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21 March 2013

This week in "Brussels"
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Articles from 14 March 2013 - 21 March 2013

Banking

Commissioner Barnier's statement following agreement in trilogue on new European rules to impose stronger prudential requirements on banks
Barnier welcomed the final agreement reached last night on a package that sets stronger prudential requirements for banks, requiring them to keep sufficient capital reserves and liquidity.   View Article
ECON Committee: Time for a wholesale restructuring of banking
Banking needs a culture change, which piecemeal legislation will not achieve on its own, says a draft report presented in the ECON Committee today. The draft urges the Commission to present a proposal for the mandatory separation of retail and investment banking activities.  View Article
ECON Committee: Banking supervision deal struck by EP negotiators and Irish Presidency
Parliament's negotiators inserted many provisions strengthening the system's transparency and accountability. They also ensured that its working structures will be imbued with a European spirit, rather than reflecting just a sum of national interests.  View Article
Statement by Commissioner Barnier following trilogue agreement on the creation of the Single Supervisory Mechanism
"This is a first fundamental step towards a real banking union which must restore confidence in the eurozone's banks and ensure the solidity and reliability of the banking sector. This will contribute to strengthening the single market and to guaranteeing financial stability."  View Article
EP President Schulz: Deal on banking union a step forward, insufficient for Cyprus
"The creation of the Single Supervisory Mechanism goes some way towards a new, sound system of financial management that would shield us from crises in the future. Yet the deeply distressing problems faced by Cyprus show how insufficient this step is in itself."  View Article
Sharon Bowles MEP hails victory for making ECB accountable in historic agreement for a Banking Union
"This was an historic agreement to establish first steps for a Banking Union which will see the ECB take over supervision of systemic banks, or those receiving state aid, and revise the voting arrangements of the European Banking Authority."  View Article
EPP/Thyssen: Deal on bank supervision system - Rapid implementation is key
The Rapporteur for banking supervision said that rapid implementation of this new legislation was vital, as banking supervision would make it possible to capitalise the banks directly from the European emergency funds.  View Article
S&D: Deal on new European supervision mechanism for a safer and more democratic banking system
"We are also eager to work on ring-fencing the most speculative banking activities to separate them from retail banking, based on the recommendations in the report by Finnish central bank governor Erkki Liikanen."  View Article
Sven Giegold: Landmark banking supervision deal includes key provisions on democratic accountability
The Rapporteur on the EBA supervision file said: "Crucially, the agreement reached today will provide for strengthened democratic accountability under the proposed system, with the EP getting a clear scrutiny role over the ECB in its performance of its tasks".  View Article
ALDE: Doubts still remain on workability of banking union agreement
"We fear that the provisions to ensure that the ECB's monetary responsibility and credibility will not be weakened by its supervisory tasks and accountability are simply not enough", said ALDE MEP Sylvie Goulard.  View Article
EBF welcomes provisional agreement on Single Supervisor for EU banks
The European Banking Federation has welcomed the provisional agreement on the Single Supervisor that was reached by the EP and the Irish Presidency.  View Article
IMF: Financial Sector Stability Assessment on the European Union
