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26 September 2013

This week in "Brussels"
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Articles from 19 September 2013 - 26 September 2013

Banking

ECON Committee: Banking Union tops agenda in discussion with Draghi
The practical details of setting up a single bank resolution system and fund, the upcoming bank balance sheet health checks and next steps for Greece were the key issues ECON Committee MEPs raised with ECB President Draghi.  View Article
VP Almunia: Banks in distress and Europe's competition regime - On the road to the Banking Union
Almunia talked about the need to integrate Europe's financial markets, and about how the financial landscape will evolve until the Banking Union project is fully achieved. (Includes comments from Jean-Claude Trichet.)  View Article
ECB/Mersch: Recent policy decisions regarding the Banking Union
Mersch elaborated on the recent policy decisions regarding the development of the Banking Union and their impact on the ECB as a supervisory authority.  View Article
ESRB ASC: The consequences of the SSM for Europe's macro-prudential policy framework
This report argues for a centralised model of macro-prudential policy within the SSM. The ECB would set the framework and apply the necessary tools, in cooperation with national authorities and to the extent those tools are provided in EU law, mainly the CRD IV.  View Article
AFME/Wymeersch: SSM to oversimplify EU prudential regulation
Wymeersch warned that the SSM regulation could have unintended consequences.  View Article
Reuters: Bank stress tests must bite this time - EU official
The toughest health check planned so far for European banks must be rigorous enough to stop the region's lenders being rated lower than their American rivals, said Martin Merlin, the Commission's head of financial services policy.  View Article
Introductory statement by ECB/Draghi at the ECON Committee hearing
Draghi gave a review of recent economic and monetary developments in the euro area, and then addressed the two topics selected for discussion: the impact of the ECB's non-standard measures; and the new tasks of the ECB in the reformed EMU architecture.  View Article
Ansgar Belke/IZA Bonn: Non-standard monetary policy measures – Magic wand or tiger by the tail?
This briefing paper, prepared for the ECON Committee, briefly assesses the effectiveness of different non-standard monetary policy tools in the euro area. Its main focus is on the OMT programme, praised by some as a "magic wand".  View Article
CEPR, Eijffinger et al: The various roles of the ECB in the new EMU architecture
Although the ECB is well-suited to its supervisory role, risks related to conflicts of interest, moral hazard or time inconsistencies may arise, in particular during deep economic-financial crises.  View Article
ECON Committee: Klaus Regling quizzed about wider lending role for European Stability Mechanism
The ESM's current legal set-up would not allow it to become a "backstop" lender to a newly-created EU bank resolution fund, said Regling, although he conceded that he was open to considering other possible legal interpretations which could justify this role for the ESM.  View Article
Bloomberg: EU mulls €50 billion fund to aid non-euro banks
The EU is weighing whether a €50 billion rescue fund can be turned into a bank backstop for Member States outside the single-currency bloc, two EU officials said.  View Article
Huertas & Nieto: A game-changer - The EU Banking Recovery and Resolution Directive
This column comments on the interaction of the bail-in tool with the proposed resolution funds, and on the effects of the carve-out approach to bail-in.  View Article
Basel III monitoring results published by the Basel Committee
The study is based on the rigorous reporting processes set up by the Committee to review periodically the implications of the Basel III standards for financial markets.   View Article
EBA publishes results of the Basel III monitoring exercise as of end 2012
This exercise, run in parallel with the one conducted by the BCBS at global level, gathered aggregate results on capital, RWAs, liquidity and leverage ratios for banks in the EU.  View Article
GFMA/Joint Trades comment in response to BCBS consultation on the revised leverage ratio
'The Associations', representing the largest participants in national and global banking and financial markets, commented on BCBS's consultation: 'Revised Basel III leverage ratio framework and disclosure requirements ("Proposed Framework")'.  View Article
GOV.UK: Legal challenge launched into new rules on bankers' pay
The UK government has lodged a legal challenge with the European Court of Justice on new EU rules on pay in the banking sector, which Britain fears will undermine responsibility in the banking system rather than promote it. (Includes comments from EP VP Othmar Karas and AFME.)  View Article
Bundesbank/Dombret: Resilient banks – Essential building blocks of a stable financial system
Dombret said that in order to ensure financial stability, resilient banks were required. He highlighted the need to move faster with regard to implementing new rules and standards.  View Article
Nicolas Véron: Banking nationalism and the European crisis
In Véron's opinion, banking nationalism has been generally under-recognised, both as a driver of European financial fragility in the run-up to the crisis, and as an obstacle to crisis resolution since the crisis started.  View Article

