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31 October 2013

This week in "Brussels"
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Articles from 24 October 2013 - 31 October 2013

Banking

European Council conclusions: EMU / Banking Union
The European Council held an in-depth discussion on completing the EMU. It focused in particular on enhanced economic policy coordination, strengthening the social dimension of the EMU and completing the Banking Union.  View Article
EP President Schulz: Speech to the European Council 24 October
Schulz said that as it was going to take some years before a resolution fund had been built up and become operational, the ESM could serve as a temporary solution. "If no good agreement is reached by the end of this electoral period, we risk losing everything we have gained so far."  View Article
Remarks by Presidents Van Rompuy and Barroso following the first session of the European Council
"The next crucial step for the Banking Union will be the Single Resolution Mechanism", said Van Rompuy. "Because once supervision is European, we cannot leave failures to the national level."  View Article
Commissioner Barnier: Three priorities for sustainable European banks in the real economy
Speaking at the ESBG conference, Barnier said: "We cannot be satisfied with a situation where the speculative activities of banks inflate their balance artificially and make them both too big to fail as well as too big to be saved". (Includes link to speech by President van Rompuy.)  View Article
Bloomberg: Bank structure plan dealt blow as EU lawmaker says no time
Commissioner Barnier has left it too late ahead of parliamentary elections to submit promised proposals to prevent banks being too internally complex, ECON chair Sharon Bowles told reporters.  View Article
Reuters: EU's Barnier ready to compromise on bank resolution
The Commission is ready to compromise on how many banks will fall directly under the scope of the eurozone's banking resolution authority, potentially limiting it to the largest institutions, Barnier said.  View Article
BoS/Linde: Reflections on the planned Banking Union in Europe
Referring to the upcoming comprehensive bank assessment, Linde said it was in the interest of all that this exercise be rigorous and transparent, so that confidence in the European banking sector could be fully restored.  View Article
EBF: Europe's banks committed to Banking Union and Single Resolution Regime
Europe's banks reiterated their strong support for the Banking Union and the SSM. EBF board members stressed their commitment to assist in implementing the Banking Union framework, to help overcome the current market fragmentation.  View Article
ECB/Mersch: Interview in Het Financieele Dagblad
Mersch discussed i.a. Banking Union and three-year LTROs. On the ECB's new supervisory role, he said: "No bank will be completely absent from our radar".  View Article
Handelsblatt: Eurozone finance ministers consider ESM overhaul
The plan would involve setting up a subsidiary fund to help banks located in non-eurozone countries that opt to participate in the Banking Union. However, such an arrangement would require a change to the ESM Treaty.  View Article
ECB/Asmussen: Interview with Il Sole 24 Ore
Asmussen said that the ESM could be the fiscal backstop to the European resolution agency. It would mean a revision of the ESM Treaty, but that would be a 'lower hurdle' than changing the European Treaty.  View Article
Fitch: Euro bank tests robust enough, but thin on details
The framework's outline is thin on details for identifying banks likely to have capital shortfalls under the AQR and under the EU-wide stress test to be conducted with the EBA. Further details on the process would improve transparency and reduce short-term uncertainties.  View Article
Nicolas Véron: An encouraging start for the ECB's Big Bank Review
Véron finds the ECB's announcements encouraging, even if the most difficult choices still lie ahead - primarily on how to restructure the banks which would be identified as severely undercapitalised or insolvent in next year's assessment.   View Article
Simon Nixon: Draghi risks having worst of all worlds in Banking Union
The odds are stacked against Mario Draghi in his effort to conduct a broad assessment of the eurozone's biggest banks, comments Nixon in the WSJ.  View Article
Bloomberg: EU delays bank capital rule following Nordic protest
The decision for a month's delay follows an outcry from bankers' associations in Denmark, Sweden, Norway and Finland, who say an EBA-proposed reporting requirement for capital buffers would overstate the risks associated with their mortgage assets.   View Article
EBA publishes risk dashboard of EU banking sector
This first risk dashboard summarises the main risks and vulnerabilities in the banking sector in the EU. It looks at the evolution of Key Risk Indicators from 56 banks across the EU, and points to significant improvements, particularly in terms of strengthened capital base.  View Article
EBA publishes final draft ITS on asset encumbrance
These final implementing technical standards, which will be part of the EU Single Rulebook in banking, provide reporting templates and instructions with the ultimate aim of ensuring harmonised reporting of asset encumbrance across institutions.  View Article
EBA consults on draft technical standards on disclosure for leverage ratio
These standards will be part of the EU Single Rulebook in the banking sector and aim at harmonising disclosure of the leverage ratio across the EU by providing institutions with uniform templates and instructions. The consultation runs until 24 January, 2014.  View Article
EBA consults on draft Guidelines on the discount rate for variable remuneration
EBA launched a consultation paper on draft Guidelines setting out the calculation of the discount rate for variable remuneration and clarifying how it should be applied. The consultation runs until 18 January, 2014.   View Article
EBA consults on the use of the Legal Entity Identifier
EBA has launched a consultation on a Recommendation on the use of the Legal Entity Identifier (LEI). The document will require all entities for which information is required under EU reporting obligations to obtain a pre-Legal Entity Identifier code for reporting purposes. Deadline: 28.11.13.  View Article
ECB publishes second SEPA migration report
The ECB's second report analyses the state of play in euro area countries in creating a single market for credit transfers and direct debits in euros across Europe. It also provides guidance on managing the transition process. (Includes link to EPC's latest SEPA newsletter.)  View Article

