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15 September 2011

This week in "Brussels"
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Articles from 08 September 2011 - 15 September 2011

Banking

Commissioner Barnier: Supervisors will be able to require more own funds from banks that face more risks
Speaking at a conference in Vilnius, Commissioner Barnier said that CRD IV will represent a significant cost for the banks. But the efforts will be spread over seven years (until 2019), and will be more than compensated by the benefits of a stronger banking system.  View Article
Almunia proposes an extension of the existing State aid crisis regime for financial institutions beyond 2011
Speaking at the Eurofi Financial Forum 2011, Almunia said that the crisis regime for the control of State aid in the financial sector put in place in 2008/2009 must come to an end – and the sooner the better. However, due to current circumstances it should be extended.   View Article
Bloomberg: Risk piling up at ECB as European banks lose deposits
European banks are losing deposits as savers and money funds spooked by the region's debt crisis search for havens, a trend that could worsen economic and financial conditions.  View Article
Reuters: Moody's cuts French banks as euro crisis deepens
Moody's Investors Service cut the credit ratings of France's Crédit Agricole SA and Société Générale on Wednesday, citing their exposure to Greece's debt, a fresh blow to euro area leaders struggling to restore confidence in the region.  View Article
Bruegel: Rethinking central banking
This report lays out a framework for rethinking central banking in light of lessons learned in the lead-up to and aftermath of the global financial crisis.  View Article
FN: Crisis ghosts haunt securitisation market
Europe's securitisation market has failed to stage a strong recovery since the financial crisis, despite the credit performance of most asset-backed securities in Europe over the past few years, and the resilience of secondary prices.  View Article
BBA: Statement in response to the publication of the Vickers Report
The British Bankers' Association said: "UK banks are well on the way to implementing the sweeping reforms already brought in and expected to be brought in by UK, EU and global authorities to make banks and the system safer".  View Article
BBA calls for accountability and strong governance as new regulators take shape
The British Bankers’ Association comments on the Treasury consultation paper ‘a new approach to financial regulation: the blueprint for reform’.  View Article
ICB: Final Report - Recommendations
The Independent Commission on Banking published this Final Report which sets out the Commission's recommendations on reforms to improve stability and competition in UK banking. It builds on the Interim Report, published on 11 April 2011, and responses to its consultation on reform options.  View Article
EMF published September 'Mortgage Info' newsletter
The European Mortgage Federation published their September 2011 newsletter, including articles on covered bonds and the European mortgage market.  View Article

Securities

ECON Committee workshop: Securities Law Directive (SLD) - what's in a securities account?
The workshop, organised in June 2011, aimed to prepare for the upcoming discussion on the expected Commission proposal for a Securities Law Directive. The paper includes a basic overview on (intermediated) securities holding systems.  View Article
FN: The ten things we learnt from the MiFID leak
The latest draft of the revised Markets in Financial Instruments Directive that has been circulating in Brussels in recent days may be more radical than anticipated, but there are some welcome surprises for those in the derivatives industry concerned about lack of competition.  View Article
SIFMA voices concerns over possible creation of credit rating agency board
SIFMA submitted comments to the Securities and Exchange Commission (SEC) in response to a Dodd-Frank mandated study the Commission must undertake related to the assignment of credit ratings to structured financial products.  View Article
Almunia: Policy objectives in merger control - Deutsche Börse and NYSE Euronext
The Commission's investigation is focusing on several areas, in particular the trading and clearing of derivatives. The NYSE Euronext/Deutsche Börse deal would give the merged company by far the leading position in derivatives' trading in Europe, Commissioner Almunia stressed.   View Article
FN: Nasdaq OMX decries 'destructive' NYSE-Börse deal
Nasdaq OMX has stepped up its opposition to the planned merger between NYSE Euronext and Deutsche Börse, and said the deal would "irrevocably destroy" competition in Europe's listed-derivatives markets, just as the European Commission nears a decision on the tie-up.  View Article
IPE: Deutsche Börse predicts investors could use ETFs to trade longevity
Deutsche Börse has suggested that exchange-traded funds could be used for trading longevity once the market becomes sufficiently liquid.  View Article

Insurance

CEA comments on new supervisory framework for groups
The CEA has submitted its comments on the concept paper of the International Association of Insurance Supervisors (IAIS) on a common framework for internationally active insurance groups (COMFRAME).  View Article
CEA responds to FSB on resolution of SIFIs
The CEA has highlighted that the international framework developed by the FSB on dealing with Systemically Important Financial Institutions (SIFIs) has an unclear scope, applies mainly to the banking sector alone, and may create confusion.  View Article
CEA calls for consistent regulation of occupational pensions
The CEA has reiterated its call for a level regulatory playing field for all providers of occupational pensions in the EU, and welcomes the use of the new Solvency II regulatory regime for insurers as the benchmark for the governance requirements for IORPs.  View Article

