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20 January 2011

This week in "Brussels"
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Asset Management Corporate Governance/Accounting Graham Bishop’s Articles
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Articles from 13 January 2011 - 20 January 2011

Banking

BCBS issued final reform elements to raise quality of capital
The Basel Committee issued minimum requirements to ensure that all classes of capital instruments fully absorb losses at the point of non-viability before taxpayers are exposed to loss.  
The EBA elected its decision-making bodies and prepares new EU-wide stress test
The 2011 stress test will be carried out in cooperation with the national supervisory authorities, the European Systemic Risk Board, the European Central Bank and the European Commission, and will cover a broadly similar group of banks as last year. 
European Banks: EU Crisis Management Framework is top priority for 2011
The framework is particularly welcomed as the proposed tools for resolution of banks in distress may solve the “too-big” or “too-interconnected to fail” conundrum.  
Presidency compromise text on the review of the Deposit Guarantee Schemes Directive
Some Member States have institutional protection schemes which are ensuring liquidity and solvency of their members within their jurisdiction. These countries have concerns that the Commission’s proposal could be interpreted in a way that requires many of their banks to pay a double contribution. 
EBF position on personal data protection in the European Union
EBF warns that there is a trend in consumer protection legislation towards requiring banks to provide customers with so much information that the question arises whether it is more than they want or can understand.  

Securities

ESMA finds diversity across Europe in regulators’ contingency measures for financial crisis situations
In December 2009, a mapping exercise was launched in order to provide a better understanding of how national authorities in the financial sector across Europe are equipped to deal with emerging crisis situations and apply contingency measures available to them at national level. 
ESMA consults on updated guidelines on the application of the CRA endorsement regime
In the light of the proposal for amending Regulation (EC) No 1060/2009, ESMA has started the process of issuing and updating the guidelines on the application of the endorsement regime. 
ESMA Work Programme for 2011
There are four broad areas of work streams: 1) TOP priorities (high), 2) technical work streams (med), 3) ESMA Staff work (low) and 4) joint committee work streams. 
ECON chairwomen Sharon Bowles: FX underpins how the world trades
Speaking at the HSBC/AFME FX derivatives conference in Brussels, Sharon Bowles said that at present, only 75% of market participants are signed up to Continuous Linked Settlement, some being reluctant because of cost. 
ECB Opinion on OTC derivatives, central counterparties and trade repositories
The ECB notes that this reform, in general, will have enormous practical consequences for market participants, particularly with regard to operations, risk management and legal documentation. 
EuropeanIssuers’ response to the EC Consultation Paper 'Credit Rating Agencies'
EuropeanIssuers states that the measures designed to prevent another crisis in the financial sector should not impact all corporates, as issuers of corporate bonds companies were not the cause for the crisis and should not be penalised for using the capital markets. 
AFME: FX industry at regulatory crossroads
The Foreign Exchange (FX) event hosted in Brussels on 12 January 2011 by the Association for Financial Markets in Europe (AFME), in conjunction with HSBC, arrived at a critical time for an industry under the regulatory spotlight in Europe and the US. 
CFTC holds ninth open meeting on Dodd-Frank
The Commission approved a proposed rulemaking regarding position limits for derivatives and a proposed rulemaking regarding swap trading relationship documentation requirements for swap dealers and major swap participants. 
ISDA submission on CSA paper on regulation of OTC derivatives regulation in Canada
ISDA asks that the regulators consider the global nature of the markets when drafting derivatives rules so that they do not restrict the ability of Canadian entities from continuing to participate and be competitive in the global derivatives markets. 
FN: In praise of dark pools of liquidity
Xavier Rolet writes that as the debate around MiFID II heats up, there is a certain measure of hostility from many bourses and continental European regulators and politicians towards dark pools – venues which offer pre-trade confidentiality.  
AmCham EU calls for transatlantic consistency in short selling
AmCham EU is concerned that draft legislation could itself have unintended negative consequences, ultimately raising costs for EU governments issuing sovereign debt and for corporate issuers of debt or equity. 
Financial News: Dutch outsider lands top ESMA role
An article in the FN states that London-based traders were left scratching their heads after one of the most important roles in European regulation was given to an outsider from the Netherlands. 
SEC proposes rule for the timely acknowledegment and verification of security-based swap transactions
The Securities and Exchange Commission today voted to propose a rule governing the way in which certain security-based swap transactions are acknowledged and verified by the parties who enter into them. 
CNMV: Proposed reforms to Spain's securities clearing, settlement and registry system
CNMV launches a public consultation on “Proposed reforms to Spain's securities clearing, settlement and registry system”. 

