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13 December 2012

This week in "Brussels"
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Articles from 06 December 2012 - 13 December 2012

Banking

European Council agrees position on bank supervision
The Council set out its position on two proposals aimed at establishing a single supervisory mechanism for the oversight of credit institutions. Barnier said it should be fully ready by March 1 2014, with about 200 banks automatically qualifying for direct ECB oversight. (Includes Barroso statement.) 
Lords Committee publishes report on European Banking Union: Key issues and challenges
As EU leaders gather for the critical European Summit on banking union, the UK Government must ensure that the City of London remains the world's premier financial centre, warns the House of Lords EU Committee in a report published today. 
Reuters: German finance minister signals ready to compromise on banking union
German Finance Minister Wolfgang Schäuble has signalled a readiness to compromise on the EU's planned banking union and said leaders are working intensively to agree on a legal framework by Christmas, German media reported. 
FT: Sweden joins UK outside Europe bank union
Stockholm is the second biggest banking centre outside the eurozone and Swedish ministers have kept their options open on joining the banking union, while expressing their strong objections to the limited rights given to non-eurozone members.  
Open Europe: The eurozone banking union - A game of two halves
Ahead of this week's EU summit, Open Europe has published a new briefing looking at the plans for a eurozone banking union and the various steps that need to be completed to make it credible. 
Robert Schuman Foundation/Perrut: Banking Union in the roadmap for the euro - Interim assessment on the eve of the European Council
Perrut looks into the banking union project that is part of the euro reform programme, and assesses its strategic interest as well as the issues that it raises. 
FN editorial: Banking union won't work while sovereigns get special treatment
The EU wants to ensure that sovereign debt ratings will not come 'out of the blue', at the most inappropriate times, by fixing three set dates per year when credit rating agencies may issue them. 
EPP/Daul: No bank is too big to fail yet too small to be regulated
Leading the plenary debate on the preparations for the European Council meeting, Joseph Daul stressed that there can be no real economic and monetary union without the supervision that goes with it.  
CEPS: Monetary policy and banking supervision - Coordination instead of separation
Thorsten Beck and Daniel Gros argue that a strict separation between the monetary policy and supervisory arms within the ECB is neither desirable nor feasible at this stage.  
Nicolas Véron: Update on the Single Supervisory Mechanism
In an updated version of his October paper, 'Europe's Single Supervisory Mechanism and the long journey towards Banking Union', Véron discusses the legal basis, and looks at German savings banks and the SSM's decision-making structure. He also comments on the Liikanen report. 
Dirk Schoenmaker: Macro-prudential supervision in banking union
Schoenmaker argues that to safeguard the financial system, eurozone macro-prudential tools should be under the ECB, separate from micro-prudential functions, with input from national central banks when differentiation is necessary. 
EBF report: Economic Growth is the Cure
Economic growth has been hampered by deepening tensions in the financial markets, combined with rising unemployment and deleveraging of both the public and private sector, say Chief Economists of the EBF Economic and Monetary Affairs Committee in their end of year outlook on the euro area economy. 
Sharon Bowles: Libor and Euribor settlements should be paid into the public purse
The Chair of the EP's ECON Committee, Sharon Bowles MEP, has said that settlements agreed between banks and regulators over the Libor and Euribor scandals should be paid into the public purse to help reduce deficits. 
Bundesbank: Which banks are more risky? The impact of loan growth and business model on bank risk-taking
In this paper, Matthias Köhler analyses the impact of lending growth and business model on bank risk in 15 EU countries.  
BaFin: "The Liikanen Report takes a holistic approach"
In an interview, BaFin's Chief Executive Director Raimund Röseler says the Liikanen proposals make an attractive alternative – particularly as the report takes a holistic approach. 
Bloomberg: Europe's banks seek Basel review on eve of implementation
Europe's banks are calling for a review of tougher financial regulations on the eve of their adoption, as the region sinks into a recession, dimming prospects of raising $621 billion in capital needed to meet the rules. 
Thomas M Hoenig: Get Basel III right and avoid Basel IV
Rather than pushing through a flawed Basel III, we need to take the time to do it right so we do not have to do it over, comments FDIC vice chairman Hoenig in this FT article. 
EBA: Joint Committee publishes report on the implementation of AML/CTF requirements for e-money in the EU
The Joint Committee of the European Supervisory Authorities (EBA, ESMA and EIOPA) has today published a report on the application of anti-money laundering and counter-terrorist financing obligations to - and the AML/CTF supervision of - e-money issuers, agents and distributors in Europe. 
French President set to miss his pledge on bank reform, Finance Watch warns in open letter
In an open letter sent to Pierre Moscovici, Finance Watch warns that the draft bank reform would fail to deliver President Hollande's pledge to separate the credit activities of banks from their trading activities. 
BIS: Operationalising the selection and application of macro-prudential instruments
The Committee on the Global Financial System (CGFS) has published a report which provides practical guidance for policymakers on how macro-prudential instruments should be chosen, combined and applied. 
Bank of England: Resolving globally active, systemically important financial institutions
The Federal Deposit Insurance Corporation (FDIC) in the United States and the Bank of England in the United Kingdom have today released a joint paper outlining resolution strategies for large and complex firms. 
Gruenberg/Tucker: When global banks fail, resolve them globally
Writing for the FT, the FDIC's Gruenberg and the BoE's Tucker believe that the 'too big to fail' problem can be cured, and that serious progress is being made. 
Commission approves prolongation of German bank support scheme
The European Commission has authorised, under EU state aid rules, the prolongation of a German aid scheme for banks until 30 June, 2013. 
HM Treasury hosts Renminbi Forum
The second meeting of the London–Hong Kong Renminbi (RMB) Forum took place on 4 December in HM Treasury. Bank participants reviewed the supply of global RMB liquidity, developments in clearing and settlement infrastructure, and the growth of RMB products and services.  