Asset Management

IMA response on AIFMD highlights need for proportionality
The IMA has now responded to ESMA's consultation on AIFMD Level 2. The IMA's response focuses on the diversity of funds caught by the Directive, and the need for proportionality in the treatment of alternative investment funds (AIFs).  View Article
ABBL and ALFI consultation paper on ESMA's draft technical advice to EU Commission on possible implementing measures of the AIFMD
The Forum encourages ESMA to strike an appropriate balance between the AIFM Directive objectives of ensuring a high level of investor protection, while refraining from putting unjustified liabilities on the fund depositaries at the expense of the stability of the entire banking and fund industries.  View Article
Hedgeweek: Liquidity is leading concern of institutional hedge fund investors
Some 75 per cent of investors are looking for greater liquidity in their hedge fund investments following the financial crisis, according to the latest Preqin study.  View Article
EFAMA: Equity funds avoid sell-off from investors in July despite market fear
EFAMA has published its latest Investment Fund Industry Fact Sheet, which provides investment sales and asset data for July 2011.  View Article

Corporate Governance/Accounting

EFRAG commented on IASB Exposure Draft Mandatory Effective Date of IFRS 9
EFRAG issued its draft comment letter to the IASB on the Exposure Draft Mandatory Effective Date of IFRS 9. Comments on the letter are invited by 17 October 2011.  View Article
FEE commented on ASB and EFRAG Discussion Paper on Considering the Effects of Accounting Standards
FEE commented on EFRAG's consultation on the effect of accounting standards. FEE commends EFRAG, the ASB and other European Standard Setters for issuing this discussion paper, which in FEE's view represents a valuable contribution to an important debate in regulation and standard-setting.  View Article
FEE commented on IAASB Exposure Draft on ISAE 3000
FEE published its comment letter on the IAASB Exposure Draft on ISAE 3000 on 'Assurance Engagements Other Than Audits or Reviews of Historical Financial Information'.  View Article

Financial Services Policy

Commissioner Šemeta met French President Sarkozy to discuss the FTT
TAXUD Commissioner Šemeta stressed that taxing financial transactions is a subject for which cooperation at European level and at global level is necessary. During the exchange of views, they addressed in particular the Commission's proposal for a financial transaction tax.   View Article
Franco-German letter on the FTT sent to Commissioners Barnier and Šemeta
The letter states that the implementation of a financial transaction tax at the European level would be a crucial step on the path to reaching a global consensus in a way that does not affect European competitiveness.   View Article
TheCityUK: Comment on European financial transaction tax
TheCityUK reports that a transaction tax would threaten the competitiveness of not just the UK, but of the EU. It would provide the catalyst for trading firms to move away from the EU to other jurisdictions where this tax is not imposed.   View Article
FTAdviser: FSA insists RDR will not create advice gap
The Financial Services Authority has responded to widespread concerns that the Retail Distribution Review (RDR) will prevent many consumers from seeking financial advice, as it released a long-awaited consultation on simplified advice rules.  View Article

Financial Stability - Policy Analysis

ECB Bini Smaghi: Policy rules and institutions in times of crisis
He stressed that the ECB acts in full independence, with a clear primary objective, which is price stability in the euro area as a whole. In recent months, the ECB has taken measures commensurate with the gravity of the situation with the intent of pursuing the objective that it has been assigned.   View Article
IIF proposes fresh drive to strengthen global policy coordination
The IIF today called on finance ministers and central bank governors of major economies to demonstrate urgency in creating a simpler, more transparent framework for economic policy formulation and implementation. This is essential to put in place a globally-consistent set of fiscal, monetary, exchange rate and financial regulatory policies to secure stability and economic recovery.  View Article
IIF: Multiple layers of financial regulatory reforms hold back economic growth and will continue to do so for some time
The cumulative impact of regulatory reforms is adding to the headwinds that the global economy faces at a time when economic growth – notably in the United States, Japan and in Western Europe – is already disappointingly weak, according to a major study by the Institute of International Finance.  View Article

