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14 July 2011

This week in "Brussels"
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Articles from 07 July 2011 - 14 July 2011

Banking

ECOFIN Council conclusions: Stress tests in the banking sector
Finance ministers discussed this year's EU-wide stress tests in the banking sector and they agreed on common lines on how to respond after the publication of the results, in particular as regards measures to be taken with respect to financial institutions found to be vulnerable.  View Article
ECON Committee adopted report on SEPA Migration Regulation
MEPs have backed a two-year switch to harmonised rules for electronic payments, in conflict with those Member States preferring a five-year period for some transactions.   View Article
ESBG: EU Parliament Committee does not challenge European Commission’s proposal on SEPA Migration Regulation
The ESBG has warned that the text approved in ECON bans interchange for direct debits, negating that the successful existing direct debit models in the eurozone are based on interchange, and that the latter protects consumers from paying for benefits retained by creditors.  View Article
FT: EU States working on 'backstops' for banks
EU officials said there was a solid commitment among countries to strengthen any institutions that are shown to be weak, but that ministers had agreed that "action plans" should look first to private sector solutions.  View Article
FT: French banks in Italy
France's big banks, already punished for having the biggest exposure to Greece, have been hit for being the most exposed to Italy, the eurozone's biggest borrower. The shares of BNP Paribas, which owns Banca Nazionale del Lavoro, have slipped by 14 per cent since July 1.   View Article
FT: Why banks and supervisors must act now
There is considerable discussion about how to manage the immediate issues – returning individual sovereigns to sustainable fiscal paths and minimising the impact on banks – but less analysis of the broader implications of heightened sovereign risk for financial stability.   View Article

Securities

Barnier: CRAs must follow a rigorous and specific methodology when rating sovereign debt
Speaking at ESMA, Barnier stressed that the Commission wants to improve competition in the rating business. The CRA market is too concentrated, and more competition and diversity is essential. The Commission will do its best to support directly or indirectly the emergence of new actors.   View Article
IOSCO: Joint Forum releases report on securitisation incentives
The report outlines recommendations to authorities on the tools and approaches they can employ to promote a sustainable and responsible securitisation framework.  View Article
ISDA publishes 2011 Equity Derivatives Definitions
ISDA announced the publication of the 2011 ISDA Equity Derivatives Definitions. The Definitions represent a key development in the ongoing industry initiative to increase standardisation and automation and further reduce risk across over-the-counter derivatives markets.  View Article
Citi publishes report on OTC derivatives
The report, called 'Ready or Not – Here it Comes: OTC Derivatives in the Post-Dodd-Frank Landscape – Implications for Investment Managers', focuses on the implications of the Dodd-Frank Act for investment managers.  View Article
FT: Push to regulate derivatives is under strain
The global deal to regulate opaque derivatives markets is under strain, according to officials and bankers, amid increased tensions between countries on the shape of the new regime.  View Article
FSA reviews of credit risk management by central counterparties
The FSA assesses both applications and existing services against the UK standards for central counterparties in the Financial Services and Markets Act and the Recognition Requirements. This letter provides information as to the way in which FSA assesses compliance with the Recognition Requirements.  View Article
FSA looks into risk-management governance at clearinghouses
Bloomberg reports that clearinghouses are likely to see greater scrutiny of their risk-management governance and organisational structure as the UK financial regulator seeks to cut the risks they pose to the financial system.  View Article
Moody’s downgrade warning pressures US on debt deal
Moody's Investors Service raised the pressure on U.S lawmakers to increase the government's $14.3 trillion debt limit by placing the nation's credit rating under review for a downgrade.   View Article
Almunia: Competition policy in 2010 and the reform of State Aid rules on the services of general economic interest (SGEI)
Almunia's speech to the ECON committee focused on the report for competition policy in 2010, and included a short update on the new State Aid rules for the services of general economic interest which are to be adopted at the end of the year.  View Article
UK's Competition Commission: BATS/CHI-X merger issues statement
Both operate MTFs which enable market participants to trade pan-European equities through a single platform as an alternative to trading on national exchanges. The CC has been asked to decide whether the acquisition may be expected to result in a substantial lessening of competition in the UK.  View Article

