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01 March 2012

This week in "Brussels"

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Articles from 23 February 2012 - 01 March 2012


Barnier: Europe is taking the right decisions
Speaking at the US Chamber of commerce in Washington, Commissioner Barnier expressed concern about delays in implementing Basel 2.5 and Basel III in the US. He defended CRD IV, and stressed that the EU rules will apply to 8,000 European banks.  View Article
SEPA: Council adopts regulation on credit transfers and direct debits
The regulation constitutes a key element of SEPA (single euro payments area), an EU-wide integrated market for credit transfers and direct debits with no distinction between national and cross-border payments.   View Article
ECON Committee published a report on banks' remuneration rules (CRD III) - are they implemented and do they work in practice?
CRD III provides a prescriptive rules-based approach to regulating bonuses for senior executives and risk traders that creates complexity and limits effective disclosure to the market.   View Article
FT: UK banks welcome liquidity swap ruling
UK banks can use complicated asset trades with insurers to help achieve tough liquidity rules, the UK Financial Services Authority announced, cheering industry groups which had feared the transactions would be banned.  View Article
EPC Video: 'SEPA for Billers'
This film from the European Payments Council highlights aspects relevant for businesses and public entities transitioning to SEPA. Extended and short versions are available.   View Article
EPC: Get ready for February 2014 - Early SEPA movers on the customer side share lessons
Preparation is everything and time is of the essence: this is key for any business and public entity transitioning to the Single Euro Payments Area (SEPA) within less than two years. It may also be worthwhile considering lessons learnt by early movers on the customer side.  View Article
ABBL: Consumers - switching bank accounts may not be as easy as hoped
The Luxembourg Bankers' Association reports that switching your bank account may not be as easy as you hope. Results of a consumer market study published show that more than two thirds of mystery shoppers were not able to switch their bank account successfully.   View Article
VoxEU: Preventive macro-prudential policy
Banking runs are a major threat to modern finance. This column makes the case for preventive tools over ex post intervention.   View Article
HM Treasury: Government action halts banking tax avoidance schemes
The UK Government has taken steps to close two aggressive tax avoidance schemes recently disclosed to HM Revenue & Customs (HMRC) by a bank.   View Article


