10 May 2017

注目点は、英国のEU（欧州連合）離脱協議の第一フェーズ、バーゼルIIIの進捗状況、EMIR（欧州市場インフラ規則）改正案など

Paula Martín/Graham Bishop

Organised by the Centre for the Study of Financial Innovation (CSFI), hosted by Grant Thornton with co-presentersDenis MacShane (Avisa Partners)and Bob Penn (Cleary Gottlieb Steen & Hamilton)

Highlights from the “Brussels for Breakfast” meeting

As the meeting fell on Europe Day, I suggested we follow President Macron’s lead and hum Ode to Joy but this was not well-received by the Chairman! However, the implications of President Macron caused much discussion but perhaps not much light was shed. The full significance for European integration will hinge on his party’s performance in the Parliamentary elections in the next five weeks. However, as a straw in the wind, it was reported that the French Commercial Court is preparing to act in English where necessary!

The significance of the 28 Paragraph negotiating guidelines agreed by the European Council in four minutes triggered a substantial debate as the details go far beyond the reporting in the UK media. The demands for EU citizens’ rights in the UK go far beyond simple residence and enforcement may turn out to be a key sticking point. Barnier’s negotiating directives only run to the first phase of the negotiation so he will not be empowered to go any further no matter what the UK pressure.

The alleged `power grab’ by the EU27 over derivatives clearing turned into a controversial topic. ESMA’s work-plan on out-sourcing and delegation illustrates that EU27 will take a tough line on “brass plate” operations and the end-game on CCPs is perhaps coming into sight. Commissioner Dombrovskis laid out two basic choices: enhanced supervision or CCPs will be “asked” to re-locate. The request for “enhanced supervision” even after the ECB/BoE agreement on information exchange etc. suggests that agreement is insufficient. The idea of just “asking” CCPs to relocate illustrates the many routes for EU27 to pressure the UK without Treaty (or even Directive/Regulation) change.

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Key items in the rest of the month’s news included:

The EU27 leaders held a surprisingly short debate of just 4 minutes – a promptness that was used by Council President Tusk to underline the "outstanding unity” of the remaining EU members - in which the European Council guidelines for the Brexit negotiations were agreed. The red lines drawn in Europe for the Brexit talks will be: orderly withdrawal first, trade talks only after that; EU and UK citizens’ rights across Europe must be safeguarded; “flexible and imaginative solutions will be required” to prevent a hard border in Northern Ireland, possibly including a united Ireland brought about in accordance with the Good Friday Agreement; and no place for a sector-by-sector or multi-lateral approach – the Union will negotiate with a single, “transparent” voice, as the top EU Brexit negotiator remarked. Michel Barnier stated that the financial settlement of the divorce agreement “should cover all commitments as well as liabilities, including contingent liabilities,” as agreed in the document. Barnier doesn’t want the UK to see the debts and payments arrangement as a “punishment” or a “Brexit bill”, but warned that negotiations will be long and tough.

As an appetizer to that seemingly tortuous journey, the preliminary talks might have already started on the wrong foot. EU officials and leaders seem to have opted for a hard-line stance, in a bid to convince the rest of the countries with serious options of calling a referendum on their EU membership that leaving is not a good idea. Angela Merkel warned against ‘illusions’ some officials in London were nurturing  and reminded Britain it can’t expect preferential treatment or keeping privileges as if it was still a member of the EU club, whereas Finland’s Finance Minister said Brexit will be “so painfulthat no one will want to feel it for themselves”.

Theresa May’s equally unexpected announcement of a snap election on June 8^th caught everybody in London and Brussels off-guard, but the Prime Minister’s call for a strong support that would strengthen her hand in the withdrawal arrangements received  a cold response from Parliament chief Brexit broker Guy Verhofstadt, warning that “the election won’t change Brexit one bit.” “What has been billed as a ‘Brexit election’,” said Verhofstadt, “is an attempted power grab by the Tories, who wish to take advantage of a Labour party in seeming disarray to secure another five years of power before the reality of Brexit bites”.