Insurance

BIS: Fixed income strategies of insurance companies and pension funds
The report examines how life insurance companies and pension funds might alter their investment strategies and asset allocations, and assesses the likely consequences for market functioning and funding of various economic sectors arising from current changes.  View Article

Asset Management

ESMA seeks views on future rules for alternative investment fund managers
ESMA published a consultation paper (ESMA/2011/209) setting out its proposals for the detailed rules underlying the AIFMD. This is in response to the request for assistance which the European Commission sent to ESMA's predecessor, CESR, in December 2010.  View Article
AMF simplifies the programme of operations required of asset management companies
The AMF plans to publish a new version of AMF Instruction No. 2008-03, along with a "Guide to Preparing a Programme of Operations" in the third quarter of 2011 after consulting with professional groups.  View Article
FN: Industry told to pore over AIFM detail
Private equity lobbyists want industry executives to put in extra effort during the quiet summer period to press their case on the detail of the Alternative Investment Fund Managers Directive (AIFMD).  View Article
Hedgeweek: Alternative UCITS prosper but will QIFs and SIFs spoil the party?
The last twelve months have done a lot to consolidate people's views of alternative UCITS. Fund managers have started to wake up to the obvious benefits of having an onshore vehicle and the value that the UCITS structure can bring.  View Article
IPE: Pension funds focusing more on intrinsic value in securities lending
According to Keith Haberlin, senior vice president of global securities lending at the agent lender Brown Brothers Harriman, since the financial crisis pension funds have been seeking to drive return from lending the securities themselves and not from the collateral.  View Article

Corporate Governance/Accounting

FEE commented on EFRAG's draft comment letter on the report of the Trustees' Strategy Review
FEE welcomed most of the proposals made by the Trustees. FEE generally agrees with EFRAG's comments and recommendations included in its draft letter. However, FEE has some additional comments related to specific points of the consultation.  View Article
FASB update on the path to a differential standard-setting framework for private companies
The article describes the staff's findings, which will assist the FASB in developing a new framework for deciding when and how to modify specific US GAAP accounting standards for private company use.  View Article
IFAC: IAESB proposed clarified standard on practical experience requirements
The IAESB published for public exposure a proposed revision of IES 5, 'Practical Experience Requirements'. IES 5 currently prescribes the practical experience that IFAC member bodies should require before qualification as a professional accountant. Comments are requested by October 8, 2011.  View Article
FRC: ASB issues amendments to FRS 29 (IFRS 7) 'Disclosures - Transfers of Financial Assets'
The ASB of the FRC published amendments to FRS 29 (IFRS 7), 'Financial Instruments: Disclosures', adding requirements to that standard in relation to disclosures on transfers of financial assets. Entities are required to apply the amendments for annual periods beginning on or after 1 July 2011.  View Article
Bruegel Policy Brief: 'Keeping The Promise of Global Accounting Standards'
Senior Fellow, Nicolas Véron, looks at the medium-term prospects for International Financial Reporting Standards (IFRS). The IFRS's defining promise is cross-border comparability of financial statements, but the aim of global harmonisation will not be fully achieved in the next few years.  View Article

Financial Services Policy

ECOFIN Council: Priorities for re-launching the Single Market
The ECOFIN Council recalled that innovative financing instruments need to be further assessed in terms of leverage effects in comparison to existing instruments, risks that would be added to government balance sheets and possible crowding out of private financial institutions.   View Article
EDHEC-Risk Institute warns the European Commission of the inadvisability of imposing a Tobin tax
In an open letter dated to Commissioner Barnier, EDHEC-Risk Institute's arguments include that the Tobin tax will drive away investors who provide liquidity, stabilise prices, and help in the price discovery process.   View Article
FTAdviser: World keeps a close look at RDR
Nick Cann, chief executive of the Institute of Financial Planning, has warned that advisers outside the UK must prepare for change as international regulators increasingly monitor the success of the retail distribution review.  View Article