ECON Committee published all responses to the consultation on the review of MiFID
In December 2011, Rapporteur Markus Ferber (EPP, DE) launched a consultation based on a questionnaire to inform the Committee's work on the review of MiFID. Among the 194 replies, there are responses from banks, corporate and stock exchanges.   View Article
ESMA consultations on MiFID
ESMA published the responses received to the consultations on certain aspects of the MiFID requirements for suitability and compliance.  View Article
ECON Committee consideration of draft report on CRAs
The EU's credit rating agency reform plans need to be beefed up, in order to replace "unsolicited" sovereign debt ratings of EU Member States with ratings by an independent body, reduce reliance on agency ratings, and eliminate conflicts of interest that could influence them, said rapporteur Leonardo Domenici (S&D, IT).  View Article
ISDA and industry response to BCBS paper on application of own credit risk adjustments to derivatives
This paper focuses on gains and losses arising from changes in the creditworthiness of counterparties to OTC derivatives and Secured Financing Transactions (SFTs), without examining the relationship to gains and losses arising from a Firm's other liabilities, such as debt issued held at fair value.   View Article
ESMA readies guidelines on automated trading
ESMA published the official translations of its final "Guidelines on systems and controls in an automated trading environment for trading platforms, investment firms and competent authorities", first published on 21 December 2011. High frequency trading (HFT) is one form of automated trading.  View Article
IOSCO makes recommendations on OTC derivative mandatory clearing
IOSCO's report outlines recommendations that authorities should follow in establishing a mandatory clearing regime for standardised OTC derivatives, in support of the G20's Leaders Commitments to improve transparency, mitigate systemic risk and protect against market abuse in these markets.  View Article
VoxEU: Basel regulation needs to be rethought in the age of derivatives (Parts 1 & 2)
These columns by Paul E Atkinson and Adrian Blundell-Wignall aim to bring banking regulation back to the centre of attention. They argue that the Basel III regulations currently being proposed are already desperately out of date. Part 2 outlines how to put this right.  View Article
ALFI response to ESMA’s consultations papers on MiFID suitability requirements and on compliance function requirements
ALFI would recommend taking into account the fact that investment firms can only rely on the information provided by their clients, and that it is those clients' responsibility to give true and reliable information, as well as to communicate any relevant changes in their personal situation.   View Article
AMF: Price formation on the CDS market - lessons of the sovereign debt crisis
Further to recent trends in CDS prices and sovereign bond yields, this memo looks into the subject of price formation on CDS markets, notably on sovereign issuers. Interviews were conducted on this subject with operators on these markets.  View Article
Consob: Restrictions lifted on net short positions on financial securities
On 24 February 2012, the restriction on short sales that had been adopted on 12 August 2011 and subsequently extended was finally lifted. This provision entailed the prohibition from taking or increasing short positions on shares in the financial segment, including intraday.  View Article
FN: New reports highlight HFT research divide
The Swedish regulator issued a report which finds that the negative effects related to high frequency and algorithmic trading are limited.  View Article
FN: Settlement rules will put Europe ahead
The G20 works on a regulatory framework for delivering the financial stability that will underpin new global financial architecture. Current regulatory reforms can be divided into two streams - those initiatives that deal with risks identified by the last crisis, and those pre-emptive in nature.  View Article
EuropeanIssuers' comments on CRAs
EuropeanIssuers strongly support a clear distinction between "solicited ratings" and "unsolicited ratings".  View Article
EACT comment on latest EU proposals for regulation of credit rating agencies, and on ECON report
EACT believes that some measures proposed by the Commission would have negative consequences on the use of ratings by corporate issuers. It emphasises how financial regulatory agenda needs to take proper account of how end users in the real economy are impacted.  View Article
IFR: Moody's move threatens Triple A ABS
Moody's downgrade of Italy and Spain two weeks ago, combined with its decision to cap ratings for structured finance bonds from those countries to four notches above sovereign ratings, has stripped a series of originators of the ability to achieve Triple A ratings.  View Article
ECMI: Pending issues in the review of the European market abuse rules
In this Policy Brief, Carmine di Noia argues that rules on market abuse should be technically well-designed, proportionate and crystal-clear, but also subject to more efficient supervision than before.  View Article


EIOPA Gabriel Bernardino: Solvency II and Basel III require significant effort from the industry
Speaking at the Gala Dinner of the Institutional Money Congress, Bernardino highlighted that EIOPA is working intensively on the development of technical standards and guidelines that are essential for the implementation of Solvency II.   View Article
S&P examines consequences of Basel III and Solvency II
S&P stated that the world's insurance and banking sectors are interdependent: insurers need to invest the premiums they receive from policyholders safely, while banks need to finance their operations.  View Article
Capgemini published the fourth edition of the World Insurance Report
The 2011 World Insurance Report explores some of the ways insurers can dissect their business to identify opportunities for making fundamental and lasting improvements in operations improvements that will provide the underpinnings for long-term success.  View Article
FT: Insurers weigh benefits of headquarters switch
For groups based outside the EU, only their operations inside the Union would fall under Solvency II. By contrast, the entire global operations of insurers that have their headquarters in the EU could be caught by Solvency II.   View Article
Solvency II implementation update
Julian Adams, FSA Director of Insurance, presented the challenges of implementing Solvency II. Mr Adams stressed that the ongoing uncertainty at European level as to what the timeline for implementation will be is a key concern for the insurance industry.   View Article