This report states that the prospective introduction of the single supervisory mechanism (SSM) and the experience to date with the European Supervisory Authorities (ESAs) raise some important transparency and accountability issues.  View Article
Basel III monitoring results published by the Basel Committee
The study is based on rigorous reporting processes set up by the Committee to review periodically the implications of the Basel III standards for financial markets.   View Article
Sharon Bowles MEP: "Today's agreement on a bankers' bonus cap will usher in a much-needed culture change"
The ECON chair said that a cap on bankers' bonuses was not a punishment for bankers but a realignment of the work/reward ratio.  View Article
Policy Exchange: Capital Requirements - Gold plate or lead weight?
This paper by James Barty argues that the root cause of the financial crisis was a regulatory regime (Basel II) that, through its low allocation of capital to highly-rated securities, encouraged banks not only to issue those securities but also to hold them on their own balance sheet.  View Article
Fitch Ratings: Basel capital proposals conservative vs global SF losses
The Basel Committee on Banking Supervision's revised proposals on the capital treatment of securitisation exposures could limit the appetite for structured notes among banks, Fitch Ratings says. This could restrict the availability of structured finance as a funding source for the wider economy.   View Article
Basel Committee concludes assessment of Basel III capital regulations in Singapore
The Basel Committee on Banking Supervision has published a report assessing the regulations that implement the Basel capital framework in Singapore.   View Article
BIS: Towards better reference rate practices - A central bank perspective
This report was released by a Working Group established last September by the Economic Consultative Committee (ECC). Chaired by Hiroshi Nakaso, the Working Group comprised officials from 13 central banks and monetary authorities.   View Article
Bundesbank/Dombret: Call for greater diversity in reference interest rates
The reliability of Libor has been in question since it became known that it had been rigged. The main reason that Libor, Euribor and similar reference interest rates are open to manipulation is that they are derived from expert judgement rather than actual transactions.   View Article
BIS publishes March 2013 Quarterly Review
The Bank for International Settlements has published its March 2013 Quarterly Review: 'Markets grow confident on continued support'.  View Article
EBA consults on Supervisory Reporting Requirements for Liquidity Coverage and Stable Funding
EBA published a draft Data Point Model (DPM) based on its draft Implementing Technical Standards (ITS) on Supervisory Reporting Requirements for Liquidity Coverage and Stable Funding. Deadline for comments is 13 May, 2013.  View Article
EBA consults on Supervisory Reporting Requirements for Leverage Ratio
EBA published a draft Data Point Model (DPM) based on its draft Implementing Technical Standards (ITS) on Supervisory Reporting Requirements for Leverage Ratio. Deadline for comments is 13 May, 2013.  View Article
EBA: Update on the technical standards on supervisory reporting requirements
EBA published an updated version of the templates, instructions, validation rules and data point model for implementing technical standards (ITS) on supervisory reporting (COREP and FINREP).   View Article
EBA publishes Consumer Trends Report
This report provides an overview of the consumer protection analysis. The analysis identifies key issues in the areas of consumer protection and financial innovation, and highlights the new trends and the key areas for concern in 2013.  View Article
UK Banking Standards Commission publishes report on proprietary trading
The Parliamentary Commission on Banking Standards undertook to consider fully the ramifications and practical issues of supplementing the proposed UK ring-fence with something akin to the Volcker Rule. This report contains its conclusions and recommendations following the completion of that work.  View Article