Securities

Market abuse: Justice Ministers agree Commission proposals on criminal sanctions
European justice ministers meeting in the Council of the European Union have reached agreement on the Commission's proposals for a Directive on insider dealing and market manipulation that will criminalise such behaviour.  
FESE response to European Commission document on the regulation of indices
The consultation document covers a wide range of benchmarks which are constructed in significantly different ways and are also being sourced from different markets. Moreover, these indices are used as a basis for a large number of financial products that are traded across all asset classes. 
FN: New clearing rules spell stark choice over hedging strategies
Final rules defining the way the $639 trillion global swaps market is to be transferred to central counterparty clearing has left the buyside between a rock and a hard place: either firms put up large amounts of collateral cash or use other derivative products, which could expose them to more risk. 
GFMA comment on G-SIFI Resolution paper from US FDIC and Bank of England
The Global Financial Markets Association provided comments on the cross-border resolution plans published by the US Federal Deposit Insurance Corporation (FDIC) and Bank of England. 
ICMA: CICF publishes papers to contribute to a better-informed debate of collateral-related issues
The Collateral Initiatives Coordination Forum (a grouping of European trade associations representing a broad range of financial market participants internationally) has called for regulatory authorities to focus on the efficient mobilisation of collateral in financial markets.  
DTCC plans to strengthen intraday settlement finality in US markets
The Depository Trust & Clearing Corporation has announced plans to strengthen intraday settlement finality in the US financial markets by proposing the implementation of major structural changes in the settlement of equities, corporate debt and municipal debt securities over the next five years. 