Securities

Central securities depositories: Council sets out its position
The Permanent Representatives Committee today agreed, on behalf of the Council, its position on new rules aimed at increasing safety in the securities settlement system and at opening the market for central securities depositories (CSD) services.  View Article
ESMA TRV: Market conditions improve, as systemic risks persist
ESMA published its Trends, Risks, Vulnerabilities (TRV) Report and a Risk Dashboard for the second quarter of 2013.  View Article
Reuters: ESMA study finds new short-selling rules not harmful; sees decline in "abnormal" Euribor quotes
Although banning bets on falling share prices has not damaged prices or ramped up volatility on stock markets, curbs on short-selling of government debt have hit turnover in a few cases. The study also showed that the number of "abnormal" quotes for setting the Euribor benchmark was down sharply.  View Article
Deutsche Bank: The impact of OTC market regulations on liquidity
The BIS recently released its triennial survey on OTC interest rate derivatives (IRDs) turnover. Even though the raw amounts themselves remain gargantuan, the impact of OTC derivatives regulations on liquidity in derivatives markets is already observable.  View Article
Risk.net: Industry forced to rethink reporting after ESMA rejects GFMA proposal
ESMA has rejected an industry proposal for dual trade reporting, creating a setback for foreign exchange market participants as they gear up for compliance with EMIR.  View Article
Risk.net: Commodity trading houses face questions over systemic risk
The rapid growth of commodity trading houses has led critics to question whether these firms have become a source of systemic risk. Trading houses strongly reject such arguments, and suggest they are little more than paper tigers.   View Article
FCA/Wheatley: EU and US must harmonise derivatives rules
Speaking at the ISDA conference in London, Wheatley said that EU and US regulators must work together to harmonise rules requiring derivatives to be centrally cleared, or risk creating a "mess".   View Article
Reuters: Investors urge EU to be firm on more competition in share trading
A broad coalition of investors, asset managers and brokers has appealed to the EU not to dilute proposed rule changes that would open securities trading to more competition.  View Article
IPE: Norges Bank warns of HFT impact on investors
Norges Bank Investment Management (NBIM) has highlighted three "issues of concern" regarding the impact of high-frequency trading on long-term investors.  View Article
Risk.net: Indirect clearing model needs work - ECB's Russo
Regulators need to provide greater clarity on the capital treatment of indirect clearing, according to Daniela Russo, director general payments and market infrastructure at the ECB.  View Article
FN: Clearing contagion risk 'ignored' by regulators
Senior banking industry executives have warned that regulators have neglected the risk of potential contagion should a major clearing house member collapse. ISDA has described clearing houses as now "the most systemically important market participants".  View Article
Risk.net: Acting as a clearing member will be uneconomical – ISDA panel
New proposed capital rules will make it uneconomical for banks to act as clearing members, fatally damaging regulatory attempts to bake an incentive to clear into financial market reforms, according to industry experts.  View Article

Insurance

Letter from EIOPA/Bernardino to DG MARKT/Faull on enhancing consumer protection in insurance investment products
"Consumer protection is in the DNA of EIOPA and ranks highest on our agenda", said Bernardino.  View Article
EIOPA: Risk Dashboard - September 2013
Despite some signs of improvement in the global economic outlook, the conditions of the European insurance companies remained fragile.  View Article
Risk.net: UK insurers recoupon interest rate swaps in bid to enhance yield
UK insurers are renegotiating their in-the-money interest rate swaps to release cash to invest in higher-yielding assets and reduce the cost of servicing collateral, according to market participants.  View Article
Insurance Europe: EICL - Response to Discussion Paper V
Insurance Europe commented on Discussion Paper V, forming the basis of discussions during the fifth meeting of the expert group on European insurance contract law (EICL) (held on 9-10 September 2013).  View Article
GFIA: Supplemental comments on Draft ICP 22
GFIA submitted comments to the IAIS which supplement prior submissions of insurance associations regarding the draft Insurance Core Principle 22: Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CTF).   View Article
Risk.net: US non-bank SIFI process 'flawed' and 'unsupportable', say designating body members
The process for designating significantly important insurers in the US has been branded "flawed" and contradictory by members of the body charged with overseeing the process.  View Article