Securities

ESMA requires further improvements by CRAs
ESMA has published its second Annual Report on its supervision of credit rating agencies in the EU. The report finds that CRAs have not sufficiently embedded the main requirements of the CRA Regulation in their organisations, and ESMA believes that improvements are still necessary.  View Article
ESMA publishes Q&As on EMIR implementation
This paper provides responses to questions posed by the general public, market participants and competent authorities in relation to the practical application of EMIR.   View Article
IPE: EMIR rules will catch many pension funds off guard
The temporary exemption granted to pension funds from central clearing requirements under the European Market Infrastructure Regulation (EMIR) means many schemes have wrongly assumed they will be exempt from other requirements.  View Article
Mario Draghi: Opening remarks at the conference 'Post-trade harmonisation and the integration of financial markets: a joint effort'
Draghi said that the integration of market infrastructure, the harmonisation agenda triggered by T2S and the regulatory framework were the key elements of a coordinated harmonisation effort that complements and supports financial integration.  View Article
ESMA publishes responses received to the call for evidence on short selling
ESMA invited investors, market participants and any other interested stakeholders to provide responses to the questions outlined in the Call for Evidence by 15 March.  View Article
ESMA consults on Draft RTS in relation to prospectus supplements
ESMA has published a Consultation Paper on draft Regulatory Technical Standards setting out the situations that would require a systematic publication of a supplement to the prospectus, as well as the minimum content of such a supplement. Responses should be submitted online by 14 June, 2013.  View Article
ESMA publishes opinion on framework for assessment of third country prospectuses / Update to CESR recommendations on PD
This opinion explains a framework for third country share prospectuses under Article 20, and sets out the role of the EU Member States' competent authorities in scrutinising prospectuses under these arrangements.  View Article
GFMA response to the Consultative Document on Revisions to the Basel Securitisation Framework
GFMA believes that the envisioned framework would be much more conservative than prudence requires, would have less risk sensitivity than the current framework, would generate inconsistent results across different approaches, and would include cliff effects that could lead to adverse incentives.  View Article
EACT/US Coalition submit responses to BIS-IOSCO consultations on Margin Requirements for Non-centrally-cleared Derivatives
The responses highlight that non-financial end-users should be exempt from mandatory margining requirements for OTC derivative trades, or only be required to post margin above a certain threshold.  View Article
ALFI comments on BCBS's/IOSCO's Margin Requirements for non-centrally cleared derivatives consultative document
ALFI believes that a two-side initial margin requirement would significantly increase systemic risk due to the liquid capital backing of a very large number of currencies and volumes.  View Article
FT: Derivatives sector urges wider IOSCO role
The heads of some of the world's largest derivative trade associations have urged the body for global securities regulators to help resolve the controversial issue of cross-border application of derivatives rules.  View Article
FT: CFTC eyes derivatives reform compromise
A lead US regulator has circulated a draft proposal in an attempt to broker a deal that would finalise planned rules for the $639 trillion derivatives market.  View Article
IMF/Lagarde: The global financial sector—transforming the landscape
In her speech, Ms Lagarde focused on: 1) global regulatory reform ─ how close are we to a solid set of rules?; and 2) balance sheet repair and banking.  View Article

Insurance

EIOPA and World Bank sign agreement to develop global insurance sector
EIOPA and the World Bank have signed an operational Memorandum of Understanding (MoU) to cooperate on developing the insurance sector. The organisations will cooperate on promoting worldwide risk-based supervision and fostering consumer protection.  View Article
Insurance Europe: Indirect Taxation on Insurance Contracts in Europe - 2013
This publication shows a table of fiscal and parafiscal taxes on premiums in each of the countries in the European Economic Area (and Croatia and Switzerland).  View Article
Insurance Europe: The package of measures to avoid artificial volatility and pro-cyclicality
Vital issues still need to be resolved to take into account the long-term nature of the insurance industry. Unless the right steps are taken, Solvency II risks creating artificial volatility (in Own Funds) and pro-cyclicality.  View Article
Risk.net: Solvency II equivalence rules must not threaten European insurers – Rapporteur Skinner
Solvency II's rules on third-country equivalence must not disadvantage European insurers with significant overseas business, Peter Skinner, the European Parliament's rapporteur for Solvency II, has insisted.  View Article
CRE: Top risk manager says Solvency II is good for captives
A leading European risk manager said that Solvency II may be an administrative pain but it is actually good for captives because it inevitably demands a higher level of professionalism and communication with regulators.  View Article
Risk.net: Group supervision and solvency vex US and EU regulatory talks
The US and Europe are at loggerheads over finding a common regulatory framework for insurers. But as they struggle to come to a resolution the IAIS is looming, with its own approach to global regulation that could undermine them both.  View Article
Risk.net: US insurers expect less benefit from ORSA than European firms
Insurers expect to derive significant benefits from undertaking an Own Risk and Solvency Assessment (ORSA), but many companies are struggling to implement key aspects, according to a survey of insurers' enterprise risk management practices.  View Article
CRE: Spanish insurers warn of paralysis due to Solvency II but remain upbeat
Leading Spanish insurers have complained about the excessive regulation coming their way from the European Union, warning that in its current form Solvency II will be impossible to supervise and likely to lead to a paralysis of the sector.   View Article
Risk.net: Insurers explore exchange-traded funds (ETF) to boost yield
As insurers look for new opportunities to increase the yield on their investment portfolios, ETF could provide an efficient way to diversify and gain exposure to areas such as emerging markets and commodities. ETF providers are expanding their range of products, but insurers are cautious.  View Article
FT: Insurers escape bank-style levies
The world's biggest insurers have dodged bank-style capital surcharges based on their entire balance sheets because regulators have decided the broader financial system can be protected with a regime that focuses on their non-traditional businesses.   View Article

