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12 May 2010

This week in "Brussels"
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Articles from 06 May 2010 - 12 May 2010

Financial Services Policy

Barroso: “We will defend the euro whatever it takes”
Speaking after the Eurozone summit meeting, President Barroso explained that the Eurozone Heads of States agreed to take action on the following issues: improvement of fiscal consolidation, reinforcement of budgetary surveillance and a complete financial market reform.   View Article
Extraordinary ECOFIN agreed on a European financial stabilisation mechanism - total volume of up to € 500 billion
The stabilisation mechanism is based on Art. 122.2 of the Treaty and an intergovernmental agreement of euro area Member States. Its activation is subject to strong conditionality, in the context of a joint EU/IMF support, and will be on terms and conditions similar to the IMF.  View Article
IMF approved €30 billion loan for Greece on fast track
Asked why Greece should not opt for restructuring its debt, IMF Lipsky said debt restructuring would create more problems than it could potentially solve, with a default making things much worse. Greece is also updating its prudent debt management tools to ensure that risk is adequately managed.  View Article
ECB decides on measures to address severe tensions in financial markets
The ECB Governing Council decided to conduct interventions in the euro area public and private debt securities markets to ensure depth and liquidity in those market segments which are dysfunctional. The objective of this programme is to address the malfunctioning of securities markets.  View Article
Commission communication on reinforcing economic governance in the EU
The aim is to strengthen the functioning of the Stability and Growth Pact and extend surveillance to macro-economic imbalances. It proposes to align national budget and policy planning through the establishment of a "European Semester" for economic policy coordination.  View Article
ECON committee MEPs vote to beef up financial supervisory package - well beyond Council proposals
The European Parliament's push to strengthen the powers of new financial regulators creates a clear gap with national governments, making it harder to implement the supervisory overhaul by 2011. The first reading agreement seems now more difficult to reach.   View Article
World Economic Forum on Europe: Unprecedented rescue package to reinforce the Euro
During the debate focused on Europe’s sovereign debt, Commissioner Rehn assured participants that closer monitoring of government finances and more rigorous enforcement of the deficit criteria will remain at the core of the internal surveillance mechanism of the euro area.  View Article
EP published FAQ on the financial supervisory package ahead of the ECON vote
The general rapporteurs’ opinion is that more European integration is necessary in the field of financial supervision. They also argue that the structure which existed during the crisis led to fragmented responses and prevented a clear picture from emerging for the supervisory committees.   View Article
Trichet: Shift in the paradigm of finance that can do more harm than good
If banks neglect their primary activity of due diligence, and if they come to abuse risk control techniques, liquidity creation and arbitrage opportunities, finance will do more harm than good to the economy, Trichet said. The enforcement of transparency in financial structures is essential.   View Article
Monti report on a new strategy for the single market
The report's key recommendations on financial services include making sure that the structure of financial supervision is such as not to lead to fragmentation of the single market and to explore the possibility of reinforcing financial integration through the issuance of E-bonds.  View Article
CESR to take a coordinated effort to respond to the recent market turmoil
Following the recent exceptional volatility in the securities and derivatives markets, CESR has decided to pay attention to potential breaches of conduct of business rules and cases of market abuse with a view to coordinating the actions of national supervisors.   View Article
Schuman Declaration of 9 May 1950 - In these troubled times for the euro, a reminder of why the EU was founded
"Europe will not be made all at once, or according to a single plan. It will be built through concrete achievements which first create a de facto solidarity. The coming together of the nations of Europe requires the elimination of the age-old opposition of France and Germany...."  View Article
Barnier: EU and US are on the right track in regulating financial markets
Speaking at the European Institute in Washington, Commissioner Barnier stressed that it is essential that both sides of the Atlantic reach the same objectives with banking capital reform, otherwise regulatory arbitrage will rule financial markets.   View Article
FT: European banks in bonds plea to ECB as Greece fears rattle markets
Worried bankers from 47 European groups urged the ECB to become a "buyer of last resort" of eurozone government bonds to steady markets. Moreover, the cost for European banks to insure themselves against default rose to levels last seen after Lehman's collapse.   View Article
Geithner says root cause of crisis was failure to give regulators enough power
Geithner said the lack of authority for regulators to restrain financial risk was a fundamental cause of the 2008 crisis. Regulators didn't know before the crisis hit how that "shadow" banking system could shake the foundations of the economy.   View Article
Yoshikuni: This time Asia is different
Shinichi Yoshikuni, senior advisor to Mizuho Securities, said that Asian financial institutions are based on different government structures and business practices than those in the US and the EU. Accordingly, they have not suffered seriously from the North Atlantic crises.   View Article
G7 and G20 welcome EU area support measures
Both the G7 and the G20 member states support the actions taken by the Euro Area heads of state and government European Financial Stabilisation mechanism with a total volume of up to 500 billion euros.   View Article

Banking

EBF concerned about CEBS interpretation of concentration risk
EBF’s comments on CEBS guidelines on stress testing include that supervisors should recognise that certain concentrations of risk, especially those that arise across risk types are difficult to evaluate in a quantitative manner and consequently recognise the validity of a large array of approaches.  View Article

