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25 October 2012

This week in "Brussels"

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Articles from 18 October 2012 - 25 October 2012


ECON Committee: Banking supervision - an accountable system open to all
Draft banking supervision legislation tabled in the ECON Committee would give national supervisors a greater role than do earlier Commission proposals, while at the same time retaining the ECB's power to decide to supervise any bank directly.  View Article
Sharon Bowles MEP warns EU leaders of piecemeal approach to single banking supervision
ECON chair Sharon Bowles called on EU leaders to give the necessary care and foresight to enable the banking union proposals to be fully functional.  View Article
"Banking Union is fast becoming Banking Union Lite - getting the taste without the commitment" - Sharon Bowles MEP
Sharon Bowles questioned the need to rush the banking union, given that it will not lead to recapitalisation of Spain's banks. She went on to criticise the Capital Requirements Directive for introducing so many exemptions for the different banking models across Europe.   View Article
EPP/Thyssen: Banking supervision - 'EP must ensure legislative framework is in place by 1 January 2013'
Marianne Thyssen welcomed the agreement reached at the EU Summit to finalise the European banking supervision, the reinforcement of the EMU, and the Two Pack by the end of the 2012. She stressed that the EP must do everything it can to make sure the ambitious objectives are achieved.  View Article
ALDE/Verhofstadt: Banking supervision is just the first building block in the eurozone's urgently-needed global architecture
Verhofstadt welcomed the fact that by 2014, all 6,400 European banks will finally be placed under the supervision of a single control mechanism, which he said was "the only way to apply the same rules everywhere".  View Article
ECB Constâncio, Liikanen discuss bank reforms with UK MPs
The European Central Bank's Vítor Constâncio said that a future EU banking union should be able to focus on the resolution of the large cross-border banks.  View Article
Finnish Government: Progress in bank supervision at European Council
Finland considers it important that the single supervision mechanism be as attractive as possible to countries like Sweden and Denmark.   View Article
Reuters: EU leaders leave critical issues on banking union unanswered
EU leaders have agreed to allow the ECB to supervise banks from next year, but questions remain about how the process will work, which lenders will be involved, and whether those in trouble can be helped. (Includes quote from Graham Bishop.)  View Article
Bruegel/Pisani-Ferry: Clock is ticking on European banking union
Delay is sometimes justified. But Europe's leaders should not believe that positive market reactions to announcements will substitute for actual decisions for long.  View Article
BNE Position Paper on European Banking Union
This paper seeks to set out the background, the key issues and the recommendations for the UK government in preparation for the forthcoming European Council negotiations in October and December, which are taking place with a view to creating a European Banking Union.  View Article
CEPS/Gros: Banking union - Ireland vs Nevada, an illustration of the importance of an integrated banking system
This latest commentary by Daniel Gros vividly illustrates the importance of the shock-absorbing capacity of an integrated banking system and a banking union.  View Article
Eddy Wymeersch: The European Banking Union, a first analysis
Prof Wymeersch's in-depth paper presents a first legal and technical analysis of the Commission proposals for a Single Supervisory Mechanism. It also refers to some of the discussions that have already sprung up, including references to Graham Bishop's recent comments.  View Article
BIS: Locational banking statistics and Consolidated banking statistics
The Bank for International Settlements published its Locational and Consolidated banking statistics.  View Article
EBA: Joint Committee response to the CfA on the Fundamental Review of the Financial Conglomerates Directive
The European Banking Authority, EIOPA and ESMA responded to the European Commission's Call for Advice on the Fundamental Review of the Financial Conglomerates Directive.  View Article
EBA: Report on the assessment of SME proposals for CRD IV/CRR
The report analyses the appropriateness of the Risk Weights for Retail SME lending proposed in the CRD IV/CRR framework. It assesses the possible effects of a reduction by 1/3 in relation to the current regulation, and the effect of an increase to €5 million on the regulatory thresholds for SMEs.   View Article
EACT/Raeburn: Approaching a win on CRD IV/CRR?
In his blog, chairman Richard Raeburn writes that EACT and many corporates have been arguing that it is illogical and unhelpful to allow CRD IV/CRR to override economically the value of the corporate exemption under EMIR. The issue is specifically over the application of CVA.  View Article
EPP/Hökmark: Bank recovery - Banks in crisis may be nationalised after owners and lenders taken hit
"Temporary public ownership of banks should be an ultimate resort when a systemic crisis hits. This must be an available tool if financial crises are not to be exacerbated and in order to protect taxpayers' money in the long run. But shareholders must take the first fall."  View Article
Bank of Finland Governor Erkki Liikanen: On the structural reforms of banking after the crisis
Liikanen focuses in his speech on changes in banking in the run-up to the crisis, public reaction to the crisis and the need to rebuild trust, the regulatory response to the crisis, and the proposals of the High-level Expert Group.  View Article
Nucleus/Lloyd: Vickers and Liikanen fail to bite the bullet on banking reform
2012 has seen the publication of two reports on banking reform, both motivated by the desire to avoid future banking crisis and to protect the taxpayer from bearing the costs of the bailout of effectively insolvent banks.   View Article
Reuters: Bank reforms risk more shadow banking - ECB's Liikanen
Policymakers must guard against the risk that banking sector reforms could drive more business into the shadow banking sector, European Central Bank Governing Council member Erkki Liikanen said on Thursday. (Includes link to CNBC interview with Liikanen.)  View Article
FTAdviser: Volcker warns about ring-fence jumping
A ring-fence on retail banking, as proposed by the Independent Commission on Banking and backed by the UK government, would become permeable over time, Paul Volcker has warned. (Includes comment on Volcker's appearance before the Commission by Chairman of the PCBS, Andrew Tyrie MP.)  View Article
BFM: Extension of protection against systemic banking crises
The German Cabinet approved the extension of the Financial Market Stabilisation Fund (SoFFin) until the end of 2014, with the intent of prolonging the option for banks to receive stabilisation measures from SoFFin until the uniform European restructuring guidelines enter into force.  View Article
EBA/Enria: Deleveraging and segmentation of the Single Market
EBA chairman Andrea Enria gave a speech entitled "A Reconfiguration of Europe - the CEE Perspective on Deleveraging and segmentation of the Single Market". He highlighted the EBA's formal role as mediator and watchdog for the compliance with EU law.  View Article
Deloitte: Tougher capital rules are key driver of European bank deleveraging
Deloitte UK undertook primary research alongside DTTL member firms across Europe, surveying 18 European financial institutions, representing €11 trillion of assets, about their experience and expectations of deleveraging. The survey was reinforced by one-on-one interviews.  View Article
Bank of England: The Prudential Regulation Authority’s approach to banking supervision
The PRA will become the UK's prudential regulator for deposit-takers, insurance companies and some investment firms in 2013. This paper sets out how the PRA will carry out its role in respect of deposit-takers and investment firms.   View Article
FT: BBA considers register to ban rogue bankers
UK bankers face the risk of being barred from their profession by an independent body if they misbehave, under new rules being weighed up by the main City bank lobby group in a bid to revive the battered reputation of the financial sector.  View Article
VP Almunia: State aid control
Speaking at the Barcelona Graduate School of Economics Inaugural Lecture, Almunia explained how the European Commission has been using the instruments of State aid control to push towards the restructuring of banks since 2008.  View Article
SUERF Study 2012/5: 'Developing Distress Resolution Procedures for Financial Institutions'
This paper focuses on the need for a lex specialis for resolution of insolvent banks and other financial institutions serving similar functions, as well as on the requirements for making resolution procedures effective.  View Article


