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30 January 2014

This week in "Brussels"
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Articles from 23 January 2014 - 30 January 2014

Banking

Commission proposes structural reform of the EU banking and shadow banking sectors
The Commission has proposed new rules to stop the biggest and most complex banks from engaging in the risky activity of proprietary trading. It has also adopted accompanying measures aimed at increasing transparency of certain transactions in the shadow banking sector. 
"Too little, too late" - EP groups comment on banking sector reforms: ALDE, S&D, Greens
EP lawmakers argue the plans have come too late for them to review and approve ahead of May elections. Many will have left office or switched jobs by the time the assembly gets a chance to vote on the measures. 
Responses to proposal for banks' structural reform: AFME, BDB, BDI, EBF, FBF, Fitch, HMT
Among the general criticism from European banks for the Commission's proposal, the EBF expressed itself as "deeply concerned", and said that the "untimely proposal" was "at the expense of financing the economy". 
Commissioner Barnier: Restricting proprietary trading
Barnier explained his new plan for banking regulation in an interview with German publication Wirtschaftswoche. Separately, France and Germany said that banks should ring-fence speculative activities from other business lines, rather than be banned from them outright. 
ECOFIN Council adopts Directive on mortgage credits
The Council adopted, by qualified majority, a Directive aimed at creating a single market for mortgage credits in the EU, with a high degree of consumer protection. 
Bundesbank/Dombret: The state as a banker?
Dombret called for credible bail-in procedures through higher capital buffers. He maintained that the state was not a good banker, and that it should only take on this role in exceptional cases. 
Reuters: Eurozone may scrap option of direct bank recapitalisation in 10 years
Eurozone governments are considering inserting a "review clause" into their agreement on the direct recapitalisation of banks so that they can reverse or renegotiate the deal in the coming years. 
Reuters: ECB lacks teeth to force banks to accept loan book risks
Experts say the ECB's AQR could falter because the ECB lacks the power to force bankers, constrained by accounting rules, to accept regulators' views of the risks on their books. 
EBA issues Recommendation on the use of the Legal Entity Identifier for supervisory purposes
EBA published a Recommendation on the use of unique identification codes for supervisory purposes for every credit and financial institution in the EU. Competent authorities must notify the EBA as to whether they comply or intend to comply by 29.03.2014. 
EBA publishes final draft RTS on own funds requirements for investment firms
EBA published its final draft RTS on own funds requirements for investment firms based on fixed overheads. 
WEF 2014: Rebuilding banking in Europe
With capital flows sharply in reverse, how should Europe's banking system be reformed? Speakers at the WEF on this topic included Wolfgang Schäuble, Lord Turner, Olli Rehn and Jeroen Dijsselbloem.  

Securities

ESMA publishes final report on fines for TRs
ESMA published its final report, "Technical Advice to the Commission on procedural rules to impose fines and periodic penalty payments to Trade Repositories". Section V clarifies that ESMA's ability to impose fines and penalties on TRs should be subject to a limitation period of five years. 
ECB/Cœuré: Risks in CCPs
The US Dodd-Frank financial system reform law, mirrored by European reforms, calls for clearing houses to become the key mechanisms to protect taxpayers from derivatives trades gone wrong. At a conference with US officials, Cœuré reviewed the challenges in making that happen. 
Responses to ESMA discussion paper on Market Abuse Regulation: AFME, Euronext, FESE, ICMA, IMA, ISDA et al
In November last year, ESMA published a discussion paper setting out its initial views on the implementing measures it will have to develop for the new Market Abuse Regulation. 
Risk.net: IOSCO secretary-general slams US and Europe as 'regulatory sharks'
Moves by the US and Europe to impose a global regulatory standard on the rest of the world ignore the changing global economic dynamic and leave both polities looking like regulatory sharks, according to David Wright, secretary general of IOSCO. 
IMF: Sovereign CDS spreads in Europe: The role of global risk aversion, economic fundamentals, liquidity and spillovers
The IMF finds that European countries' sovereign CDS spreads are largely driven by global investor sentiment, macro-economic fundamentals and liquidity conditions in the CDS market. 