Insurance

Risk.net: Commission targets January start for long-term guarantees assessment
The European Commission is pushing for the impact assessment on the effect of Solvency II on long-term guarantee business to begin by the end of January. 
S&P report says Solvency II could deter insurers from securitisations
Relatively high capital charges for securitisations under the new Solvency II European insurance rules could lead European insurers to reduce exposure to the asset class dramatically and invest in covered bonds instead, according to a report published today by Standard & Poor's Ratings Services. 
Risk.net: Phase-in of Solvency II a threat to level playing field, warn insurers
European insurers have warned that proposals by the chairman of the European Insurance and Occupational Pensions Authority (EIOPA), Gabriel Bernardino, to phase in elements of Solvency II could threaten the Directive's goal of introducing a harmonised supervisory regime. 
Risk.net: New own funds specifications add capital restrictions
New technical specifications on Solvency II's capital requirements make some significant changes to the way insurers calculate their own funds, but they also leave some unanswered questions. 
Geneva Association: Cross industry analysis: 28 G-SIBs vs 28 insurers - Comparison of systemic risk indicators
Leading international insurance think tank, the Geneva Association, has today published a cross-industry analysis comparing the named 28 Global Systemically Important Banks (G-SIBs) to 28 of the world's largest insurers on indicators of systemic risk. 
Risk.net: Enhancing investment efficiencies via tax-transparent funds
Low-yield environment and regulatory requirements have increased the cost of doing business. So it is expected to see European insurers using asset-pooling and tax-transparent fund vehicles in their investment businesses to maximise efficiencies, enhance performance and meet regulatory requirements. 
Risk.net: The clearing revolution
New rules on over-the-counter derivatives are set to have a significant impact on the insurance industry. The rules will require certain OTC derivatives to be centrally cleared and high-quality collateral posted upfront and during the contract to cover counterparty exposure. 
Airmic unveils clause to control use of Reservation of Rights
The main purpose of the new Reservation of Rights (RoR) clause is to agree a 90-day period following any claim or notification of circumstance before the insurer can issue a notice to reserve its rights. 
Airmic: Insurance Claims
A presentation to underwriters needs to give a fair representation of the risks and not hide uncomfortable information in an avalanche of data and glossy corporate publications. 
John Gapper: Insurers must learn lessons from AIG
Business is still being done in the name of insurance that bears little resemblance to it, writes Gapper in his FT column. 

Asset Management

EIOPA consults on draft ITS for occupational pension schemes
EIOPA has launched its Consultation Paper on 'Draft Implementing Technical Standards on reporting of national provisions of prudential nature relevant to the field of occupational pension schemes'. Deadline for comments is 10 March, 2013. 
CBI: EU pension changes would slash jobs and growth
Proposed EU pension changes would force £350 billion (€440 billion) of extra costs on UK businesses, hit long-term growth by a potential 2.5 per cent, slash 180,000 jobs and cut the value of pensions, according to independent analysis commissioned by the Confederation of British Industry.  
Risk.net: The unintended consequences of the UFR
Over the past six months, Dutch pension reform has had an impact on the shape of the interest rate swap curve from the 15-year point onwards. With a compromise solution now on the table, traders say some certainty should return – but what does it mean for the long end of the curve? 
FSA: Review of Outsourcing Arrangements in the Asset Management Sector
The FSA's concern is that if an outsource provider were to face financial distress, UK asset managers would not be able to perform critical and important regulated activities, thereby causing detriment to customers. 
Hedgeweek: ESMA proposals will impact €3 billion of CTA UCITS assets, says Alix Capital
ESMA proposals limiting the use of indices by UCITS funds will require a change in investment approach for €3 billion of CTA UCITS assets, according to a paper published by Alix Capital, the Geneva-based investment boutique specialising in regulated alternatives investments. 
Hedgeweek: New regulations set to raise costs and erode margins
"The operational expense and sheer implementation cost under all this new regulation is not something prime brokers will be able to pass on easily to their clients, so I expect their profit margins will be impacted...", comments Claude Brown, prime brokerage expert at law firm Clifford Chance. 
Hedgeweek: The challenges in prime finance
Organisations are facing significant obstacles to generating proprietary trading revenue and are now focusing as intensely as ever on their client franchises. With its focus on hedge fund financing and service, prime finance is a major pillar of any client-centred banking organisation. 
Hedgeweek: Funds of hedge funds must adapt business model to remain competitive, says SEI study
There are signs of optimism for funds of hedge funds as both investors and managers see the model as resilient and relevant to the long-term investing landscape, despite declining assets and recent negative headlines seeming to signal their decline, according to a study released by SEI. 
IMA: Living wills are needed but not for asset managers
Responding to the Financial Stability Board's consultation on recovery and resolution planning, the Investment Management Association welcomed efforts to ensure firms have suitable resolution plans but said that the fund management industry should not be included in such a regime. 