Asset Management

Barnier: Towards a real single market for occupational pensions offering greater choice and better protection for pensioners
Speaking at the public hearing on IORP, Barnier clarified that he had never said that pension funds could be subject to exactly the same rules as those set out under Solvency II.   View Article
ESMA launches a consultation on key concepts of the Alternative Investment Fund Managers' Directive and types of AIFM
Responses to this discussion paper will help ESMA in finalising its policy approach. The results of the public consultation will be used by ESMA in finalising the draft regulatory technical standards to be submitted to the European Commission for endorsement by the end of 2012.  View Article
EFAMA: Impact of FTT on UCITS
EFAMA claims that the financial scale of the FTT charge will lead to a shift of business away from funds in Europe.  View Article
IPE: Asset managers unable to challenge insurers' dominance over pensions
Asset managers are failing to meet the needs of German occupational pension schemes (bAV), a survey by consultancy Kommalpha has shown. The survey, 'Retirement provision and the asset management industry', details the importance the industry places on clients within the bAV sector.  View Article
FN: Austerity threatens great EU pensions reform vision
Cicero Group's Mark Twigg writes that in the UK and elsewhere, the initial reaction to the White Paper on pensions has been dominated by the industry's fears of insurance-style solvency standards being applied to pensions.  View Article

Corporate Governance/Accounting

EFRAG: Findings of the field tests on implementing IFRS 10, IFRS 11 and IFRS 12
The EFRAG secretariat issued a Feedback Report that summarises the findings and input received from companies which participated in the field tests on implementing IFRS 10, IFRS 11 and IFRS 12.  View Article
Auditing internal audits: The BBA responds to a Basel Committee consultation
The Bank of International Settlements (BIS) recently held a consultation on internal audit functions, specifically in banks. The BBA responded to the BIS consultative report, welcoming offering suggestions on how to improve international guidance on enhancing audits.  View Article
FEE commented on the recast of the 4th and 7th Directives
FEE commented on the EC proposal for a Directive on the Annual Financial Statements, 'Consolidated Financial Statements and Related Reports of Certain Type of Undertakings ("the Proposal")' including comments on amended Transparency Directive, which have been issued by the EC on 26 October, 2011.  View Article
IFAC: IESBA's proposal for changes to Code of Ethics definition of engagement team
The International Ethics Standards Board for Accountants (IESBA) released for public exposure proposed changes to the definition of "engagement team" in the IESBA Code of Ethics for Professional Accountants (the Code). Comments on the Exposure Draft are requested by May 31, 2012.  View Article
IFAC: IAASB issued Q&A document on professional scepticism
The staff of the IAASB released 'Professional Scepticism in an Audit of Financial Statements', a new question-and-answer (Q&A) publication that re-emphasises to auditors the importance of an attitude of professional scepticism when performing their role.  View Article

Financial Services Policy

ECON Committee: A better design of the FTT is possible
The proposed financial transaction tax should be better designed to capture more traders and to make evading it unprofitable. The proposals also say the tax should go ahead even if not all Member States opt for it.   View Article
FSA publishes RDR Newsletter February 2012
With only 10 months to go until the Retail Distribution Review (RDR) comes in, the FSA's focus is now on helping firms to prepare and implement any necessary changes.  View Article
FSA published ‘Distribution of retail investments: RDR Adviser Charging – treatment of legacy assets’
This Policy Statement reports on the main issues arising from Consultation Paper 11/26 (Distribution of retail investments: RDR Adviser Charging – treatment of legacy assets) and publishes final guidance on how the regulator will keep tabs on legacy commission post-2012.  View Article
FTAdviser: Delivering RDR knowledge - IFAs need to look at CPD too
In order to achieve the annual statement of professional standing required under RDR, advisers and discretionary managers must complete a prescribed amount of continuing professional development (CPD) every year.   View Article


Othmar Karas: Parliaments must be involved in G20 decision-making
Othmar Karas called for parliaments to be involved in global decision-making and strengthening the global financial system. At a meeting of the G20 countries in Riyadh, he said the G20 is dominated by governments but bringing parliamentarians into the mix can add a new dimension.   View Article
Ignazio Angeloni: Reflections after the G20 meeting in Mexico
In diplomatic language there is a difference between saying "event B cannot happen because condition A is not fulfilled" and saying "event B will happen if – or even as soon as – condition A is fulfilled". This distinction helps understand what happened last weekend in the G20 ministerial meeting in Mexico City.  View Article
Ignazio Angeloni: The turn of emerging countries
The distinguishing trait of the G20 is the inclusion of the emerging economies (EME) alongside the advanced ones.  View Article

© Graham Bishop

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