Economic Crisis

Quarterly report on the euro area: The European Semester helps to tackle the ongoing debt crisis
In Greece, Ireland and Portugal, tailor-made economic adjustment programmes have been devised in order to rebuild sovereign funding access and consolidate public finances. In all programme countries significant steps towards fiscal consolidation have been taken, and structural reforms are underway.  View Article
WSJ: Euro solution is at hand - with a little courage
The darkest hour is just before dawn — and these are undoubtedly dark days for the eurozone. Yet a comprehensive solution to the euro crisis could be activated in days. All it requires is political courage.(Citing Graham Bishop's article.)  View Article
ECOFIN Council conclusions on fiscal surveillance
The Council notes that according to the Commission services' spring 2011 forecast, the general government deficit both in the euro area and in the EU as a whole is planned to decline over the forecast horizon.   View Article
CGFS: The impact of sovereign credit risk on bank funding conditions
The Committee on the Global Financial System examines in this report the relationship between sovereign credit risk and bank funding conditions, how banks might respond to an environment of ongoing elevated sovereign risk, and the implications for policy-makers.   View Article
Moody's cuts Irish debt rating to junk status
The more politicians talk about private-sector participation for Greece, the greater the risk of a downgrade for Ireland and Portugal. Yesterday, Moody's cut Ireland to junk status, using similar arguments as those they used in respect of Portugal last week.   View Article
Statement by the Eurogroup: Greece must sustain its ongoing efforts to meet its commitments towards fiscal sustainability
Ministers recognised the need for a broader and more forward-looking policy response to assist the government in its efforts to bolster debt sustainability and thereby safeguard financial stability in the euro area.  View Article
Bruegel: Fledgling referee of systemic risk
Overall, the ESRB could play a leading role in the financial stability discussions of the EU but it will be important to take up difficult topics forcefully early on. For example, it could establish itself now by preparing policy options for decision-makers on how to deal with sovereign risk.  View Article
Lorenzo Bini Smaghi: European democracies and decision-making in times of crisis
Bini Smaghi argued that in today's sophisticated financial markets, deferring decisions creates uncertainty, entails substantial costs and may undermine the political cohesion of the European Union.  View Article

Graham Bishop’s Articles

Either political union of the eurozone OR disaster is at hand
With the eurozone’s future now at stake, leaders must find the courage to “do whatever it takes”. Eurozone leaders must act courageously - and now - by accepting Parliament's "six pack" and expanding/opening up the EFSF.  View Article
Graham Bishop's blog: Bank stress test/incipient liquidity crisis - a 7 point plan as "the only thing we have to fear is fear itself"
As Roosevelt said in his 1933 Inauguration Speech "the only thing we have to fear is fear itself” and the eurozone is quite capable of taking the political and economic measures that will resolve this crisis and turn it round into a major boost to confidence and thus growth.  View Article

Commentaries

Paul N Goldschmidt: Why the Italian crisis is different!
Extension of the sovereign debt crisis to Italy and Spain is symptomatic of the long-term imbedded contradictions between the imperatives of a single monetary policy carried out by the ECB and the more diverse and often incompatible economic and political agendas pursued by individual Member States.  View Article

Graham Bishop's Webinars

Graham Bishop's Webinar: 29th July 2011
Our next webinar will be held on the 29th July 2011, when Graham will be joined online by outstanding specialist co-hosts.   View Article
Graham Bishop's Webinar: 8th July 2011
Graham was joined online by Ian Williams, Alexander Merriman (Sisclear) and Elina Yrgård (Nasdaq OMX). Our thanks go to those who attended and participated.   View Article




© Graham Bishop

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