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19 December 2013

This week in "Brussels"
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Articles from 12 December 2013 - 19 December 2013

Banking

ECOFIN Council agrees general approach on Single Resolution Mechanism
The Council set out its position on the establishment of a single resolution board and a single fund for the resolution of banks. It called on the presidency to start negotiations with the EP, with the aim of agreeing the SRM regulation at first reading before May 2014. 
Commissioner Barnier's remarks at the ECOFIN Council press conference
"Today is a momentous day for Banking Union. A memorable day for Europe's financial sector. (...) Taxpayers will no longer foot the bill when banks make mistakes. We are ending the era of massive bailouts." 
ECON Committee: Single resolution system for struggling banks - MEPs adopt negotiating position
The Commission, acting as resolution authority, should be empowered to decide to wind down a bank in the Banking Union, says a draft law voted by the ECON Committee. Commissioner Barnier said the proposals formed a good basis, but he expressed a number of concerns. 
ECON Committee: Deal reached on bank "bail-in directive"
Political agreement has been reached on the draft BRRD, the first step towards setting up an EU system to deal with struggling banks. This Directive will introduce the "bail-in" principle by January 2016, thereby ensuring that taxpayers will not be first in line to pay for bank failures. 
ECON Committee: Draghi allies with MEPs against a bad Banking Union
The EU Member States' current plans for a common system for winding down troubled banks risk being too complex to work, the ECB president told the ECON Committee.  
EP Groups comment on SRM / SBRF
ALDE, the EPP Group, S&Ds and Greens commented on the Single Resolution Mechanism and the Single Bank Resolution Fund. The EPP Group is opposed to watering down rules for failing banks. 
Comments on new banking sector rules: AFME, BBA, EBF
Overall, the finance industry has welcomed the EU's plans for dealing with troubled banks. However, the EBF remains somewhat concerned with regard to the demand for banks to build up, at Member State level, a separate ex-ante financed resolution fund of 1 per cent of covered deposits. 
ECON Committee: EP and Council negotiators break depositor-taxpayer link
Savings deposits under €100,000 will finally be guaranteed by funds contributed by banks rather than the taxpayer, thanks to a political agreement struck by Parliament and Council negotiators. (Includes Barnier/Šadžius/Ferreira comments.) 
BCBS: Capital requirements for banks' equity investments in funds - final standard
BCBS has revised its policy framework for the prudential treatment of banks' investments in the equity of funds that are held in the banking book. The revised policy framework will take effect from 1 January 2017 and will apply to investments in all types of funds. 
BCBS: Progress in adopting the principles for effective risk data aggregation and risk reporting
The progress report provides a snapshot of G-SIBs' overall preparedness to comply with the Principles, as well as the related challenges they face. 
BCBS: Revisions to the securitisation framework - consultative document
This second consultative paper comprises a detailed set of proposals, including draft standards text, for a comprehensive revision of the treatment of securitisation. Comments on the proposals should be uploaded by 21 March, 2014. 
EBA publishes reports on comparability of risk-weighted assets and pro-cyclicality
The EBA published three reports: (i) an interim report on the consistency of RWAs in SMEs and residential mortgages portfolios; (ii) a report on the comparability of supervisory rules and practices; and (iii) a report on variability of RWAs for market risk portfolios.  
EBA publishes outcome of 2013 EU-wide transparency exercise
The EBA disclosed updated information on 64 European banks from 21 countries of the EEA. The EBA aims to promote greater understanding of capital positions and exposures of EU banks, thus contributing to market discipline and financial stability in the EU. 
EBA agrees on definition of identified staff for remuneration purposes
The EBA agreed on criteria to identify categories of staff whose professional activities have a material impact on an institution's risk profile. These identified staff will be subject to provisions related in particular to the payment of variable remuneration.  
Further EBA reporting
EBA's press releases are too numerous to include in this newsletter. Please see website for further reporting on: Monitoring additional liquidity; market risk; securitisation retention rules; warning on virtual currencies; and consultations on securitisation transactions and methodology for G-SIIs. 

