03 February 2016

Deepening EMU – Round-up of Key Events – January 2016

Ahead of the Euro Summit in which a deal on EU reform is expected to be reached, Cameron continues his diplomatic efforts as the banking and financial sector keeps on warning of the dramatic effect of a Brexit. Solvency II entered into force, and ECON agreed its report on IORP II.

By Paula Martín Camargo, Editor

Political

With the renegotiation of the terms of UK’s EU membership now at full throttle, has anybody really gauged the effective legal and regulatory consequences a Brexit would entail? Graham Bishop points to the importance of the UK laws being `Equivalent’ to all the post-crisis EU regulatory structure, a particularly inconvenient truth for ‘Brexiteers’.

The UK Parliament’s Treasury Select Committee listened to three heads of financial services associations who told lawmakers that Britain leaving the EU would probably bring "massive disruption" to mutual funds sector, which could lose market access without gaining regulatory freedom. The House of Lords Select Committee headed to Brussels as part of its inquiry on the EU referendum, only to be told that the EU would punish the UK if it votes to leave, forcing a draconian exit to set an example and tackle further disintegration of the European Union. [...]

Financial  

Banking

The EBF responded to the EBA consultation on criteria for a preferential treatment in cross-border intragroup financial support under LCR. Bruegel suggested that EU-wide security of savings must be considered to take banking union seriously. The eurozone recovery is being curbed by bad loans, an issue the ECB plans to address telling banks how to better manage bad loans.

The BCBS reviewed its market risk framework to ensure it delivers credible capital outcomes and promotes consistent implementation of the standards across jurisdictions – this regulation, along with the work programme for the Basel Committee was endorsed by its governing body. BCBS’ revised Trading Book Framework was responded to by GFMA, IIF and ISDA, which were concerned that the rules may have a negative effect on banks’ capital markets activities and reduce market liquidity.  [...]

Securities

ICMA Quarterly Report concluded that CMU may also have a microeconomic impact through its reforms of the structure of capital markets. The FESE responded to ESMA on indirect clearing arrangements under EMIR and MiFIR agreeing with the need for clients to be offered a choice of account types. ESMA is to cooperate with Canadian and Swiss regulators on CCPs, and to that purpose it has established three MoUs under EMIR. [...]

Asset Management

The European Parliament agreed a reformed IORP II draft that was welcomed by PensionsEurope as ‘more practicable, proportionate and less prescriptive’.

EIOPA published the results of the first EU stress test for occupational pensions, presented by its chairman Bernardino as an important insight into vulnerability to market shocks. However, EIOPA’s approach to stress tests was challenged by the Dutch pensions industry and by PensionsEurope, which warned that the results do not necessarily give the correct picture of an IORPs’ ability to cope with stress scenarios. [...]

Financial Services Policy

ECON issued a report on the impact and the way forward towards a more efficient and effective EU framework for Financial Services Regulation and a CMU. The ESAs wrote to the European Commission on cross-selling of financial products in the EU: the cumulative impact of regulation subject to a Call for Evidence by the EC was also responded by ICMA, whose letter focuses principally on the issue of market liquidity. [...]

Full article for consultancy clients here