Securities

Fundamental review of the trading book - second consultative document issued by the Basel Committee
The paper comprises a detailed set of proposals for a comprehensive revision of the market risk framework, as part of the Committee's broader agenda to reform regulatory standards for banks in response to the financial crisis. Consultation deadline: 31 January, 2014.  View Article
ESMA publishes updated Q&As on the Prospectus Directive
The updated Q&As on the Prospectus Directive revise a number of current market practices and address a number of new issues related to the implementation of the PD.  View Article
Regulatory Reform: EP demands CCPs act in the general public interest
Rapporteur Swinburne has published a report containing a motion for an EU Parliament resolution on a framework for non-bank recovery and resolution plans.  View Article
FOW: Does CCP recovery fall unfairly on asset managers?
This article claims that the buy-side already pays brokers to support the default fund and explores why its assets could be at risk in the event of a clearing house default.  View Article
Reuters: Derivatives dispute harming EU-US free-trade talks
Ambitious plans for an EU-US free-trade agreement may be put in jeopardy by Washington's failure to finalise a deal coordinating rules in the $630 trillion derivatives market, the EU's financial markets chief has warned.  View Article
ISDA: New EMIR counterparty classification tool launched on ISDA amend to help businesses comply with EMIR
ISDA, BBA, IMA and Markit announced the launch of the EMIR Counterparty Classification Tool on ISDA Amend, the online service from ISDA and Markit that facilitates compliance with certain EMIR and other regulatory requirements.  View Article
The Trade: Mandatory SEF trades could transform OTC market
The effects of mandatory trading rules for swap execution facilities could potentially alter the course that many expected SEFs to follow, but bilateral OTC derivatives trading will remain a constant for the buy-side in particular.  View Article
Philip Stafford: Innovation the keystone for exchanges
Until now, the swap futures debate has been primarily a US one as it is further down the road with the implementation of the G20 mandate, writes Stafford in the FT. But the European market now looks as if it will follow a similar approach to the one taken across the Atlantic.  View Article
The Trade: Industry concerned over MiFID II agreement to regulate algos
The latest agreements reached in negotiations for MiFID II will require firms to have their algorithms authorised by regulators and tested, but market participants are doubtful the plans will succeed. Rapporteur Ferber has announced a major breakthrough on some aspects of the legislation.  View Article
FN: Debate on living wills for clearers kicks off
The European Commission has started consulting on how to deal with the default of a clearing house without having to use money from taxpayers.  View Article
Wickens & Polito: A fiscal perspective on EU sovereign credit ratings - Did the credit rating agencies get them right?
Recent experience has raised doubts about the sovereign ratings provided by the credit rating agencies. This column suggests a new way to measure credit ratings based on a country's ability to meet its liabilities using fiscal policy.  View Article