Securities

Lithuanian Presidency reaches political agreement on the Regulation on central securities depositories
The Lithuanian Presidency has reached a preliminary political agreement with the EP on the Regulation on improving securities settlement in the EU and on central securities depositories, pending technical finalisation. (Includes comments from Commissioner Barnier.) 
Bloomberg: EU lawmakers fail to clinch deal on financial market rules overhaul
MEP Sven Giegold said that MiFID negotiations had broken down over the scope of planned curbs on commodity derivative speculation and on investor protection rule. Discussions are to resume on January 14 in Strasbourg. 
CESR positions and ESMA opinion: Waivers from pre-trade transparency
The CESR/ESMA position paper is intended to help firms by providing clarity on the content of the MiFID requirements without creating an extra layer of requirements, and to assist them when they intend to develop new trading functionalities.  
AmCham position on the third country regime of MiFID/R
Any approach to regulating cross-border services which restricts access by EU investors, issuers and firms to financial services provided from outside the EU needs to be carefully elaborated. 
IOSCO issues final report on regulatory issues raised by changes in market structure
The report makes four recommendations that seek to promote market liquidity and efficiency, price transparency and investors' execution quality in a fragmented environment. 
FT: Derivative trading rules will not reduce risk
The theory behind the post-crisis regulatory overhaul of derivatives trading is about to become practice, and concerns are growing that systemic risk will simply be transferred rather than backstopped. 
Risk.net: ESMA - No 90-day reporting delay for post-EMIR trades
Trades executed after August 2012 will be immediately subject to Europe's new reporting rules if they are still outstanding when the regime takes effect on February 12, 2014, according to ESMA. 
FN: US and Europe lock horns on derivatives
In Europe, trade reporting for OTC derivatives is set to begin in February 2014, with mandatory trading and clearing to follow. The misaligned timing with the US Dodd-Frank Act results in harder compliance and fragmentation of markets and liquidity - potentially increasing systemic risk. 
ESMA opinion on the format of the base prospectus and consistent application of article 26(4) of the Prospectus Regulation
The Prospectus Directive sets out two alternative formats for a prospectus: a single document, or a tripartite document composed of three separate documents. The Board of Supervisors published an opinion on the latter. (Includes data on prospectuses approved and passported 1H 2013.) 
Fitch publishes report on approach to CRA III for sovereigns
The report, outlining its approach to the introduction of CRA III in respect of affected sovereign and sub-national issuers, sets out the implications of the regulation for EU-registered credit ratings agencies. 
WSJ: CFTC is poised to expand its reach overseas
The CFTC is moving to force overseas financial firms to comply with certain US rules, according to an official familiar with the process, a move likely to stoke criticism that the US is bidding to become the de facto global financial regulator. 

Insurance

PRA/Adams: Solvency II - A turning point
New European guidelines to help insurers prepare for Solvency II will not be 'gold-plated' by the PRA and should not place an additional burden on many firms, a senior official from the PRA has said. (Includes link to PRA supervisory statement on Solvency II.) 
Risk.net: Policy-makers consider extending capital backstop to global insurers
Regulators are weighing up imposing a capital backstop on international insurers other than the nine designated G-SIIs. 
IAIS: Public consultation begins on proposal for basic capital requirements for G-SIIs
IAIS released for public consultation proposed options for the development of basic capital requirements (BCR) for global systemically important insurers (G-SIIs). The consultation runs until 3 February, 2014. 
CRE: ECIROA 'optimistic' captive definition will be relaxed under Solvency II
ECIROA said it was 'optimistic' that the European Commission and EIOPA would respond positively to its recent request to amend the definition of captives under Solvency II. 
Responses to IAIS ComFrame draft: GFIA, GIAJ, Insurance Europe
On 18 October, the IAIS released the 2013 draft of the Common Framework for the Supervision of Internationally Active Insurance Groups, or ComFrame, for public consultation. 

Asset Management

EIOPA: Final report on public consultation on occupational pension schemes
EIOPA published its final draft ITS on reporting of national provisions of prudential nature on occupational pensions. The ITS promote transparency and comparability of national provisions and help to promote cross-border activity of IORPs. 
CPSS-IOSCO issues consultative report on oversight expectations applicable to critical service providers
CPSS and IOSCO published for public comment a consultative report on the assessment methodology for the oversight expectations applicable to critical service providers. Comments should be sent by 20 February, 2014. 
IOSCO issues final report on the impact of trading fee models on trading behaviour
The report provides a comprehensive overview of trading fees and trading fee models around the globe and how they influence trading behaviour. 
FN: Marketing levy threat for fund managers
Some national regulators are planning to levy fees on alternative investment fund managers who market funds in their countries, in a move that has triggered angry protests from trade bodies. 
Canadian securities regulators seek comments on mutual fund risk classification methodology
The CSA published for comment CSA Notice 81-324 and a Request for Comments on Proposed CSA Mutual Fund Risk Classification Methodology for Use in Fund Facts, which sets out a proposed risk classification methodology for use by mutual fund managers. The comment period is open until March 12, 2014. 