EPFSF Briefing "Markets in Financial Instruments Directive (MiFID II/MiFIR) – State of play"
This briefing mainly refers to market structure issues, non-discriminatory access to market infrastructures and, the third country regime. The paper also covers other issues such as the investor protection regime, which is of the utmost importance for the buy and sell side.  View Article
Bloomberg: Asset-backed securities may face tougher oversight in Basel plan
Banks trading asset-backed securities may face tougher capital requirements and stricter oversight from global supervisors amid concerns that regulation is failing to curb excessive-risk taking.  View Article
FT: It's time to levy the risk-takers
Since the Lehman bankruptcy and AIG bailout, there has been increased momentum to move "over-the-counter" financial derivatives from the books of large banks to clearing houses – or central counterparties (CCPs) – in effect moving the risk off large banks' balance sheets.  View Article
FT: UK report urges rules to limit HFT risks
The two-year study, commissioned by the British government, urges regulators, investors and brokers to examine the use of circuit breakers, both to stop sudden swings in the market, and to protect investors by reducing so-called "tick sizes".  View Article
FT: Swaps trades on brink of tough new regime
In the new order, swaps trades have to go through a central counterparty, or clearing house, so that the failure of the institution on one side of a trade does not harm the other, and the trades themselves should be made on a trading platform.  View Article


