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05 December 2013

This week in "Brussels"
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Articles from 28 November 2013 - 05 December 2013

Banking

Lithuanian Presidency to sign MoU between Council and ECB on cooperation in bank supervision
The Council of the EU has approved the MoU between the Council and the ECB on cooperation on procedures related to the SSM, as well as the mandate to the Lithuanian Presidency to sign it. 
EP President Schulz: "We will all have to bite the bullet"
Schulz said: "We cannot afford long-winded negotiations in the Council when a bank failure is imminent(...) If we want to have a Banking Union that works and achieves its objectives, we will all have to bite the bullet." 
Q&A with Danièle Nouy, Chair-to-be of the ECB Supervisory Board
Nuoy discussed what her guiding objectives would be, and shared her thoughts on the AQR, Banking Union, the SRM, and other legislative proposals currently being debated in the EP.  
ECB/Constâncio: Banking Union and the future of banking
Constâncio said that the Banking Union, and the SSM in particular, would prompt significant changes in the supervision and structure of euro area banking, but that Europe should keep its universal banking model. 
ECB/Mersch: On the way to the European Banking Union - Using opportunities, controlling risks
Mersch elaborated on the practicalities of the balance sheet reviews and stress tests in preparation for the SSM to take up supervision of the eurozone's most important banks in November 2014. He reiterated that the SRM was both justified and necessary. 
Bloomberg: Brussels should make call on bank failures, document says
Despite opposition led by Germany, EU nations are leaning towards giving the Commission the power to trigger bank resolution, an EU document shows. 
Bruegel/Gandrud & Hallerberg: Who decides? Resolving failed banks in a European framework
Of the competing approaches to a European framework for recovery and resolution, a more supranational approach may lead to more consistently credible commitments to resolve bank failures at minimum public expense, especially when the asset separation tool is used. 
Nicolas Véron: ECB's big moment
Writing for Financial World, Véron assesses the prospects for a successful centralisation of banking supervision under the authority of the ECB. 
Stefano Micossi: The new Single Bank Resolution Mechanism of the European Union
Of the three pillars of the nascent European Banking Union, establishing a unified bank resolution mechanism is the most pressing issue, says Micossi, suggesting some changes to the existing SRM proposals. 
Fitch: Loss estimates overlooked driver of Basel risk weights
Basel III's more conservative risk-based ratios will in effect "turbo-charge" the risk weights already in effect under Basel II, says Fitch Ratings. Banks will consequently face even stronger incentives to use Basel's "advanced" internal ratings-based approach. 
PwC: De-leverage take 2 - Making a virtue of necessity
European banks face a €280 billion capital shortfall in 2014, PwC has warned. Banks' capital reserves will face three pressures next year: the Basel III capital ratio requirements, leverage ratio requirements, and the ECB's comprehensive assessment. 
PRA sets out key decisions on capital standards
The largest UK banks will have to comply with tougher capital rules five years ahead of an international timetable, as the Bank of England seeks to bolster lenders' resilience to crises. 
BoE publishes Financial Stability Report
The Bank of England presented its biannual Financial Stability Report. The Financial Policy Committee said it would not consider imposing tougher balance sheet curbs on banks until global regulators have agreed a common definition. 

