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03 June 2010

This week in "Brussels"
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Financial Services Policy Banking Securities
Insurance Asset Management Corporate Governance/Accounting
Competition: Financial Services Edited Minutes of key legislative Bodies Brief Opinions/Commentaries
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Articles from 27 May 2010 - 03 June 2010

Financial Services Policy

Commission Communication on Financial Services 2010-2011 – "Regulating financial services for sustainable growth"
The Commission outlined its work programme for the next months, stating that it will come forward with proposals on the functioning of derivatives markets in summer, and will also propose appropriate measures on short selling and credit default swaps, including 'naked short-selling'.   View Article
Commission publishes two reports on remuneration policies in the financial services sector and for directors of listed companies
The evaluation report concludes that 10 Member States – Austria, Belgium, Denmark, Germany, Italy, Lithuania, the Netherlands, Portugal, Slovenia, and the United Kingdom – have implemented at least half of the recommendations.  View Article
ECON committee discussion on Eurostat's powers and quality of budgetary deficit data
MEPs asked the Council to grant more audit powers to Eurostat and agreed on minimum standards for statistical data. It also calls for Member States to be obliged to provide more information to Eurostat.   View Article
MEP Sharon Bowles supports proposal to give Eurostat powers to improve the quality of European statistics
ECON Chairwoman Sharon Bowles highlighted that the Commission proposal is a minimum needed as a result of the Greek case and reporting obligations need to be enforced among all Member States. This reporting should include details of any off-balance sheet activity.  View Article
ECON committee - consideration of amendments on the remuneration own-initiative report
Rapporteur El Khadraoui (S&D/BE) called for action on compensation practices. The amendments discussed included greater proportionality, meaning not just looking at salary but also at pension rights as part of the remuneration package and also to look at remuneration practices of listed companies.   View Article
Trichet: The ECB’s response to the recent tensions in financial markets
Trichet stressed that countries have to take up their responsibilities. Major improvements need to be made to prevent bad fiscal behaviour, ensure effective implementation of the recommendations made by partners and enforce real and effective sanctions in case of breaches.  View Article
ECB Financial Stability Review - modest return to profitability in 2009
ECB measures taken to stabilise markets as well as the establishment of the European Financial Stabilisation Mechanism have considerably lowered tail and contagion risks. However, sizeable fiscal imbalances remain, and the responsibility rests on governments to accelerate fiscal consolidation.   View Article
ECB Papademos: Banks should ensure they have adequate capital and liquidity buffers
Papademos highlighted that the main risks for the euro area financial system include the possibility of vulnerabilities of financial institutions associated with concentrations of lending exposures to commercial property markets and to central and eastern European countries.  View Article
AFME conference on financial markets and the real economy
The provisions on the trading book of CRD III will start applying mid-2011 and not as initially scheduled for early 2011, Director General Jörgen Holmquist said explaining the EC work programme on financial services and referring to an agreement between Commissioner Barnier and Geithner.  View Article
Eurofinas: European consumer credit experiences downturn in 2009; lenders expect little growth in 2010
Eurofinas 2009 Annual Survey shows that total new credit granted by Eurofinas members was down -12.6% in 2009 compared to 2008. This comes as little surprise as households concentrate their efforts on repaying existing loans.  View Article

Banking

FT: Bankers' 'doomsday scenarios' under fire from Basel study chief
Banks are exaggerating the economic effects of the regulations they are likely to face, BIS chief economic advisor Stephen Cecchetti said. The banks' "doomsday scenarios" were based on them assuming "the maximum impact of the maximum change with the minimum behavioural change".  View Article
European Parliament Draft Report on Basel II and revision of the Capital Requirements Directives (CRD IV)
The Committee’s proposal aims to improve the quality of the capital base, extend and strengthen the coverage of the capital framework. The Committee also intends to introduce a leverage ratio, other supplementary countercyclical measures such as capital buffers, and standards on liquidity management  View Article
ECON committee – first exchange of view on the CRD IV own-initiative report
Rapporteur Othmar Karas called for a coordinated timetable on both sides of the Atlantic. He warned that differences in implementation will create a disadvantaged level playing field and undermine the future CRD IV or Basel III.   View Article
German Banks Association welcomes European Commission's proposals on bank resolution funds
The Commission’s proposals go in a similar direction to those of the German government. It is important to establish a standard criterion throughout Europe for who will pay into the fund and for how the money is to be spent. This is a prerequisite for the idea's success  View Article