Asset Management

ECON Committee: Bonus caps for fund managers and safeguards for retail investors
Investment fund managers' bonuses must be capped, their salaries must be linked to their funds' performance said ECON Committee MEPs in a draft law voted on Thursday. Individual investors' money must also be better protected, they added.  View Article
FT: EU set to widen bonus clampdown
Europe's fund managers are facing a ban on bonuses that exceed salary, as the European Parliament pushes for the extension of its severe pay clampdown on bankers to the wider financial sector.  View Article
IMA: "Joined-up thinking on asset management – and the Government is putting skin in the game"
IMA chief executive Daniel Godfrey said: "Together with the consultation that's been announced on the possible freedom for funds to make gross interest distributions to international investors, the Government is putting skin in the game to show its commitment".  View Article
NAPF: Pension funds react to [UK] Budget
The National Association of Pension Funds (NAPF) responded to today's Budget announcements around the State Pension and the Pensions Regulator.  View Article
IPE: Public pension liability disclosure a 'win for transparency'
Sharon Bowles, the chair of the European Parliament's economic committee has welcomed as a "win for transparency and good governance" rules that would force all EU Member States to disclose unfunded pension liabilities.  View Article
IPE: VAT exemption could apply to DC pension funds
Tax experts have argued that a value added tax (VAT) exemption could be extended to defined contribution (DC) pension funds in future due to their structure.  View Article
FN: Banks and pension funds struggle for common ground on sell-offs
This article details the controversy between banks and pension funds that are struggling to find common ground.  View Article
FSA launches consultation on transposing the Alternative Investment Fund Managers Directive (AIFMD) in the UK
The FSA proposes to issue a full AIFMD policy statement in June, but intends to confirm some of its final policy positions before that date to give affected firms as much time as possible to continue their AIFMD preparation. Deadline for comments is 10 May, 2013.  View Article
John Gapper: Hedge funds' reputation in the balance
An entire industry can be discredited over the sins of a few, writes Gapper in this FT article.  View Article
EDHEC: Smart Beta 2.0 – Taking the risks of new equity benchmarks into account
EDHEC-Risk Institute is seeking to draw the attention of investors to the risks of traditional smart beta equity indices, and proposes a new approach to smart beta investing to take account of these risks.  View Article