EIOPA: Technical Specifications for the Solvency II valuation and Solvency Capital Requirements calculations (Part I)
This first part of updated Technical Specifications is a working document that EIOPA recommends to insurance and reinsurance undertakings to use in any quantitative assessments. It contains only general specifications that do not depend on the Long-Term Guarantee (LTG) package.  View Article
IAIS releases proposed policy measures for global systemically important insurers (G-SIIs)
The paper was endorsed for consultation by the Financial Stability Board (FSB), which is coordinating the overall project to reduce the moral hazard posed by global systemically important financial institutions.   View Article EU elections could derail Solvency II development, warn insurers
Insurers are urging European lawmakers to set out a clear timetable for the introduction of Solvency II, amid fears that the 2014 European elections could waylay the legislative process.  View Article
IPE: Nearly half of European insurers unready for Solvency II
According to a study by Ernst & Young, just under half of European insurers (43 per cent) would be ready for the Solvency II regulatory framework by January 2014, but nearly 90 per cent would be prepared by 2015.  View Article
Risk management is linked to better corporate performance, FERMA survey finds
Maturity of risk management processes is correlated with sustainable improvements in corporate performance, the 2012 Risk Management Benchmarking Survey of the Federation of European Risk Management Associations (FERMA) has revealed.  View Article
CRE: IRM launches risk culture guidance to bridge ERM gap
The Institute of Risk Management (IRM) this week issued two guidance documents to help risk professionals and their organisations tackle the difficult topic of risk culture - described by the institute as the 'missing link in the successful implementation of Enterprise Risk Management (ERM)'.  View Article
CRE: European non-life insurers remain well capitalised but negative outlook persists
The crisis remains a significant challenge facing the European non-life insurance sector that is attempting to increase premium rates, according to AM Best, which believes current underwriting margins are only 'passable' based on today's pricing levels, and retains its negative view on the sector.  View Article

Asset Management

EFAMA reply to EC Consultation on UCITS
EFAMA welcomes the opportunity to comment on the eight areas covered in the Consultation Document of the European Commission on UCITS.  View Article
JAC Response to EC Consultation Document on UCITS
The Joint Associations Committee considers that UCITS provides a balanced and considered approach to eligible assets.   View Article
ALFI's reply to the EC Consultation Document on UCITS
ALFI strongly believes that UCITS should be allowed to invest in Responsible Investing in general and in EuSEFs in particular, subject to some restriction, and would welcome a common framework to support long-term investing for retail investors in a parallel regime to the UCITS regime.  View Article
AIMA calls for depositary passport in UCITS V position paper
The Alternative Investment Management Association (AIMA), the global hedge fund association, has called for the establishment of a UCITS (Undertakings for Collective Investment in Transferable Securities) depositary "passport" regime in its Position Paper on the proposal for a UCITS V Directive.  View Article
ICMA AMIC responds to EC Consultation Paper on UCITS
The ICMA AMIC has responded to the European Commission's Consultation Paper on UCITS: Product Rules, Liquidity Management, Depositary, Money Market Funds and Long-term Investments.  View Article
ISLA responds to the European Commission's consultation on UCITS
ISLA believes that a UCITS' fund board should be able to define policies for the use of EPM techniques within a robust principle-based regulatory framework, and with full disclosure to the underlying investors.  View Article
IMA welcomes second EU retail fund passport and warns against imposing additional constraints on UCITS
In its response to the European Commission's wide-ranging UCITS VI consultation, the Investment Management Association (IMA) warns against restricting UCITS investment strategies or imposing yet more requirements on an already highly-regulated product.  View Article
IPE: EIOPA – Only revised IORP Directive will revive moribund DB schemes
Gabriel Bernardino, chairman at the EIOPA, has argued that defined benefit (DB) schemes are dead and will be revived only by pending changes to the IORP Directive, as he sought to fend off allegations that proposed solvency capital requirements could force the closure of UK schemes.  View Article
EFAMA: The IORP Directive revision - a truly political debate
EFAMA commends EIOPA on its view that this first QIS will be a partial exercise to be complemented with further quantitative evaluations and assessment of fundamental aspects, such as supervisory responses, multi-employer IORPs treatment, and a right assessment of the expenses borne by employers.  View Article
IPE: Industry organisations accuse Brussels of ignoring EIOPA advice
A group of eight industry associations has claimed that the European Commission ignored issues raised by EIOPA in the implementation process of the new IORP Directive, and has called on the authority to conduct further impact exercises.  View Article
IPE: Brussels should allow DC pensions to invest in illiquid funds – AREF
The Association of Real Estate Funds (AREF) has urged the European Commission to keep illiquid real estate funds open to retail investors, arguing that not to do so would reduce options for defined contribution pension schemes.  View Article
Irish Department of Social Protection: Report on Pension Charges in Ireland 2012
This report has gathered information on the level of pension charges levied on pension arrangements, for the purpose of assessing whether charges are reasonable and transparent. It also reports on the findings and makes recommendations to the Minister for Social Protection and the Government.  View Article
IPE: Interest in buyouts doubles among Irish pension funds – IAPF
Interest by Irish pension funds in buying out liabilities has more than doubled in the last year, despite subjects being sceptical about either the purchase of sovereign bonds or sovereign annuities – specifically introduced by the government to allow for such de-risking.  View Article
WSJ: Northern European investors steer clear of needy South
Pension managers in Finland who long ago stopped buying bonds of troubled eurozone countries aren't changing their policy just because the European Central Bank has expressed readiness to buy the bonds.  View Article
IPE: UK pensions minister proposes DB with no liability beyond employment
Defined benefit (DB) funds with no further obligations on an employer once a worker leaves, and a levy on defined contribution (DC) savings to allow for smoothing, were two of the ideas proposed by pensions minister Steve Webb as he shed light on his 'defined ambition' proposals.  View Article
IPE: Austria's VBV calls for separation of active, retired pension fund members
Günther Schiendl, CIO at VBV, Austria's largest pension fund, said the major problem now was "a liability and asset mismatch", adding that there was no way to change the "asset side of the equation".  View Article
300 Club - From short-term salesmanship to long-term stewardship
The asset management industry as a whole fails in expertise, discipline and reliability, according to the latest paper from the influential 300 Club.  View Article
IPE: European asset managers must adapt to institutional needs
European asset managers will have no option but to adapt to institutional investors' needs by pursuing new trading and structuring strategies instead of offering "standard" investment solutions, according to Fitch.  View Article