Securities

Antitrust: Commission fines banks €1.71 billion for participating in cartels in the interest rate derivatives industry
The Commission has fined eight international financial institutions, including Deutsche Bank, RBS and Société Générale, a total of over €1.71 billion for participating in illegal cartels in markets for financial derivatives covering the EEA. (Includes statements from VP Almunia & EPP Group.) 
ESMA identifies deficiencies in CRAs' sovereign ratings processes
ESMA has published a report identifying numerous deficiencies in the processes for producing and issuing sovereign ratings at the three largest credit rating agencies: Fitch Ratings, Moody's Investors Service and Standard & Poor's. 
FTSE: European investors concerned about dark pool trading cap
According to new research from TABB Group Europe, European institutional investors have serious concerns regarding the introduction of volume cap proposals. The vast majority anticipate being forced to return to more traditional forms of execution.  
Response to FSB consultation on Policy Framework for addressing Shadow Banking Risks in Securities Lending and Repos: EFAMA
EFAMA says it should be a priority that regulators are enabled to gain a comprehensive picture of the evolution of securities lending and repo markets and of the risks linked to behaviour patterns in the markets before deciding on recommendations on managing collateral chains. 
Risk.net: Europe set for swap futures shoot-out
At least eight exchanges and trading platforms are currently working on swap futures launches or revamps, with some looking to import existing products from the US, some tweaking old designs and others building from scratch.  
Risk.net: Liquidity support for CCPs is a last-resort option, says Carney
CCPs will receive liquidity support from the UK central bank only as a last resort, the governor of the Bank of England has warned. Under all other conditions, a CCP must be able to get by on its traditional waterfall of financial resources. 
Euroclear UK & Ireland to lead local T+2 settlement initiative
Euroclear UK & Ireland (EUI), in cooperation with London Stock Exchange, BATS Chi-X Europe, the Irish Stock Exchange and Turquoise, will shorten the standard securities settlement cycle for the Irish and UK capital markets to T+2 in October next year. 
IMF publishes Financial Sector Assessment Programme documentation—Detailed assessment of observance of the CPSS-IOSCO Principles for FMI
According to this report, Euroclear Bank and the NBB should accord a high priority to being operationally ready for the full implementation of recovery plans and plans for the orderly winding down of operations.  
FT: Asia regulators attack EU over clearing house standards
Europe has come under attack from Asian market regulators, who are warning that the one-size-fits-all tests for clearing houses will hamper business and liquidity in their region. 

Insurance

EIOPA publishes Guidelines on complaints-handling by insurance intermediaries
These Guidelines include circumstances where the competent authority supervises complaints-handling under EU and national law, by insurance intermediaries doing business in their jurisdiction under free provision of services or freedom of establishment. 
EIOPA publishes Opinion on beneficiary protection arrangements regarding life insurance contracts
The opinion aims to facilitate adequate measures to ensure the effective protection of beneficiaries of life insurance policies, and to foster a consistent consumer protection approach throughout the EU. 
EIOPA publishes Consumer Trends Report
The aim of this report is to identify any possible vulnerabilities in the relevant markets which could provide the basis for targeted policy proposals. However, Insurance Europe has said the report's conclusions are 'questionable'. 
Risk.net: Global capital standard may require 'adjustments' to national supervisory regimes
European regulators are prepared to re-open Solvency II to comply with a future global insurance capital standard (ICS), currently under development. 
GFIA comments on IAIS restructuring
GFIA cautioned against establishing an additional coordination level which may end up slowing down the decision-making process. 
GOV.UK unveils UK Insurance Growth Action Plan/National Infrastructure Plan; insurance industry commits £25bn to domestic infrastructure
The growth action plan sets out a package of measures to strengthen the insurance sector's contribution to the UK economy. The insurance industry is now able to invest because of changes that have been made to the Solvency II regulations. (Includes comments from Sharon Bowles and ABI.) 
FT: Austrian regulator orders insurers to build up further provisions
Regulators are so concerned about the ability of Austria's life insurers to meet promises made to consumers that they are requiring them to build up further provisions, equivalent to about a fifth of their profits. 

Asset Management

Investment funds: Council sets out its position on UCITS
The Permanent Representatives Committee agreed, on behalf of the Council, its position on a draft directive aimed at amending EU rules on investment funds as concerns depositary functions, remuneration policies and sanctions. 
Commissioner Barnier: Long-term investment is key for renewed sustainable growth in Europe
Barnier said it was now time for investors and savers to regain confidence and return to funding long-term projects. The Commission's action plan is to be presented in the coming months and aims to support this change.  
Deutsche Bank study shows hedge funds launching traditional long-only strategies in direct competition with asset managers
The study, 'From Alternatives to Mainstream', analyses how hedge funds have evolved to run non-traditional products such as long-only and liquid alternative strategies to meet new demand from institutional investors. 
UK Pensions Regulator: Defined benefit consultation - Setting a balanced approach
This consultation sets out how the regulator intends to balance its new objective to minimise the impact on employers' sustainable growth, with its existing DB funding objectives. The consultation period closes on 7 February, 2014. (Includes NAPF response.) 
IPE: Danish pension funds join forces for push into alternatives
Four Danish pension funds are planning to invest tens of billions of Danish krone in alternative credit, capital funds, infrastructure and forestry over the next five years. 

