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22 April 2010

This week in "Brussels" + Podcast
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Financial stability - policy analysis   About this email

  Articles from 15 April 2010 - 22 April 2010

  Financial Services Policy

 
 
 
Salgado: Crisis prevention instruments are not an insurance policy permitting banks to take risks
The implementation of financing instruments that are maintained by the banks themselves, are being considered to design a crisis prevention strategy, Spanish Economy Minister Salgado said and announced that the EC plans to propose an EU resolution crisis framework in October.  View Article
 
Commissioner Barnier: The EC needs to close the regulatory loopholes and to take action against non-cooperative jurisdictions
In an interview published in the April DG MARKT magazine, Barnier was optimistic on the AIFMD vote and said that with a bit of good will on all sides a final agreement is possible before the summer. The Commission will also focused its work on promoting the standardisation of derivatives.  View Article
 
CRIS Committee Hearing on exit strategies: Choosing the right ways out of the crisis
"We do not want a system that creates crisis",Columbia University Professor Griffith-Jones said. He argued that we need a financial system which is sustainable and able to withstand future shocks. This means better regulation and simple rules for hedge funds, derivates and off-balance banking sheets  View Article
 
ECB’s report on the lessons learned from the crisis regarding the functioning of European financial market infrastructures
The Eurosystem identified procedures and rules that might be enhanced to cope better with similar events in the future. The report focuses on information flows following a default, behavioural factors and issues relating to the OTC markets.  View Article
 
SWIFT: Spanish Presidency guarantees no mass transfer of financial data to USA
The concerns of the EP on a new agreement for transferring financial data to the United States will be taken into account in the negotiations, especially the main fear expressed by MEPs over a possible "wholesale" transfer of data, Secretary of State for the EU Diego López Garrido said.   View Article
 
EBF concerned over accumulation of proposed measures and impact on the real economy
European banks consider essential that the financial regulatory package as a whole - including the results of the calibration - is made available for further consultation and assessment. It also stresses that all reforms must be implemented progressively and simultaneously worldwide.   View Article
 
JSDA warns against inappropriate uniform regulations on capital requirements
The Japan Securities Dealers Association is concerned that uniform regulations excessively focused on capital requirements without proper consideration of the differences among jurisdictions may lead to skewed risk-taking incentives and impair the stability of real economies and financial markets.  View Article
 
EFR letter to G20 finance ministers concerning the recent regulatory developments
EFR believes that authorities should have a sufficiently large arsenal of crisis management tools to deal with the successive stages of early intervention, recovery, and resolution, or insolvency so the financial institution failure can be managed in an orderly way to maintains financial stability.   View Article
 
The EU evaluates the possibility of supervising national budgets
Speaking at the informal ECOFIN Council meeting in Madrid, Commissioner Rehn explained that the idea is to create a "European semester for designing economic policy", between January and July, so that for next spring Brussels can know the main budgetary lines of each country for the coming year.   View Article
 
IMF: Government borrowing is rising risk to world financial system
The biggest threats for advanced economies have moved from the private to the public sectors. Governments not only took on many of the bad assets from private institutions, they also face heavy borrowing needs for the next few years due to the continuing recession.   View Article
 
IMF report to G20 suggests tax on bank balance sheets
The report reveals that a “financial stability contribution” would work best if it were levied on bank balance sheets, specifically their liabilities. The IMF suggested each country would want to raise between 2 per cent to 4 per cent of its gross domestic product over the long term.  View Article
 
IMF and FSB hold joint conference on implementing G-20 recommendations on information gaps
The conference recognized that some of the most challenging recommendations to implement - such as measuring aggregate leverage and maturity mismatches, and gaining a better understanding of financial networks - were among the most relevant for financial stability analysis.  View Article
 
US Senate approves tougher rules on derivatives trading
The Senate approved the so-called Lincoln’s bill that imposes tougher rules for derivatives by introducing higher transparency requirements and providing strong oversight of market participants. Congress is expected to pass a far-reaching overhaul of the financial regulatory system soon.  View Article
 
SEC charges Goldman Sachs with fraud in marketing of CDO
Goldman Sachs failed to disclose to investors vital information about the CDO, the SEC states and charged the company and its vice president Fabrice Tourre, alleged to be principally responsible for the ABACUS 2007-AC1, for defrauding investors.   View Article
 

 
  Banking

 
 
 
ABBL responded to the Commission consultation on CRD IV – Single rule book will be difficult to achieve
Concerning liquidity standards, ABBL believes that the proposed metrics fail to recognise the characteristics of two significant banking products and activities: the custodian banks’ activity related to the investment funds, and the mortgage lenders using Covered Bonds as funding instruments.   View Article
 
EFR responded to the Commission’s consultation on CRD IV
EFR calls on the Commission to await the completion of the CEB impact assessments on capital requirements before further steps are taken. If the outcome of the impact assessments confirms the preliminary analysis mentioned above, the proposed rules should be fundamentally reconsidered.   View Article
 
EFR responded to the BCBS consultations on “Basel III” – liquidity and capital requirements
The European Financial Services Round Table is very concerned that consequences of the Basel Committee’s capital and liquidity proposals for the economy will be severe as the banking industry’s capacity to finance the economy would be strongly hampered by the proposed measures.  View Article
 
