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07 November 2013

This week in "Brussels"
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Articles from 31 October 2013 - 07 November 2013

Banking

Bloomberg: EU lawmakers seek public loan backstop for euro area bank plan
Key EU lawmakers say a planned euro area system for handling failing lenders should have access to public money until a common resolution fund is filled by levies on the banking industry. 
Handelsblatt: Schäuble's new plan for banking resolution
Schäuble proposed forming an agency composed of representatives of national resolution authorities to make decisions on ailing banks, which would then be approved by EU finance ministers. For future settlement costs, he proposed a transnational network of national resolution funds. 
Reuters: Berlin wants bank resolution mechanism open to all of EU
Europe's resolution mechanism for failing banks should be open to European Union countries outside the eurozone, Germany's Finance Ministry told Reuters. 
ECB report details structural changes in the euro area banking sector
This report "provides an important base for the work we are doing in preparation for becoming the euro area's single supervisor", said VP Constâncio. (Includes further reporting on HFT/leverage ratios.) 
ECB/Asmussen: Banking Union – essential for the ins, desirable for the outs!
Speaking in Stockholm, Asmussen looked at what a Banking Union meant for countries inside and outside the euro area, and whether a Banking Union was sufficient to kick-start bank lending and consolidate the recovery. 
ESFRC: Misdiagnosis of crisis has led to botched liquidity regulation
The ESFRC recommends mandatory disclosure of a simple liquidity indicator (SLI) as an alternative to the Basel-required minimum liquidity coverage ratio (LCR). 
Fitch: Basel III spurs rise in European G-SIB sovereign exposure; corporates, interbank lending drop
This study assesses the effects of Basel III on the credit and capital allocation of the European G-SIBs.  
Risk.net: Filter furore - EU countries set to shield banks from bond volatility
It was the toughest part of Basel III for the US to swallow – a requirement that unrealised gains and losses on some bonds would hit bank capital calculations. In Europe, legislators provided an opt-out – and some countries have already chosen to use it, in breach of the Basel text. 
Otmar Issing: "More Europe" mantra leads to misguided adoption of ever further centralisation
The former ECB chief economist said he was relying on rigorous bank stress tests, and hoped that the OMT bond purchases would never become a reality. In his opinion, the ECB should not have been entrusted with banking supervision. 
EBF Position Paper on the European Commission Proposal for a Regulation on Interchange Fees for Card-Based Payment Transactions
The EBF supports the proposal as it is fully in line with the long-standing call of the European banking industry to be able to set up modern and innovative e-payment systems, allowing a quicker and more secure payment processing as an alternative to cash payments. 

Securities

ESMA and EBA consult on complaints handling guidelines for the investment and banking sectors
The proposed Guidelines will build on the existing guidelines on complaints handling by insurance undertakings published by EIOPA in June 2012. The consultation runs until 7 February, 2014. 
FSB launches QIS2 on proposed regulatory framework for haircuts on securities financing transactions
The FSB has launched the second stage of its two-stage QIS on the proposed regulatory framework for securities financing transactions. Responses are requested by 23 December, 2013. 
Reuters: EU's Barnier warns about softening new derivatives trading rules
Barnier has criticised the way in which the revised MiFID deals with derivatives regulation, saying that the rules are too light-touch and will leave markets in the dark. 
FT: Fierce battle erupts over 'dark pools'
European authorities are considering proposals for the future of dark pools as part of a review of the MiFID. But agreement looks to be a long way off.  
Resolution authorities call for uniform derivatives contracts language
FDIC, BoE, BaFin and FINMA have expressed support for the adoption of changes to ISDA's standard documentation to provide for short-term suspension of early termination rights and other remedies in the event of a G-SIFI resolution. (Includes ISDA response.) 
Reuters: Global watchdog says new body with teeth needed to police markets
IOSCO's secretary general argues that a new global watchdog with binding powers is needed to resolve disputes such as the current clash over derivatives rules that threatens to undermine financial stability. 
Bloomberg: UK to fight monopolistic derivatives exchanges at EU
Britain will fight 'monopolistic' exchanges in the EU, in a bid to boost competition in the market for clearing derivatives trades, according to UK Financial Secretary to the Treasury, Sajid Javid. 
Risk.net: Cross-border OTC reforms - No path forward
This article claims that without working European rules, a system of equivalence testing will fall flat. 
Reuters: EU lawmakers pledge speedy Libor reform, scope debated
EU lawmakers pledged rapid approval of a draft EU law to regulate market benchmarks such as Libor, although they sparred over how comprehensive the new regime should be. 
Bruegel/Mariniello: Fines to banks in the Euribor antitrust case do not lessen the need for new regulation
Without bold moves from EU and national legislators and more stringent supervision, Euribor-style scandals could happen again, writes Mariniello. 
Risk.net: BoE calls for greater transparency on CCP margin modelling
According to Edwin Schooling Latter, head of payments and infrastructure at the Bank of England, CCPs should provide complete transparency over the modelling of their margin requirements and how they cross-margin between different product lines. 
ISLA publishes ALD Best Practice Paper on the Approval of Principals
ISLA has published a best practice paper designed to help create consistency in the way the market uses the Agency Lending Disclosure system in Europe for the proposing and approval of principal lenders.  
Bloomberg editorial: If it looks like a bank, regulate it like a bank
The authors believe that financial intermediaries, such as hedge funds and securities dealers, should be regulated in the same way as banks. The $60 trillion industry is vulnerable to bank runs that could cause broad economic consequences, they say.  