Corporate Governance/Accounting

Commissioner Barnier welcomes trilogue agreement on EU co-financing of IFRS Foundation, EFRAG and PIOB
"The harmonisation of financial reporting and auditing rules at global level is essential for the sake of transparency, comparability and the smooth functioning of the global capital markets and an integrated market for financial services in the EU", said Barnier. 
IASB/Hoogervorst: Why the financial industry is different
The IASB chair delivered a speech entitled 'Why the financial industry is different: The relevance of current measurement for the financial industry' at a conference in London. He discussed the IASB's work on replacing IAS 39 with IFRS 9. 
ACCA/FEE: Maystadt Review - Ensuring EU influence over global financial reporting standards
Special adviser Philippe Maystadt discussed the findings of his review on EU endorsement of IFRS with stakeholders at the EP, who broadly welcomed his recommendations. 
EFRAG paves the way for swift implementation of the Maystadt reform
Having received unanimous support from ECOFIN, EFRAG is getting ready to proceed with implementing the changes required in its own governance as quickly as possible. 
ESMA's comment letter on IFRS 5 - Non-current assets held for sale and discontinued operations
ESMA and national enforcers have identified several issues concerning the application of IFRS 5 on the classification and measurement of non-current assets and discontinued operations.  
IASB publishes proposals for narrow-scope amendments to IAS 27 Separate Financial Statements
The IASB published for public comment the ED, 'Equity Method in Separate Financial Statements (Proposed amendments to IAS 27)'. The ED is open for comments until 3 February, 2014. 
Comments on IAASB proposals to improve auditor reporting: ACCA, ESMA
ACCA and ESMA have published comments on the IAASB Exposure Draft, 'Reporting on Audited Financial Statements: Proposed New and Revised International Standards on Auditing (ISAs)'. 
Reuters: Talks on EU law forcing companies to switch auditors put on hold
Negotiations on an EU draft law forcing companies to switch accountants about every 10 years are on hold due to disagreements over other planned curbs on auditors, an EU lawmaker said. 
Reuters: IASB says loan rule for banks ready in January
The FASB and the IASB are finalising two different rules, much to the disappointment of the G20 which wanted a single global rule. An accounting rule forcing banks to set aside capital far earlier for troubled loans will be completed next month and start in 2017, the IASB said. 

Financial Services Policy

EBA, EIOPA and ESMA publish Joint Position on product oversight and governance processes
The Joint Committee of the three ESAs published eight principles applicable to the oversight and governance processes of financial products, related in particular to the designing and marketing of financial products, and at reviewing the products' life cycle. 
EIOPA publishes results of survey on crisis prevention, management and resolution preparedness of national supervisors
The objective of the survey was to obtain a better understanding of the crisis prevention, management and resolution approaches/practices in the different NSAs. 
WSJ: FTT faces more delays; governments remain divided on key details
Berlin's decision to push for a tax that would cover currency transactions could complicate negotiations, because the EU's executive arm has warned that such a move would violate the free movement of capital in the EU. 

European Council/Parliament

Competitiveness Council: Conclusions on Single Market policy
The Council adopted conclusions addressing three main strands for a better functioning of the internal market: the governance of the single market; the steps to be taken to unlock the full potential of the services sector; and the actions to promote the transition to electronic procurement. 
Competitiveness Council: Conclusions on Smart Regulation
The Council adopted conclusions addressing the need to ensure that EU regulation is transparent, simple and is achieved at minimum cost, while fostering competitiveness and job creation, and taking into account the protection of citizens. 

Graham Bishop’s Articles and Speeches

Financial World: The day of the MiFIDs (Graham Bishop article)
The review of the financial instruments directive hangs by a thread as talks bump up against the EU parliamentary elections, writes Graham Bishop 





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