make a case' for the tax, and suggests that if it were introduced the UK could account for 71 per cent of the revenue it would raise. It calls for the EC to show financial restraint to reflect the austerity being experienced in Member States.  View Article
Patrick Honohan: Philosophy of regulation and supervision
In his speech Mr Honohan, Governor of the Central Bank of Ireland, talked about the bank's approach to supervision in Ireland, including a characterisation of its regulatory philosophy.  View Article
FSA publishes RDR Newsletter April 2012
This newsletter covers RDR readiness, clarifies the 30-month rule, and recaps on the FSA's latest policy updates regarding the RDR.  View Article
BDO warns of RDR clash with European regulations
The FSA would find it "very difficult" to resist European regulations if they clash with RDR rules, accountancy giant BDO has warned.  View Article

Financial Services Month in Brussels - Report

April 2012 Financial Services Month in Brussels
Graham Bishop's personal overview of events in April. The European Union is still only partway through an extraordinarily testing time, and it will emerge from this period as a very different entity from the loose political and economic grouping that went into the crisis.   View Article




© Graham Bishop

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