Insurance

Risk.net: Trilogue parties lock horns on Solvency II third-country equivalence
The EP and the Commission continue to disagree over how to grant Solvency II equivalent status to third countries that fail to engage in a formal equivalence process. 
EIOPA establishes a Q&A tool on its Guidelines
The objective of the Q&A tool is to ensure consistent and effective application of the Guidelines across the Single Market. EIOPA also published its Guidelines on preparing for Solvency II in all the official languages of the EU. 
CRE: Capital influx huge opportunity to service uninsurable risks, says broker
A leading broker has heralded the influx of alternative capital flowing into the risk transfer market as a 'wonderful opportunity' for corporate buyers and risk advisers to find solutions to emerging and previously uninsurable risks. In the short term it will keep the cost of insurance competitive. 
Insurance Europe: Market Access issues for European insurers in Japan, China
Insurance Europe highlights its key market access issues with respect to Japan and China. 
Business Insider: A mix of new US regulations has made way for a massive shadow insurance industry
US insurers, particularly life insurers, have pushed up their credit ratings by offloading up to $363 billion worth of their own liabilities to offshore 'captive shadow reinsurers', according to an NBER paper by Ralph Koijen of the London Business School and Motohiro Yogo of the Minneapolis Fed. 

Asset Management

ESMA/Maijoor speech at EFAMA Investment Management Forum
Maijoor set out the areas on which the authority will be focusing its attention in the coming months, with a focus on asset management issues. (Includes link to ESMA's list of non-EEA CCPs that applied for recognition.) 
IPE: ECON backs Bernardino's call for independent levy to fund EIOPA
European parliamentarians have backed a call from EIOPA to raise its own funding through a levy on the industry, noting that it could improve the regulator's functioning. 
ECB: Results of the Euro Money Market survey 2013
This survey shows that turnover in eurozone money markets climbed in the second quarter compared with Q2 of 2012. However, unsecured lending reached a 10-year low.  
Responses to EIOPA's Discussion Paper on Sponsor Support Technical Specifications: AEIP, NAPF, PensionsEurope, USS
AEIP and USS criticised EIOPA's approach as being either too severe, arbitrary or applied inconsistently. Both NAPF and PensionsEurope reiterated their opposition to the HBS approach. 
EDHEC-Risk Institute disagrees with EFAMA on ESMA Guidelines and reiterates its call for greater index transparency
EDHEC-Risk Institute disagreed with EFAMA's assertion that ESMA had exceeded its powers and mandate by issuing quasi-regulation on topics not previously regulated at EU level. 
FCA: Outsourcing in the asset management industry
The FCA has started to see improvements in planning for the failure of a service provider. CEO Martin Wheatley has called for greater transparency. 
FN: Why it's make-or-break time for European fund body
New European Commission plans affecting money market funds (mutual funds invested in short-term, very liquid debt) have put the IMMFA into the spotlight. 
FN: Funds of funds to change their game
The challenges facing the private equity fund of funds industry are well documented. For one, the difficulties of fund-raising at a tough time for smaller private equity firms are exacerbated by the growing focus on the additional layer of fees that funds of funds charge. 
FN: PRIPs fallout weighs heavy on fund firms
Unintended consequences from the PRIPs regulations will put the asset management industry at risk of losing business to insurance companies and banks, according to EFAMA. 

Corporate Governance/Accounting

ESMA: Agenda item requests related to the application of IAS 1 and IAS 34
NCAs and ESMA have identified issues related to the application of IAS 1 'Presentation of Financial Statements' and IAS 34 'Interim Financial Reporting', which they have brought to the attention of the IFRS Interpretations Committee for further consideration. 
FRC raises the bar for risk management
The FRC published for consultation changes to the Corporate Governance Code, guidance for boards of listed companies and standards for auditors covering risk management and reporting. It also issued supplementary guidance for directors of all banks. The consultation closes on 24 January, 2014. 
FASB votes to move forward with final standard on revenue recognition
The FASB voted to move forward with preparing a final standard on revenue recognition. The final standard is expected to be issued during the first quarter of 2014. 
FEE's comment letter on IAASB's ED on auditor reporting
FEE issued a comment letter to the IAASB on the IAASB ED 'Reporting on Audited Financial Statements: Proposed New and Revised International Standards on Auditing'. FEE highlights that the currently proposed EU legislation is not entirely consistent with the IAASB ED. 
Deloitte: What are the organisational impacts of IFRS on insurance?
The Deloitte member firms use a four-dimensional assessment (reporting to the market; strategy and governance; organisational, people and culture; and infrastructure) to describe the impact of financial reporting changes on an insurance business. 

European Council/Parliament

Sharon Bowles: Taxation policy - The EU matters!
The ECON Committee has voted by a large majority in favour of extending rules on the automatic exchange of information in taxation policy, making full exchange of information the standard across the EU. 

Graham Bishop’s Articles and Speeches

Financial World: Step up and be counted (Graham Bishop article)
The asset quality review to be conducted by the ECB will have direct impact on the operations of European banks, explains Graham Bishop. 





© Graham Bishop

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