Corporate Governance/Accounting

European Council: Agreement on the reform of the audit market
Member States endorsed the agreement reached between the Lithuanian Presidency of the Council and the EP representatives on the reform of the audit market in the EU. (Includes Lithuanian Presidency comments.) 
Commissioner Barnier welcomes provisional agreement in trilogue on the reform of the audit sector
"This is a first step towards increasing audit quality and re-establishing investor confidence in financial information, an essential ingredient for investment and economic growth in Europe." 
Comments on the announced agreement on European audit reform: ACCA, FEE, FRC
Now the framework of the EU audit reform has been endorsed by Member States, a formal approval in the Council and a plenary vote in the EP are expected shortly and will finalise the legislative process.  
FRC calls for rapid improvement in quality of bank audits, publishes report on auditor’s materiality judgements
The FRC announced a series of key projects, including a specific review of the quality of auditing of banks, in its draft Plan & Budget for 2014/15. It also published the report of its first Audit Quality Thematic Review into the auditor's consideration and application of materiality. 
IAESB proposes revised standard on professional competence of the audit engagement partner
The IAESB released for public exposure a proposed revision of IES 8, Professional Competence for Engagement Partners Responsible for Audits of Financial Statements. Comments are requested by April 17, 2014. 
Member States endorse agreement on renewal of Union programme for financial reporting and auditing for 2014-2020
COREPER I confirmed the compromise text regarding the Proposal for a Regulation of the EP/Council on establishing a Union programme to support specific activities in the field of financial reporting and auditing for the period 2014-2020.  
Member States mandate Presidency to negotiate on Directive regarding disclosure of non-financial and diversity information
COREPER I has mandated the Presidency to engage in informal trilogue negotiations with the EP on the Directive amending the current Accounting Directive, with a view to having a final agreement on this Directive by the end of the current legislative cycle. 
FRC proposes first annual update to the Reduced Disclosure Framework
The FRC has issued for consultation proposals to update its UK GAAP standard on the Reduced Disclosure Framework (FRS 101). The comment period closes on 21 March, 2014. 
IESBA's Proposed Strategy and Work Plan, 2014-2018
The IESBA's consultation paper lays out four proposed strategic themes to reflect the Ethics Board's vision for the medium to longer term and to guide its work plan over the five-year period. Comments are due by 28 February, 2014. 
EFRAG, ANC and FRC issue research paper: ‘The role of the business model in financial statements'
The research paper argues that the business model should play a role in financial reporting and be part of the revised Conceptual Framework. It is open for comment until 31 May, 2014. 
IASB concludes 2010–2012 & 2011–2013 Annual Improvements Cycles
The IASB issued Annual Improvements to IFRSs 2010–2012 Cycle and Annual Improvements to IFRSs 2011–2013 Cycle. 
ICAEW publishes report calling for changes to disclosure rules
ICAEW has published a report by its Financial Reporting Faculty calling for urgent reform to the regulation of financial reporting disclosures, saying that if the system is not changed quickly, the current situation will get worse as the volume of irrelevant material increases. 
ACCA: 'Transparency crucial' for the public sector
At ACCA's fifth international public sector conference it was concluded that governments need to be fully transparent in all decisions they make and concise in their communication if they wish to be seen as trustworthy.  
FRC seeks consistency in the reporting of exceptional items
The FRC has issued a reminder to Boards on the need to improve the reporting of additional and exceptional items by companies and ensure consistency in their presentation. 

Financial Services Policy

Joint ESA Opinion on the functioning of the European Systemic Risk Board
The ESAs consider that the mandate of the ESRB is relevant and should be maintained. However, they would appreciate greater support from the ESRB in clarifying macro-prudential issues relevant for supervisory decisions. 
ESBG's position on the Review of the European System of Financial Supervision and feedback already received
Compared to some of the rather bold, almost revolutionary ideas already proposed, the approach promoted by the ESBG is rather moderate and largely in favour of maintaining the status quo. 

International/G20

FSB: Annual update on global adherence to regulatory and supervisory standards on international cooperation and information exchange
The FSB published a statement providing an update of information on the jurisdictions evaluated to date under its initiative to encourage the adherence of all countries and jurisdictions to regulatory and supervisory standards on international cooperation and information exchange. 





© Graham Bishop

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