Insurance

Insurance Europe: IMD 2: Mixed feelings about ECON report
On 22 January, the ECON Committee adopted its report on the revised Insurance Mediation Directive. Insurance Europe is concerned that the report would effectively introduce a ban on tying together different products, since it requires the components of a package to be offered for sale separately. 
Risk.net: Rapporteur Balz on long-term guarantees, Solvency II's level 2 and global standards
Two months after the landmark political agreement on Omnibus II, MEP Burkhard Balz discusses the thorny issues that did not make it into the Directive, spells out his expectations for the level 2 text, and gives a warning about the implications of global insurance regulation in the making. 
Risk.net: Proposals for stable Solvency II credit risk adjustment 'good news' but floor sparks controversy
The Commission has attempted to address fears over a volatile Solvency II risk-free rate with proposals for a stable credit risk adjustment. But the unofficial draft of the Level 2 delegated acts is set to put the Commission at loggerheads with the insurance industry. 
Reuters: Trade groups attack CMBS Solvency II rules
Real estate trade bodies are arguing for EIOPA to re-assess its capital charges under Solvency II, saying they are unduly harsh on commercial mortgage-backed securitisations. 
Risk.net: Insurers seize opportunities in European corporate funding markets
In the aftermath of the financial crisis in Europe, insurers lacked the credit risk analysis skills to finance credit-starved corporates and were held back by inconsistent regulatory and contractual frameworks. Now the ground is shifting. 

Asset Management

FT: Europe asset-backed deals set for return
The latest issue comes amid increasingly vocal support among senior policy-makers for securitisation to become an important tool in Europe's economic recovery. The question is whether regulators are listening to their calls. 
IOSCO publishes recommendations regarding the protection of client assets
IOSCO published the final report on Recommendations Regarding the Protection of Client Assets, which seeks to help regulators improve the supervision of intermediaries holding client assets. 
Risk.net: Transatlantic tug-of-war puts European hedge funds in impossible position
Hedge funds are calling for a change to cross-border derivatives rules before European clearing requirements come into force – arguing overseas funds of European managers will be caught in a regulatory tug-of-war. Some funds will have to comply with Dodd-Frank and EMIR simultaneously. 
Hedgeweek: AIFMD - make sure you’re connected
The requirement for private equity and real estate fund managers to appoint an independent depositary under the AIFMD is a major development and, for many managers, a move into uncharted territory. 
IPE: Allocations to private equity increasing at European pension funds
Research conducted by the London Business School Coller Institute of Private Equity showed European public and private schemes allocate around 4 per cent to the asset class, meaning they have grown since 2005 but still fall behind levels seen in the US, Australia and New Zealand.  
IPE: Debate over systemic risk of asset management intensifies
The debate over whether the asset management industry poses systemic risk is heating up, after US lawmakers dismissed a report from the Office for Financial Research which warned that managers "herding" into asset classes, in search of yield, could push up prices and magnify volatility. 

Corporate Governance/Accounting

ESA letter to Commission Barnier on Maystadt Report – Should IFRS standards be more European?
The three European Supervisory Authorities shared with Commissioner Barnier their concerns and views on potential implications of the report. 
Fitch: Revenue to fall for some European corporates under new IFRS rules
According to Fitch Ratings' latest report, new IFRS accounting standards which update the rules on group accounting will result in a material fall in reported revenues, assets and liabilities in financial year 2013 for some European corporates. 
EFRAG: Input received at Vienna and Vilnius joint outreach events on the review of the conceptual framework
EFRAG, AFRAC and the Lithuanian Authority of Audit and Accounting (AAT) have published a summary of their joint outreach event on the IASB Discussion Paper, 'A Review of the Conceptual Framework for Financial Reporting'. 
FAF offers to participate on the funding of IFRS Foundation to aid completion of joint IASB projects
The Financial Accounting Foundation announced that it will make a non-recurring contribution of up to $3 million to the International Financial Reporting Standards Foundation to support the completion of international convergence projects 
EFRAG/ASBJ: Bilateral meeting on development of high quality global accounting standards
Representatives of the ASBJ and EFRAG exchanged views and information on the development of high quality global accounting standards. 

Financial Services Policy

Positions on the proposal for a regulation on KIDs for investment products: EuropeanIssuers, JAC, PensionsEurope
On 20 November 2013, the EP adopted the Commission's report on the PRIPs proposal. Trilogue negotiations are expected to begin soon. 
IRSG: Implications of a Financial Transaction Tax for the European regulatory reform agenda
In its current design, the FTT is likely to conflict with rather than complement a number of key regulatory initiatives aimed at increasing financial stability in the financial services sector. It is also likely to fail in achieving its own policy objectives. 

International/G20

European Commission: TTIP - Cooperation on financial services regulation
The EU believes it is in the interests of both the EU and US to agree within the TTIP on a framework for regulatory coherence in financial services. 

European Council/Parliament

Results of the ECOFIN Council: SSM, Presidency work programme
The Council was briefed by the ECB on implementation of the EU's single supervisory mechanism for banks. Supporting economic growth and employment and restoring confidence in the financial sector are the main objectives of the Hellenic Presidency.  
ECON Committee: Troika inquiry - Workers and business differ on verdict, call for more dialogue
Strikingly different verdicts on the crisis rescue work of the EU Commission/ECB/IMF "Troika" were voiced by business and trade union representatives at an EP inquiry hearing. 





© Graham Bishop

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