Corporate Governance/Accounting

Commissioner Barnier appoints Philippe Maystadt as Special Adviser to enhance EU's role in promoting high quality accounting standards
Capitalising on his expertise in the financial sector, Mr Maystadt's role as Special Adviser will be to reinforce the EU's contribution to International Financial Reporting Standards (IFRS), and to improve the governance of the institutions developing these standards.  View Article
IFAC: IAASB further strengthens standard on using work of internal auditors
The IAASB issued new requirements and guidance that address the auditor's responsibilities if using internal auditors to provide direct assistance under the direction, supervision and review of the external auditor for purposes of the audit ("direct assistance").  View Article
FRC responds to Competition Commission's preliminary report on the statutory audit services market
The FRC welcomes the report, noting the importance of an investigation into the long-standing question of concentration in the audit market, and of the audit market serving the interests of investors.  View Article
IAIS response to IAASB on ISA 720 (Revised)
The IAIS published it comment letter addressed to the IAASB on the proposed revision of ISA 720. The IAIS is fully supportive of the objectives and the outlines of the proposed revision.  View Article
ACCA: Proposed ISA will boost the quality of corporate reporting
ACCA has said that proposals to revise ISA 720 could make audit more beneficial, and have the potential better to meet investor demands.  View Article
IFAC: IESBA strengthens key sections of Code of Ethics for Professional Accountants
The IESBA released strengthened provisions in its Code of Ethics for Professional Accountants (the Code) to address conflicts of interest and a breach of a requirement of the Code. It also released amendments to the definition of the term "engagement team" in the Code.  View Article
IFAC: Principles for Effective Business Reporting Processes
This new publication helps professional accountants implement effective business reporting processes in organisations.  View Article
Deloitte comments on impairment disclosures
Deloitte's IFRS Global Office has submitted a letter of comment responding to the IASB Exposure Draft 2013/1 'Recoverable Amount Disclosures for Non-Financial Assets'. Deloitte supports the amendments to IAS 36 proposed in the ED, and offers some recommendations for drafting changes to add clarity.  View Article
IASB/Hoogervorst: IFRS and Indonesian Accounting Standards 2013 and beyond
On 6 March, IASB Chairman Hans Hoogervorst delivered a speech at the IAI-AFA International Seminar in Jakarta, Indonesia. According to Hoogervorst, full adoption of IFRS can really help Indonesia to sustain its economic development.  View Article

Financial Services Policy

Irish Times: EU common tax base still on agenda
The European Commission's push for common rules which would see companies pay tax where they make sales rather than where they are based is not a thing of the past.   View Article
Reuters: EU executive plays down transactions tax impact on UK
A senior European Commission official has said that tax on trading in 11 eurozone countries won't harm Britain, and its government cannot be forced to collect the levy.   View Article

European Council/Parliament

European Council Conclusions: 14/15 March 2013
The European Council had a comprehensive discussion on the economic and social situation, and set the orientations for the economic policy of the Member States and the EU in 2013. It also took stock of ongoing work on deepening EMU, with a view to its meeting in June.  View Article
Remarks by President Herman Van Rompuy following the European Council
Van Rompuy said that the only way out of the crisis was to keep tackling its root causes. The Council reconfirmed its overall economic strategy, which has four clear and consistent strands. (Includes link to opening statement.)  View Article
Speech by EP President Schulz to the European Council
"I should like to voice once again our very real fear that the debates on Treaty amendments and constitutional conventions, however important they may be, will blind us to the fact that we must use the provisions of the existing Treaties to overcome the current crisis."  View Article
European Council: New EU label for venture capital and social entrepreneurship funds
The overall objective is to foster the growth of SMEs by improving their access to finance through the establishment of an EU-wide passport for managers of venture capital funds (EuVECA) and social entrepreneurship funds (EuSEF) relating to the marketing of their funds.  View Article

Graham Bishop’s Articles and Speeches

Graham Bishop: A budget of tinkering not vision
Although the Chancellor noted completion of the EU trade talks as a key UK foreign policy goal, the political answer to our longer-term economic problems was missing amidst the tinkering and European scapegoating.  View Article
Graham Bishop: Cyprus – Over the brink? Sooner? Or Later?
Whatever the twists and turns in the next few days, it is now very difficult to see a happy period for Cyprus in the next few years.  View Article
Graham Bishop: The Cyprus Rescue of 16 March: Is this just a first and small step?
The Eurogroup only reached 'political agreement' on the 'cornerstones' of an agreement so more detail is awaited. Could the EU create a new (and initially 'narrow') bank leaving 'black' money to wait for the old banks to be run off completely - creating a new frontier for 'black' money?   View Article
Graham Bishop's Blog: A new (and 'narrow') bank for Cypriot citizens?
The 19th March deadline for the ECB to switch off Emergency Lending Facilities (ELA) was a powerful factor in forcing negotiations, as such a switch-off would have led to the collapse of the Cypriot banking system and thus the whole economy.   View Article





© Graham Bishop

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