Economic Crisis

Statement by Commissioner Rehn on Greece
Commissioner Rehn said that he welcomes the commitment by the Greek government to meet the agreed fiscal targets fully this year and next, and to take the necessary consolidation measures to achieve these objectives.   View Article
Plenary session: MEPs call for unified EU response to debt crisis
MEPs emphasised the need for a unified European response to stabilise the situation. The adoption of a legislative package on economic governance would be a big step in the right direction, MEPs agreed, while warning that ordinary people cannot be expected to bear the whole cost of the crisis.   View Article
Statement by Herman van Rompuy following his meeting with Donald Tusk, Prime Minister of Poland
Van Rompuy and Tusk had an exchange of views on the most recent economic developments in the euro area and the EU. They agreed that economic growth is moderating in Europe and other developed countries, and "we are facing headwinds".  View Article
IMF chief urges focus on riskier EU debt
International Monetary Fund chief, Christine Lagarde, encouraged emerging market countries interested in buying European government debt to focus on nations that have trouble borrowing, not just those with strong fiscal track records.  View Article
WSJ: Merkel, Sarkozy say Greece belongs in currency bloc
Angela Merkel and Nicolas Sarkozy are convinced that Greece's future is within the eurozone, after a three-way conference call with Greek Prime Minister, George Papandreou.  View Article
S&D Schulz leads call for united action plan for euro
S&D leader, Martin Schulz, today criticised poor management of the euro crisis and called for "a committed common set of actions with common institutions" to resolve the current crisis.  View Article
A euro without Germany? Don’t bet against it
Times editor-at-large, Anatole Kaletsky, comments that if the Bundesbank doesn't get its way on bailouts, the impossible may become inevitable.  View Article
Bloomberg: Geithner takes tougher tone on Europe
US Treasury Secretary, Timothy F Geithner, will urge European governments to step up their crisis-fighting efforts amid Obama administration concerns that the region's woes may hurt the US economy.  View Article
World Bank Zoellick: Time for muddling through is over, all need to be responsible stakeholders now
Mr Zoellick said the stakeholders need to act on today's problems while building for tomorrow's challenges, and they need to solve national issues with an eye towards shaping a healthy international system.  View Article
FT: Wen sets preconditions to help Europe
Wen Jiabao, Chinese premier, has called on debt-laden European countries to put their “own houses in order” before asking China for a bail-out, in a sign of Beijing's reluctance to be cast as a saviour for the global economy.  View Article
Reuters: EU warned of credit crunch
European finance ministers have been warned of the danger of a renewed credit crunch as a "systemic" crisis in eurozone sovereign debt spills over to banks.  View Article
FT: Merkel bids to quash Greece default talk
Mixed messages from members of Germany’s ruling centre-right coalition have fed recent market turmoil. But the chancellor slapped down her political partners for speculating about Greek insolvency, or even an exit by Athens from the euro.  View Article
WSJ: Greece's efforts fail to calm
The property-tax manoeuvre is part of what has now become a ritual between Greece and the international lenders who are bailing it out: the country teeters on the brink of running out of money—Greece has only enough to last until mid-October—and then hurriedly promises fresh measures to win more.  View Article
Bloomberg: Merkel says uncontrolled Greek insolvency must be avoided
German Chancellor Angela Merkel said she won't let Greece go into “uncontrolled insolvency” because of the risk of contagion for other euro area countries.  View Article
WSJ: Support grows for new EU Treaty to boost fiscal ties in eurozone
The push for a new European Union treaty giving the eurozone greater fiscal integration got a significant boost over the weekend after UK finance chief, George Osborne, acknowledged he had discussed the matter with his European counterparts, and said a new treaty was likely in the next two years.  View Article
IMF completes first review under an EFF with Portugal and approves €3.98 billion disbursement
The EFF, which was approved on May 20 2011, is part of a cooperative package of financing with the European Union, amounting to €78 billion over three years.  View Article
EC 2011 Report on Public Finances: The sustainability of the public finances is the key policy concern in the wake of the crisis
The report looks at the recent developments in public finances, analyses new ways of assessing debt sustainability, and describes the changes to budgetary surveillance. The reforms put prevention and debt reduction at the centre of EU budgetary surveillance, based on the lessons of the crisis.  View Article
FT: Italy turns to China for help in debt crisis
Italy's government is turning to China in the hope that Beijing will help rescue it from financial crisis by making “significant” purchases of Italian bonds and investments in strategic companies.  View Article
FN: Default swaps could boost EFSF funding efforts
The European Financial Stability Fund faces a busy autumn. It has issued three bonds this year worth €13bn in total, but more are on the way. Its borrowing capacity has increased from €250bn last year to €440bn, but it may not be enough to cope with the growing number of weak eurozone credits.  View Article
Reuters: Stark ECB exit hits shaky eurozone at worst time
The resignation of the top German official at the European Central Bank could hardly have come at a worse time for eurozone policymakers as they grope for a way out of the deepest crisis in the single currency's 12-year history.  View Article
FT: Germany rewrites its contract with ECB
Jürgen Stark's surprise resignation as ECB executive board member on Friday was a serious jolt to the eurozone, at a time when worries over a Greek default were already fraying financial market nerves.  View Article
FT: Lagarde softens stance on EU banks
Christine Lagarde has softened her stance on the amount of capital needed by European banks.  View Article
WSJ: ECB opens door to shift on rates
The European Central Bank opened the door to interest-rate cuts if needed to bolster a weakening economic recovery - a dramatic U-turn from its decision to raise interest rates just two months ago.  View Article
OECD says economic growth perspectives weakening as recovery slows
Economic recovery appears to have come close to a halt in the major industrialised economies, with falling household and business confidence affecting both world trade and employment, according to new analysis from the Organisation for Economic Cooperation and Development.  View Article
Madrid and Rome – two sorts of crisis
The article claims that both Spain and Italy play a crucial role in the future of the single currency.  View Article
FT: Expulsion from the eurozone has to be the final penalty
Dutch Prime Minister Mark Rutte and Dutch Minister of Finance Jan Kees de Jager say that the agreements that have been made must be anchored more firmly, and tougher action taken to enforce them.  View Article
WSJ: Italian austerity plan clears Senate hurdle
The Italian government's austerity package was approved by the Senate on Wednesday, clearing a major hurdle in Italy's efforts to convince investors that the country is credit-worthy.  View Article
Geithner: What the world must do to boost growth
Writing in the FT, US Treasury Secretary Tim Geithner says that the question is not whether we have the economic or financial capacity to act to strengthen growth, but whether we have the political ability to do the right things.  View Article