The Financial Times reported on a leaked Commission document on proposed changes to derivative rules that will impose greater control over euro-clearing of derivatives markets from Brussels once Britain has become a third country: either allow EU rules and supervision of relocate to a country within the bloc.  This has been seen as a provocative power grab ahead of the beginning of disconnection talks: the London Stock Exchange said the attempt may backfire and put “only European”  investors and financial firms at risk. (More below)

Banks in The City continue seeking ways to keep access to the EU internal market: ‘Voluntarism’ has been seen as a potential “passport”, if individual firms sign up to EU rules and standards, while Wall Street banks are considering establishing “pop-up” branches in European countries to keep both trading access and their European headquarters in London. The International Regulatory Strategy Group proposed that the UK and EU mutually recognise of each other’s regulatory and supervisory regimes. ACCA published guidance on the key principles on which business law must be based during the talks and said policymakers now “have the opportunity to revisit our fundamental laws and regulations to ensure that they are fit for purpose.”

Whatever the deal, UK banks applying for a post-Brexit licence in Europe face a six month wait, as the ECB has announced it will take that time to start the evaluation process. There might not even be a deal, the Bank of England has warned banks, setting a July deadline for all financial services companies to speed up planning for such a scenario. Pessimism is spreading among firms, with 73% of institutional investors who believe Brexit will be “hard” and 29% taking for granted it will be “very hard”. Officials in Washington added to the bad news, saying that the US will give preference to the UE over Britain to strike a free-trade deal.

In view of the growing sentiment of a severe trade disruption, some of the biggest banks are planning to move operations to a safe place within the EU: theDeutsche Bankhead of regulation said 4,000 staff could be forced to relocate, while JPMorgan confirmed plans to move hundreds of London-based bankers to Dublin, Frankfurt and Luxembourg and Standard Chartered picked Frankfurt as its post-Brexit EU subsidiary. Although the relocations might not end up being the exodus some economists predicted, they might impact the 10.7% of UK economy they represent, as highlighted in a recent report by the City biggest lobby.

For some EU leaders, Brexit shows a clear path for the European Union: but one that goes the opposite way to ever-closer union, according to the Belgian finance minister, who warned that the bloc had to transform itself to survive. But creating a ‘multi-speed Europe’, one of the options signalled in Juncker’s White Paper on the future of the EU, would divide the union and diminish it as a foreign policy actor, in Angelos Chryssogelos’ view. The Telegraph reported that the Europe Union is studying the idea of creating a new class of supranational MEPs after Brexit to replace the British lawmakers’ empty seats, in order to show the European project is “alive and kicking”.

This is "Europe's pivotal year", Commissioner Moscovici said in the US, pointing at the three pillars the Commission’s reflection on deepening EMU will be based on: a fully-fledged Banking Union, a fiscal capacity for the euro area and enhancing democratic accountability. Graham Bishop refined further his plan for a Temporary Eurobill Fund (TEF), and commended it to the European Commission for consideration in its Reflections.

Moscovici referred to populisms with his eyes focussed on the French presidential election, that this weekend gave a landslide victory to Emmanuel Macron over far-right nationalist candidate Marine Le Pen. Macron will now have to deal with deeper scrutiny of his policy – a great part of his electorate has voted him to stop Le Pen and won’t give him their trust for free – and with the task of organising his ‘En Marche!” movement if he wants to win Parliament support in the legislative elections in June. His victory – welcomed with sighs of relief in Europe - means May will face a rough ride from France in the upcoming withdrawal negotiations, since pro-European Macron pledged to ensure that Britain doesn’t achieve too many concessions in the agreement, in order to protect the integrity of the European Union.

Banking

The Basel Committee issued the Twelfth progress report on adoption of the Basel III regulatory framework.  City AM reported that the global banking watchdog will pause its regulatory activity for two years and take account of their post-crisis reforms. This will allow the industry to catch its breath, but it will still have to prepare for a capital shortfall of 120 billion euros[PM1] [PM2] [PM3] if new rules come into force as they are, according to McKinsey & Co.  This is perhaps the main of the string of unintended consequences of the Basel Accord in its regulatory convergence of the international banking system efforts.