Securities

CPSS and IOSCO consult on policy guidance for central counterparties and trade repositories in OTC derivatives market
These two complementary sets of high-level guidance constitute an important response of the CPSS and IOSCO to the recent financial crisis. They also reflect the G20's recommendations for the strengthening of the OTC derivatives market.   View Article
MiFID review: CESR consults on non-equity markets transparency
Since derivatives were not analysed in the past, CESR is now also exploring the possibility of a post-trade transparency regime for the most significant subset of these financial instruments: interest rate derivatives, equity derivatives, foreign exchange derivatives and commodity derivatives.  View Article
IOSCO Tanzer: Implementation of standards essential
Speaking at the ICSA conference in Istanbul IOSCO Secretary General Greg Tanzer underlined that it cannot be the goal of regulation to finally take the existing risks out of the market.   View Article
CESR Comporti calls for increased transparency standards
Speaking at the ICSA event in Istanbul, Mr Comporti said that it is not sure if Europe will introduce a similar regime for consolidated market data as in the US. However, post trade transparency has to be brought within the scope of regulation.  View Article
BIS: OTC derivatives market activity in the second half of 2009
The report reveals that total notional amounts outstanding for OTC derivatives increased modestly in the second half of 2009, to $615 trillion. The increase was evenly spread among risk categories - with the exception of commodities and CDS, which receded by 21% and 9%, respectively.  View Article

Insurance

OECD issues paper on impact of the financial crisis on the insurance sector and policy responses
The paper clarifies the nature of the impact of the financial crisis on the insurance sector in OECD economies and reviews governmental and supervisory responses. It also recommends to properly consider the systemically important insurers and to strengthen insurer corporate governance standards.  View Article

Asset Management

Council general secretariat reveals the state of play on AIFMD – first reading desirable
The document calls on the Coreper to verify, if there is either unanimity or a qualified majority supporting the adoption of the general approach. It also recommends the Presidency to start negotiations with the EP on the basis of the general approach so as to reach an agreement at first reading.  View Article
ECON committee postponed vote on AIFMD – now on 17 May
AIFMD has excited much discussion and MEPs have tabled 3000 amendments. The vote postponement is due to a clash of competences between the JURI committee which is in charge of giving opinion on the legal aspects of the directive, and the ECON committee.  View Article
European Economic and Social Committee’s opinion on AIFMD
Although endorsing the much debated proposal of the European Commission, the EESC calls for uniform risk data provision for all AIF and emphasizes their responsibility in triggering the crisis. The EESC insists that all alternative investment fund managers should be covered by the AIFMD.  View Article

Corporate Governance/Accounting

IASB addresses ‘counter-intuitive’ effects of fair value measurement of financial liabilities
The IASB is proposing that all gains and losses resulting from changes in ‘own credit’ for financial liabilities that an entity chooses to measure at fair value should be transferred to ‘other comprehensive income’. Changes in ‘own credit’ will therefore not affect reported profit or loss.   View Article
IPSASB 2010 handbook of pronouncements
The handbook provides a comprehensive set of accounting requirements specifically for preparers of public sector financial statements. It also includes a set of principles that will underpin the IPSASB's standard setting activities for the long-term and maintaining alignment with the IASB’s IFRSs.  View Article
ESBG: IFRS 9 defines the amortised cost category too narrowly
ESBG also reiterate its concern regarding the piecemeal approach adopted by the IASB. In order to fully assess the impact of a mixed measurement accounting model, it is necessary to form a view of the entire situation, including impairment rules and hedge accounting principles.  View Article
IASB concludes 2008-2010 cycle of annual improvements to IFRSs
The IASB issued Improvements to IFRSs - a collection of amendments to seven International Financial Reporting Standards - as its latest set of annual improvements.   View Article

Competition: Financial Services

State aid: Commission clears Swedish restructuring aid for Carnegie Investment Bank
Sweden's quick resolution of the problems of Carnegie is an example of effective restructuring, in terms of addressing the bank's viability, the legitimate competition concerns of others and of ensuring that former shareholders contributed to the cost of restructuring, said Commissioner Almunia.  View Article

Brief Opinions/Commentaries

Wolfgang Münchau: The eurozone must take responsibility or it will split
Münchau argues that a minimally sufficient fiscal union, about 5 per cent of eurozone GDP is needed. This could act as an automatic stabiliser to help cope with asymmetric shocks. Moreover, to make it work, binding policy co-ordination mechanisms are needed too.  View Article
Paul Goldschmid’s analysis of the Euro rescue package
Goldschmid concludes that a minimum form of credible “economic governance” must be introduced at EMU level, while at the same time the legislative process of reforming the financial system should be pursued with even greater determination.   View Article

Financial stability - policy analysis

CER: Closing the gap between rhetoric and reality is key to the euro's survival
Simon Tilford argues that there needs to be an acknowledgement that if the euro is to work it will require greater integration. The problem is that when countries signed-up to the single currency, they were not made aware that it would require such integration. Politician need to start explaining it  View Article




© Graham Bishop

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