Corporate Governance/Accounting

Commission plans to modernise European company law and corporate governance
European company law and corporate governance should make sure that companies are competitive and sustainable. The European Commission has today adopted an Action Plan outlining future initiatives in this area. 
ACCA: Modernisation of European company law and corporate governance rules
ecoDa, EuropeanIssuers and ACCA welcome the EC's Action Plan on company law and corporate governance, while recognising that it will raise some implementation challenges. The organisations appreciate the EC's commitment to ensure thorough ex-ante impact assessments on individual initiatives. 
Main results of the Competitiveness Council: Review of accounting requirements for companies
The Council took note of the progress made on the review and simplification of the accounting rules applicable to EU companies. 
IFAC/Ball: Government accounts - clear and present danger
There is an emerging consensus that poor governmental reporting represents a threat to global financial stability and economic growth that must be addressed. A recent IMF paper is the latest to take this view. 
FRC: Feedback Papers on responses to consultation documents on Sanctions Guidance and Disciplinary Schemes
The FRC issued Feedback Papers that summarise the comments received in response to its consultation documents, 'Sanctions Guidance to Tribunals and Disciplinary Schemes – Proposed Changes'. These Papers also outline proposed amendments in response to those comments. 
Compliance Week: Read between the lines - A farewell to IFRS adoption
Matt Kelly reports on a speech given by Julie Erhardt, deputy chief accountant at the SEC, at the AICPA's annual conference on why countries might adopt the IFRSs, and whether the United States will ever get around to adopting IFRS. 
FASB: PCC identified four areas for research
At its inaugural meeting, the Private Company Council (PCC), a new body created to improve the standard-setting process for private companies, identified four areas to research for agenda consideration. 
FASB/Seidman: Current SEC and PCAOB developments
Leslie F Seidman, Chairman of the FASB, delivered her speech to AICPA on current SEC and PCAOB developments. Ms Seidman assesses the improving of financial reporting in the United States and implications for convergence of IFRS and US GAAP in the future. 
The Economist: Two controversies ensnare the Big Four
The Big Four claim that their global scale and multidisciplinary scope are good things. But the events of the past few weeks show there are perils, too, in trying to have the best of all worlds. 

Financial Services Policy

Modernisation of state aid rules - Impact on competitiveness
Competitiveness council ministers exchanged views on the modernisation of the state aid rules and their impact on EU competitiveness, in preparation for the reform of state aid policy to be carried out during 2013. 
Bruegel/Kim: Financial regulatory reforms in the UK and US to manage systemic risks and strengthen consumer protection
The implication of regulatory reforms in the two countries is that systemic risk might be better taken care of by a regulatory body for which it is a sole responsibility. 
Main results of the Competitiveness Council: Professional Qualifications Directive
The recognition of qualifications among Member States has become a fundamental building block of the single market, and professional mobility a key element of Europe's competitiveness. 

European Council/Parliament

European Council 13-14 December 2012: Draft conclusions
The draft conclusions are prepared prior to the summit by the President of the European Council, in close cooperation with the member of the European Council representing the Member State holding the six-monthly Presidency of the Council and with the President of the Commission. 
Plenary Session: 11 EU countries receive Parliament's all clear for a financial transaction tax
11 EU countries planning to introduce a financial transaction tax (FTT) won a resounding go-ahead from MEPs on Wednesday. Together, they account for 90 per cent of eurozone GDP.  

International/G20

Tim Adams appointed to succeed Charles Dallara as IIF Managing Director
Mr Tim Adams, Managing Director of The Lindsey Group, has been appointed to succeed Charles Dallara as IIF Managing Director. He will join the Institute on January 1, 2013 as Managing Director-Designate, and take up his new position on February 1. 

Graham Bishop’s Articles and Speeches

SSM agreed – Implications for the EU Summit – 13/14 December 2012
So the famous year-end deadline for agreeing the SSM may be met – if the European Parliament agrees in time. However, it may be well into 2104 before the ECB feels that the detailed work has been completed and it is ready to take up the day-to-day supervisory tasks. 
Italy after Monti – Graham Bishop's initial thoughts
The probable removal of Mario Monti from the Italian Premiership is exquisitely badly timed for the EU. But he may well have had time to create an enduring, positive legacy for both Italy and the European Union.  
Van Rompuy Final GEMU Report: Graham Bishop's First Comments
The Report proposes as profound a transformation of the European Union as expected, and in three stages: to end-2013; to end-2014; and after that. 





© Graham Bishop

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