Securities

Commission working document on transparency requirements for listed companies
The current financial crisis demonstrates that the disclosure of accurate and timely information about securities issuers is essential. The document describes the impact of the Transparency Directive and how it has been complied with. It also presents the main issues emerging from its application.  View Article
Commission consults on possible ways forward to modernise the transparency regime for listed companies
The EC has published a report which describes the impact of the Transparency Directive and how it has been complied with, identifies the main issues emerging from the application of the Transparency Directive and draws a number of conclusions.  View Article
ECON committee debate and vote on OTC report
The committee resolution advocates "abandoning the misjudgement that derivatives need no further regulation because they are only used by expert financial professions". Instead, it calls for strict rules to prevent inexperienced users and speculators from building up dangerous levels of risk.   View Article
Spain’s stock market regulator toughens rules on short selling
The CNMV has agreed, among other measures, to establish the obligation to communicate to the CNMV all short positions that exceed 0,2% of the issued shares admitted to trading.  View Article
Commission proposal to improve EU supervision of Credit Rating Agencies
The new European Securities and Markets Authority would be entrusted with exclusive supervision powers over CRAs registered in the EU. This would include also the European subsidiaries of well-known CRAs such as Fitch, Moody's and Standard & Poor's.   View Article
ECB published its opinion on the Prospectus Directive
The ECB welcomes the current dialogue between the ECB, the competent authorities and the industry on the possibility of creating a standard for reference data on securities and issuers, with the aim of making such data available to policymakers and regulators.  View Article

Insurance

European Mortgage Federation newsletter: Solvency II – Covered Bonds’ New Best Friend?
Solvency II will produce a more consistent solvency standard across insurers in the European region. Importantly, Solvency II marks the first time a pan-European regulatory regime will force insurers to hold capital against their investment portfolio.  View Article

Asset Management

Economic Policy Committee and Social Protection Committee Joint Report on pensions
The report concludes there is a need to carefully review pension policy in the context of the aftermath of the crisis and the overall Europe 2020 vision, taking a holistic approach in view of delivering sustainable and adequate retirement incomes.   View Article

Corporate Governance/Accounting

Commission consultation on Green Paper on corporate governance in financial institutions
The Commission consultation deals with issues that include how to improve the functioning and the composition of boards of financial institutions in order to enhance their supervision of senior management or how to establish a risk culture at all levels of a financial institution.   View Article
The Financial Reporting Council issues new governance standards for listed companies
New standards include a clearer statement of the board’s responsibilities relating to risk, a greater emphasis on the importance of getting the right mix of skills and experience on the board, and a recommendation that all directors of FTSE 350 companies be put up for re-election every year.  View Article
ACCA responds to FRC's proposed changes to new UK Governance Code - FRC could have gone further
ACCA has some reservations about some of the provisions of the new Code. For example, all directors of FTSE 350 companies should be subject to annual re-election. During the consultation process, ACCA expressed concern that these changes could lead to an even greater focus on the short-term.   View Article
EFRAG's comments on the IASB's ED Presentation of Items of Other Comprehensive Income - Proposed amendments to IAS 1
EFRAG objects to IASB’s initiative to remove the option of presenting performance in two statements prior to the discussion of fundamental issues related to performance reporting. EFRAG also observes that this proposal would not result in any change/improvements to the current financial reporting.  View Article
IASB and FASB issue statement on their convergence work
It is expected that the common action by the FASB and IASB will not negatively impact the Securities and Exchange Commission’s work plan, announced in February, to consider in 2011 whether and how to incorporate IFRS into the US financial system.  View Article
IASB proposes improvements to the presentation of items of other comprehensive income
The IASB published for public comment proposals to improve the consistency of how items of Other Comprehensive Income (OCI) are presented. The proposals have been jointly developed with the US Financial Accounting Standards Board.   View Article

Competition: Financial Services

Commission report on recent developments on crisis aid to the financial sector – spring 2010
The report concludes that it is important to continue the restructuring of the banking sector, including the cleaning of balance sheets and the strengthening of banks’ risk bearing capacity, in order for the banks to be able to perform their function of lenders to the real economy without State aid.   View Article

Brief Opinions/Commentaries

Wolfgang Münchau: Why the optimists are wrong about the eurozone
Münchau argues that the eurozone needs a consolidation strategy based on growth and a credible fiscal adjustment plan. It needs to encourage domestic demand in northern Europe to facilitate the adjustment in southern Europe and a new and functioning system of economic governance.  View Article




© Graham Bishop

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