Insurance

Commission published the “Omnibus Directive” II – Complementing the framework for financial supervision in Europe
The EC legislative proposal contains a limited set of amendments to the "Solvency II" Directive, including the provision of more specific tasks for EIOPA, such as ensuring harmonised technical approaches on the use of ratings in relation to the Solvency Capital Requirements.  
EIOPA released its medium-term work plan to reflect on the current status of the Solvency II project
By launching the work plan, EIOPA emphasises the need for a risk-based regulation as well as its commitment to supporting a smooth transition to the Solvency II framework for all participants. 
CEA seeks consultation on applying Solvency II principles to IORPs
As things stand, when insurers move to the sophisticated new Solvency II regime, the institutions for occupational retirement provision that are currently subject to the same regulation as insurers — Solvency I — will continue to be regulated under that older and somewhat cruder system.  
FT: Lloyd’s to push for reserves reduction
Lloyd’s of London is pushing for cuts in the amount of capital that insurers are required to hold against exposure to major catastrophes under new European rules, which threaten to force the historic insurance market to hold billions more in capital. 

Asset Management

AIMA responds to ESMA consultation on AIFMD
AIMA hopes that ESMA would implement the AIFMD in such a way as to take account of one of the most striking features of the hedge fund sector – its great diversity. 
CEA raised concerns on Article 9 of AIFMD - professional indemnity issues
CEA recommends that Article 9 remain as flexible as possible in order to prevent insurance market capacity for the cover of potential claims from being unduly hindered. This includes affording AIFMs the freedom to determine the scope of their cover, as well as any ongoing adjustments for that cover in the future. 

Corporate Governance/Accounting

EFRAG commented on the IASB Exposure Draft Hedge Accounting
EFRAG issued its draft comment letter on the IASB Exposure Draft Hedge Accounting. Comments are invited by 2 March 2011. 
IFRS Foundation: XBRL initiative with public US-listed companies
The IFRS Foundation has successfully concluded the pilot initiative that was launched in April to work with US-listed foreign companies to produce IFRS financial reports in XBRL (eXtensible Business Reporting Language) that are compliant with US SEC requirements. 
FSA and FRC signed up for a new memorandum of understanding on audit issues
The new memorandum of understanding underpins the increased dialogue between the FSA and FRC on accounting and disclosure issues that has been in place since 2005, and follows the publication of a joint discussion paper on the audit of financial institutions published in June 2010. 
IAASB proposed engagements to review historical financial statements
The IAASB released for public exposure proposed ISRE 2400, engagements to review historical financial statements. This revised standard addresses the growing international need for robust standards for services that can be used by entities that are either not required or do not elect to be audited.  
IASB: The objective of financial reporting and the qualitative characteristics of useful information
Patricia McConnell, a Board member of the IASB, published an update on financial reporting matters, a new issue of the Investor Perspectives. 
FT: India’s accounting system into line with the International Financial Reporting Standards
India could delay an overhaul of its accounting rules – designed to deepen its ties with the world economy. 

Graham Bishop’s Articles

The EU Fiscal Crises: Forcing Eurozone Political Union in 2011
Eurozone will have emerged from the financial crisis as a political federation – loose in some respects, but with tightly centralised economic governance at its heart. The proven commitment to fiscal probity may even make it attractive relative to alternative investments around the world. 

Financial Services Policy

The Hungarian Presidency of the EU published its six-month programme
The importance of strengthening economic governance in the EU has been highlighted by the economic and financial crisis. A key priority for the Presidency is to conduct the work within the Council on the discussion of the six legislative proposals published by the Commission on this subject. 
ECOFIN Council conclusions: Launch of the 2011 "European Semester"
The "European Semester" is being implemented for the first time this year as part of a reform of EU economic governance. It is aimed at ensuring better-coordinated and more effective policies for putting Europe's economy on a path to sustainable growth. 
ECON Chair Sharon Bowles: Refund the interest to bailed out countries upon repayment of European loan
MEP Sharon Bowles has put forward a proposal for countries that have needed bailing out by the European rescue to be refunded some of the high interest they have had to pay, once they have managed to pay off all their debt. 

Financial Stability - Policy Analysis

Katinka Barysch: Can Greece be saved?
Barysch argues that in order to avoid default, Greece would need two things: economic growth and more help from its European neighbours. 
CER: Euro crisis - In defence of investors
Simon Tilford argues that the eurozone’s fiscal position is better than the US and the UK, and that the crisis-hit members of the currency union are doing more to strengthen their public finances than either of these countries, but that those who are suffering the most are still the eurozone countries. 

Economic Crisis

ECB Bini Smaghi: Lessons for monetary policy from the recent crisis
He stressed that the interlinkages between financial stability and price stability, as well as between monetary policy and prudential supervision, have become more evident as a result of the crisis. 
EP Plenary session: Different takes on Member States' handling of Eurozone crisis
MEPs broadly appealed for more radical thinking and greater resolve from the Commission and Member States to reform economic coordination. They argued that a 'too little too late' approach was no way to surmount the Eurozone crisis.  




© Graham Bishop

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