But President Trump and Brexit could mean a sudden change of course to the bank rules as Bloomberg’s Silla Brush and Alexander Weber noted, taking stock of the recent regulatory events in the US and Europe.  Brussels expects Trump to keep supporting regulatory convergence, but there are three areas where international cooperation is particularly crucial: derivatives markets, bank capital charges and crisis management.  

The EBA provided guidance on bail-in under the BRRD and outlined the roadmap of its plan to update 2017-2018 SREP. The relocation of the Authority’s headquarters to the EU after Britain’s withdrawal should move towards a long-term twin peaks model – dividing supervision of prudential and conduct-of-business issues, Bruegel’s Véron and Schoenmaker argued.
More than eight years after Europe’s financial crisis, the problem of bad loans and debt restructuring still burdens the European banking sector heavily and should be addressed,  authors at Bruegel wrote. Vox EU backed the proposal of aEurozone-level asset management company saying that it could resolve bank fragility and spur economic recovery.

A new report by the Committee on the Global Financial System set out principles for central banks to consider when providing liquidity assistance in times of stress. 

Securities

Commission Vice-President Valdis Dombrovskis presented EMIR REFIT, revamped derivatives rules that include the optimization of reporting requirements and a temporary exception for pension funds to take part in central clearing. But the main issue was for third countries clearing large amounts of CCPs – namely Britain after Brexit. Dombrovskis’ message was clear: the UK will have to allow greater control from Brussels if it doesn’t want its euro-derivatives clearing to move to the EU.

ESMA had previously issued an opinion regarding the implementation of portfolio margining requirements for central counterparties under the EMIR, whereas ECB’s Benoît Cœuré wroteon the finalisation of the CCP work plan, on interactions between requirements for central counterparties and those for banks, and on greater granularity of central counterparty supervision and oversight.  

ESMA published their response to the European Commission’s Consultation Paper on the Capital Markets Union Mid-Term Review that was presented by ESMA Chair Steven Maijoor at a Public Hearing.  The ECB also explained why it supports the Capital Markets Unionproject.   ESMA’s Maijoor wrote an article saying it expects market-based finance to grow in the future driven by a strong potential for demand facilitated by a supportive policy environment and the limited ability of banks to finance the economy.

ESMA clarified market structure issues under MiFID II, a set of rules that recognises new types of trading facilities, codifies product governance, and will require unprecedented levels of data recording, City A.M. explained.  

ESMA participated in an ECON hearing on the Credit Rating Agencies Regulation and issued a Supervisory Briefing promoting a common approach to rules supporting the use of smaller CRAs.  

Insurance

EFAMA and Insurance Europe commented on the recently published RTS for Packaged Retail and Insurance-based Investment products(PRIIPs). 

Asset Management

ESMA published a report on its 2016 thematic study on the operation of home and host responsibilities under the AIFMD and the UCITS.  

The Financial Conduct Authority (FCA) warned against the failure or “disorderly wind-down” of large asset managers, saying that it could affect the stability of the UK’s financial system.

Experts sounded the alarm over the planned European Central Bank regulation on statutory reporting requirements for pension schemes, saying that the new rules could lead to extensive reporting obligations – and considerable additional costs – for pension institutions.

Financial Services Policy

ESAs highlighted the main risks for the EU financial system in their latestspring 2017 Report. The FSB launched a consultation on its framework for post-implementation evaluation of the effects of the G20 financial regulatory reforms.   

The European Parliament’s report on FinTech called on the Commission to draw up a comprehensive FinTech Action Plan, but EU decision-makers said it is still too early to take targeted policy actions in the field of BDL technologies. In his contribution to the report, BBA’s Anthony Brownedescribed how FinTech is already transforming the way UK banks and their customers do business. A new report outlined the opportunities and risks for engaging in block-chain and distributed ledger technology projects in the insurance sector.