Asset Management

Bundesbank/Dombret: Shadow banking and more
In a guest contribution for the Süddeutsche Zeitung, Dombret underlined the need to strengthen the global framework for the financial system, including further shadow banking sector regulation.  View Article
Euromoney: European Commission 'schizophrenic' on shadow banking
Policy experts argue that more work needs to be done to understand the relationship between banks and non-banks, and the ways in which shadow lenders – previously beyond the regulatory perimeter – contribute to the financial infrastructure as a whole.  View Article
FN: The risk of playing wait and see
The AIFMD has dramatically changed the hedge fund industry in Europe and beyond. Many fund managers, perhaps concerned about the cost of compliance, are currently taking a "wait and see" approach to establishing management entities and/or funds in the EU.   View Article
Evening Standard: Bank of England puts hedge funds' 'threat to stability' under microscope
The FPC, chaired by Governor Mark Carney, is to carry out more research with the FCA into hedge funds, to assess more fully whether they pose a threat to financial stability.  View Article
FN: Dutch seek pension support for €40 billion recovery plan
A group of pension schemes and insurers have signed up to government plans to finance up to €40 billion of infrastructure projects in the Netherlands – the most ambitious proposal of its kind in Europe.   View Article

Corporate Governance/Accounting

IASB/Hoogervorst: Strengthening institutional relationships
In a speech at the IFRS Foundation World Standard-Setters Conference, the IASB chairman discussed jurisdictional profiles, the agreement with IOSCO, the introduction of the ASAF and the role of standard-setters.  View Article
IFAC: IESBA clarifies definition of "those charged with governance"
The IESBA released final changes to the definition of "those charged with governance" in its Code of Ethics for Professional Accountants. The changes, effective on July 1 2014, will be printed in the 2014 Handbook of the Code of Ethics for Professional Accountants.  View Article
IIA/Chambers: Should internal auditors participate in the evaluation of external auditors?
IIA President and CEO Richard Chambers believes internal auditors can fill an important advisory role for the audit committee, applying their knowledge of risk and control frameworks to evaluate the overall performance of the external auditors.  View Article
ACCA: Real-time reporting would give companies 'halo effect'
Investors believe that a move towards 'real-time' reporting would enhance investor returns and improve the level of confidence in corporate reporting, a report by ACCA reveals.  View Article
Draft responses to IASB's ED/2013/7 "Insurance Contracts": EFRAG, FRC
EFRAG and FRC issued their Draft Comment Letters to the IASB's revised Exposure Draft Insurance Contracts (ED/2013/07). Comments on EFRAG's draft letter are invited by 18 October, 2013. Comments on the FRC's draft letter are invited by 10 October, 2013.  View Article

Financial Services Policy

FT: Deep divide over EU retail investor protection vote
A significant EP vote on rules to improve protection for retail investors has been delayed until November amid divisions over the proposals.  View Article
FN: German election results revive FTT threat
With the Free Democrats' defeat, Merkel now faces the prospect of forming a coalition government with the left-leaning Social Democrats, who have publicly stated their support for an FTT.  View Article

International/G20

IMF: More fiscal integration to boost euro area resilience
Deeper fiscal integration in the euro area can correct weaknesses in the system's architecture, make the area more resilient to future crises, and provide long-term credibility to crisis-response measures already adopted, argues a new paper by IMF staff.  View Article
Commissioner De Gucht: Team Europe - What we need for a successful TTIP
De Gucht said that the most difficult but most important goal for the agreement would be to reduce regulatory barriers to trade and investment, although this did not mean a "transatlantic deregulatory free-for-all". (Includes link to TTIP study by Atlantic Council et al.)  View Article

Graham Bishop’s Articles and Speeches

Graham Bishop: The German Elections - What a Result!
The election campaign seemed to underline that Chancellor Merkel's key strengths lay in her unwillingness to take grand political gambles.  View Article





© Graham Bishop

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