European Council/Parliament

European Monetary Policy under Jean-Claude Trichet
In a study for the European Parliament's Committee on Economic and Monetary Affairs, Stefan Collignon says the change of the German board member at the ECB has led some observers to question the bank's commitment to monetary stability in the present crisis.  View Article
S&D: Martin Schulz - official candidate for the Presidency of the European Parliament
The Socialist and Democrat Group in the European Parliament tonight unanimously backed Martin Schulz as its candidate for the Presidency of the Parliament.  View Article
Bruegel: How effective and legitimate is the European Semester? Increasing the role of the European Parliament
The European Semester is a new institutional process that provides Member States with ex-ante guidance on fiscal and structural objectives. The Semester's goals are ambitious and it is still uncertain how it will fit into the new EU economic governance framework.   View Article

Think Tanks

Bruegel: Will the US dollar be dethroned as the global currency?
Zsolt Darvas comments that dollar dominance will not stay with us forever. In the period running up to the crisis, some major developments have surfaced - which will shape the future.  View Article
Bruegel: Monetary challenges in a multipolar world - can international monetary reform succeed?
The reform of the international monetary system has been selected by the French presidency of the G20 as its main priority for the Cannes summit in November. This raises two questions: First, is the issue worth the time and energy officials will devote to it? Second, what can these discussions lead to?  View Article
Bruegel: The euro - no soft landing on exit
In Jean Pisani-Ferry's opinion, the option of an exit with a soft landing for Greece is fiction. If by any chance this were to happen, there would be chaos. It would be economically destructive, financially ruinous and socially devastating.  View Article
Bruegel: Changing of the guard - challenges ahead for the new ECB president
Guntram B Wolff writes that Jean-Claude Trichet deserves praise for fighting inflation and his handling of the financial crisis of 2007-2009. But his legacy is unfinished and it remains to be seen whether he will be the one who saved the euro. Important challenges remain for the incoming president.  View Article
CEPS Commentary: Can Greece ‘grow solvent’?
With the completion of the latest rescue package for Greece – which relieved the country of short-term liquidity problems and eased the borrowing terms, but which made only a small dent in the overall debt burden – this Commentary explores the question whether Greece can now 'grow solvent'.  View Article
CEPS Commentary: Balanced budget fundamentalism
Under extreme pressure from the financial markets and from Germany, member countries of the eurozone feel obliged to introduce balanced budget clauses into their constitutions. In this new Commentary, CEPS Senior Associate Research Fellow, Paul De Grauwe, explains why the balanced budget rule is a bad idea.  View Article

Commentaries

Wolfgang Münchau: Stop rejoicing - this was no victory for the eurozone
Münchau comments that far from being a victory for the eurozone, the ruling of the German constitutional court to uphold the European financial adjustment facility, the crisis mechanism, categorically rules out any policy option beyond what has been agreed so far.  View Article
OMFIF: Stark's departure - an historic step for German central banking
According to David Marsh, Friday's announcement of Jürgen Stark's resignation from the European Central Bank is one more milestone in a long and dramatic line of central banking dismissals, deaths, reversals and retreats in Europe's most important economy.  View Article
Julie Chon: G7 faces three-front battle against contagion
The US is focused on domestic issues, but many of the economic problems are global. G7 officials meet tomorrow, and Julie Chon, Atlantic Council senior fellow and former Senate Banking Committee senior adviser, says they must work to battle contagion.  View Article
Paul N Goldschmidt: Merging EMU Members’ IMF quotas would provide the strong political signal markets are waiting for!
There is a broad consensus that the financial crisis should be addressed at the political level if Governments rather than markets wish to reassert their leadership in shaping the future of the global economy in general, and that of the eurozone in particular.  View Article




© Graham Bishop

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