ABBL replied to the Basel consultation on “Strengthening the Resilience of the Banking Sector”
In ABBL view, what is relevant is not the leverage as such, but rather the risks that are leveraged by a bank. Hence, a leveraged portfolio composed of non-risky assets may well be less risky than a non-leveraged portfolio composed of risky assets.  View Article
 

 
  Securities

 
 
 
ECRI: Shaping reforms and business models for the OTC derivatives market
The paper explores the three major sources of disruptive effects in OTC derivatives: liquidity, counterparty risk and legal uncertainty. It also finds that the EU and US proposals are divergent and the author warns that such divergences may encourage regulatory and supervisory arbitrage.  View Article
 
AFG responded to CESR’s consultation on OTC derivatives
AFG calls on CESR to specify that the reporting entities are those to whom the settlement operations are delegated. AFG also belives that there is a need to keep the operational flexibility to either amend or cancel a trade to reflect events on the life of the trade.   View Article
 
CESR published feedback statement on understanding the definition of advice under MiFID
CESR clarifies that a service will only be considered as investment advice if it meets all five of the tests set out in CESR's Q&A. CESR also accepts that in practice firms can often place greater reliance on the ability of professional clients to understand whether they are receiving advice.   View Article
 
CESR final position on good and poor practices on inducements
According to CESR all fees necessary for the provision of order execution services which cannot give rise to conflicts with the best interests of the investment firm’s clients and all kinds of fees paid by a firm in order to access on a given execution venue should be considered as "proper fees".  View Article
 

 
  Insurance

 
 
 
CEIOPS main background document for its L2 advice on calibrations
The calibration paper provides background information and compiles all the technical analysis carried out by CEIOPS in calibrating the Solvency Capital Requirement standard formula, as well as key parameters for the calculation of the Technical Provisions.  View Article
 

 
  Asset Management

 
 
 
AIMA: EU should not diverge from G20 path on hedge fund regulation
AIMA also warned against a potential protectionist outcome from the AIFMD, saying that any restrictions imposed on European investors would also hit asset managers in other financial centres outside the EU, such as the US, Japan, Hongkong and Australia.  View Article
 
CESR feedback on Key Information Document disclosures for UCITS
Concerning risk and reward disclosure and in light of the results of the consumer testing exercise and stakeholder feedback, CESR confirmed its preference for a synthetic risk and reward indicator accompanied by a narrative text.  View Article
 
CESR feedback on level 2 measures on mergers, master-feeder structures and cross-border notification of UCITS
As regards mergers of UCITS, CESR provides further clarification on the distinction between information provided to unitholders in the merging UCITS and the receiving UCITS, as well as on the content of the information to be included to allow unitholders to make an informed decision.  View Article
 
CESR consults on risk measurement and the calculation of global exposure and counterparty risk for UCITS
CESR stressed that the calculation of the global exposure is only one element of the UCITS’ overall risk management process. It remains the responsibility of the UCITS to select the right methodology to calculate it. CESR proposes methodologies to be followed by UCITS when VaR approach is used.  View Article
 

 
  Corporate Governance/Accounting

 
 
 
IAASB 2009 annual report highlights implementation and assurance developments
The report highlights the completion of the landmark Clarity Project surrounding the IAASB's International Standards on Auditing (ISAs), the development of adoption and implementation resources for the ISAs, and the launch of innovative new projects to address emerging issues.  View Article
 
EFRAG and European national standard-setters published report on performance reporting
The report summarizes all the comments received on EFRAG European discussion paper. The paper provides useful analysis on the current state of play in the accounting framework, including inconsistencies in the determination and (non-)recycling of Other Comprehensive Income (OCI) items.  View Article
 

 
  Competition: Financial Services

 
 
 
Almunia: There is a need to avoid "zombie banks" that stay alive but are too weak to lend to the real economy
Speaking at a conference on Europe 2020 strategy in Bonn, Commissioner Almunia said the Commission is currently discussing the restructuring measures with the German authorities and a number of German banks, including Bayern LB or HSH Nordbank. The measures include downsizing and divestment measures  View Article
 

 
  Brief Opinions/Commentaries

 
 
 
Nicolas Véron: The challenge of Europe’s effort at financial redesign
The existence of an EU level of financial supervision is a necessary, though not sufficient, condition for sustainable market integration, Véron argues. He also shows the practical challenges that the new ESA’s could encounter with respect to power-sharing and governance.  View Article
 

 
  Financial stability - policy analysis

 
 
 
BIS Hervé Hannoun: What has the crisis taught us on information gaps?
Speaking at an IMF/FSB joint conference in Basel, Herve Hannoun emphasized that there is a need to "see" consolidated balance sheets, both at the individual bank level and in aggregate, since it is across the whole balance sheet that stresses build up.   View Article
 
Sveriges Riksbank Stefan Ingves: The importance of being savvy – lessons on European crisis management
Although EU Member States already signed a MoU to improve cross-border cooperation of banking groups in 2008, the cooperation remained limited in reality, Sweden’s central bank Governor said. To build a well-functioning cooperation structure is highly time consuming but is urgently needed.  View Article
 
BIS Caruana: Backstopping global banking
Speaking at the ECB/EC joint conference in Frankfurt, Jaime Caruana highlighted that a new framework for global financial stability addressing the challenges of system-wide risks head-on is needed. Such a framework needs contributions from monetary, fiscal, and macro- and micro prudential policies.  View Article
 

 

 


© Graham Bishop

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