Insurance

Risk.net: No agreement in crucial Solvency II negotiations
Further trilogue is now scheduled and the uncertainty over the Omnibus II package continues, as European lawmakers failed to broker a deal during a key meeting in Strasbourg.  View Article
Risk.net: PRA U-turn on reporting in Solvency II guidelines implementation
UK insurers are to face extensive reporting requirements in the run-up to Solvency II, after the PRA unveiled its plans to implement EU-wide preparatory guidelines from next January.  View Article
Risk.net: New Swedish discount curve rejects Solvency II methodology
The Swedish financial regulator will introduce a temporary risk-free discount curve for insurers using an extrapolation methodology that contradicts Solvency II proposals, amid concerns that the latter is unworkable.  View Article
Risk.net: ComFrame must build on existing regulations, say insurers
Insurers are urging global standard-setters to allow for the mutual recognition of existing regulatory regimes within ComFrame, amid fears that the new guidelines are too prescriptive.  View Article
CRE: European reinsurance prices under pressure
Many European buyers of reinsurance can expect to see lower prices at the January renewal, according to a leading broker. But large reinsurers predict a stable renewal with increases for loss-affected business in Germany in particular.  View Article

Asset Management

FSB: Responses to consultation on resolution regimes to non-bank financial institutions: AGB, AIMA/MFA, EBF, EIOPA, Insurance Europe
On 12 August 2013, the FSB published its consultative document on the application of the Key Attributes of Effective Resolution Regimes to non-bank financial institutions.  View Article
Fitch: EU asset managers face growing margin pressure in 2014
Margins on assets under management at European fund managers are likely to come under more pressure next year and beyond, as competition intensifies and sources of higher fee-generating business decline.  View Article
FN: Asset managers face tax hike
International tax loopholes through which asset managers boost profits and investor returns would be closed under proposals being put to consultation by the OECD.  View Article
Reuters: British watchdog to crack down on fund manager fees
Britain's financial regulator plans to crack down on the £5.2 trillion fund management sector for unfairly making customers pay too many of its costs.  View Article
Alessandro Beber: What If OTC derivatives were banned? A look at the potential impact on asset managers
Beber, a Professor in Finance at Cass Business School, conducted a 'what if' analysis on the consequences for asset managers and their customers if such a ban on derivatives were enforced. He talked to DerivSource about his findings.  View Article

Corporate Governance/Accounting

ESMA publishes 14th enforcement decisions report
The ESMA has published the 14th extract from its confidential database of enforcement decisions on financial statements, with the aim of providing issuers and users of financial statements with relevant information on the appropriate application of the IFRS.  View Article
EFRAG informs European Commission on long-term investing activities business models accounting
EFRAG has issued a letter to the European Commission with the findings and conclusions reached to date from its consultation on long-term investing activities business models.  View Article
EFRAG comments to the IASB on the specific financial reporting need for long-term investing activities business models
EFRAG's letter provides an analysis of the input received from constituents in EFRAG's consultation and recommendations to the IASB.   View Article
FRC calls to action for improving disclosures
The FRC has set out a series of calls to action for preparers and auditors to consider improving the quality of disclosures in annual reports. These calls to action are based on feedback received on the FRC's thought leadership paper, 'Thinking about disclosures in a broader context'.  View Article
IPSASB publishes ED on first-time adoption of accrual basis IPSASs
The IPSASB has published an Exposure Draft (ED 53), 'First-Time Adoption of Accrual Basis International Public Sector Accounting Standards'. Comments on the ED are requested by February 15, 2014.  View Article
Final responses to IASB's ED "Insurance Contracts" and to EFRAG's draft response to IASB: Deloitte, EBA, FEE, Insurance Europe
Deloitte, EBA, FEE and Insurance Europe issued their comment letters to the IASB on its ED Insurance Contracts. FEE and Insurance Europe also published their comment letters on EFRAG's draft comment letter to the IASB.  View Article
CIIA: Financial services code
The code has been produced by an independent committee established by the IIA, with representation and observers from leading banks, insurers, the FCA, the PRA and the Bank of England.   View Article

Financial Services Policy

José Manuel Barroso: We are determined to make EU laws more business-friendly
In an op-ed for the Telegraph, Barroso writes: "Where more integration and more regulation are needed, we will take the lead. But when less means more and simple is smarter, we will not hesitate to say so." (Includes link to letter from British business leaders to Council.)  View Article
FT: ECB's Noyer says Tobin tax Is "enormous risk", must be revised
In the latest attack on the Commission's plan for a financial transaction tax across 11 eurozone countries, Noyer told the FT: "The Commission's draft is a non-starter and needs to be entirely revised".  View Article

European Council/Parliament

European Council Conclusions: Regulatory fitness
The Council gave a new impetus to better regulation, saying regulation at Union level was necessary in order to ensure that EU policy goals, including the proper functioning of the Single Market, were attained. (Includes comments by Presidents Schulz/Barroso and PM Cameron.)  View Article





© Graham Bishop

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