Corporate Governance/Accounting

EuropeanIssuers comment on audit Regulation and Directive
EuropeanIssuers commented on the audit Regulation (Proposal for a Regulation on specific requirements regarding statutory audit of public-interest entities) and the Directive (Proposal for a Directive amending directive 2006/43/EC on statutory audits of annual accounts and consolidated accounts).  View Article
ACCA: IAASB project on auditor's reports on the right track for investors
Responding to a consultation by the IAASB about improvement to the auditor's report, ACCA concludes that the IAASB project is a good first step to innovative change in audit.  View Article
ACCA: The future of audit - Towards more transparency, quality and independence
On 25 September, Sajjad Karim MEP hosted a high-level roundtable, organised by ACCA in partnership with ecoDa, to discuss the various proposals linked to audit quality and transparency, as well as those targeting independence and market structure.   View Article
IFAC and IVSC: Strengthen collaboration to improve confidence in business reporting
The IFAC and the IVSC have renewed their Memorandum of Understanding (MoU), first signed in 2009. The MoU reflects their shared conviction that the transparency provided by high-quality international standards contributes significantly to the effective functioning of capital markets.  View Article
IASB: IFRS Foundation staff analysis of SEC Final Staff Report on IFRS
IFRS Foundation Trustees published a staff analysis of the SEC Final Staff Report on IFRSs. The SEC Staff Report represented the culmination of almost two years' work by SEC staff to analyse the issues related to the possible incorporation of IFRSs into the US financial reporting regime.  View Article
FT: Accounting convergence risks derailing
A decade-long effort to converge US and international accounting rules is at risk of derailing, according to a report released on Tuesday by a top standard-setter, the IASB.  View Article

Financial Services Policy

FSCP: European legislation may undermine RDR
The UK Financial Services Consumer Panel (FSCP) has become the latest body to warn that conflicts between UK and EU laws could undermine the Retail Distribution Review (RDR).  View Article

European Council/Parliament

European Council - 18/19 October 2012 - Conclusions
The European Council reiterated today its firm commitment to take resolute action to address financial market tensions, restore confidence and stimulate growth and jobs.  View Article

Graham Bishop's Personal Contributions

FT story on illegality of Banking Union proposals: Graham Bishop comments
Graham gives his views on the FT article, 'Leaked legal opinion on the eurozone banking union', which says in essence that the Commission plan for a separate body within the ECB to receive delegated powers would be 'ultra vires'.  View Article

© Graham Bishop

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