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09 January 2014

This week in "Brussels"

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Articles from 19 December 2013 - 09 January 2014


ECON Committee: MEPs' statement on the work on the single resolution mechanism for banks
The negotiating team of the EP re-stated their crucial requests that all banks must be treated equally, irrespective of which country they are established in, and that the system must be credible and efficient.  View Article
Bank recovery and resolution: Council confirms agreement with EP
The Permanent Representatives Committee approved, on behalf of the Council, a compromise agreed provisionally with the EP on a draft directive aimed at harmonising national rules on bank recovery and resolution.  View Article
President Barroso at the European Council: "This is the beginning of the end of bank bailouts"
Speaking after the first session of the European Council, Barroso said that the unanimous political support reached between the Member States on the SRM was a real breakthrough and showed the EU could make swift progress even when issues were complex and politically sensitive.  View Article
EP President Schulz on Banking Union: "The slower and inefficient a system is, the more expensive it will be"
In his address at the opening of the Council summit, Schulz reiterated 'clearly and unambiguously' the EP's position on the Banking Union/SRM report. He went on to list a number of negative effects for the Banking Union should the ECOFIN decisions become a reality.  View Article
S&D/Swoboda: Lack of progress in Banking Union negotiations
Negotiations on the future Banking Union have restarted but the Council of the European Union is submitting half-hearted proposals, notably on the single resolution fund for managing failing banks, says the S&D Group.  View Article
EP Group comments on European Council: ALDE, EPP
Both groups stressed that the new rules for failing banks should not be weakened.  View Article
CEPS/Gros: The bank resolution compromise - Incomplete, but workable?
Calling the SRM an "inelegant step in the right direction", Gros singles out the Single Resolution Fund, with its considerable mutualisation of risk, as the key advance – but one that will require changes over time in the extremely complex decision-making mechanisms agreed.  View Article
Bruegel/Gandrud & Hallerberg: Supervisory transparency in the European Banking Union
A number of concrete steps are needed to increase minimal transparency across the European Banking Union.   View Article
FT: Europe set to ease reform on bank splits
Brussels is set to ease financial reforms so that big European banks are not forced automatically to split lending operations from risky trading. (Includes BBA comment.)  View Article
FT: Banks test impact of reform on debt demand
Europe's biggest banks need to raise about €38.4 billion to meet capital ratios required by regulators, while between 15-20 mid-tier banks could fail the EU's stress tests altogether, according to RBS estimates.  View Article
BIS publishes three working papers on monetary policy
BIS released the following papers: 1) Is monetary policy overburdened?; 2) Global spillovers and domestic monetary policy; and 3) International monetary policy coordination: past, present and future.  View Article
BIS: Final paper on longevity risk transfer markets issued by the Joint Forum
The Joint Forum released its final report on Longevity risk transfer markets: market structure, growth drivers and impediments, and potential risks.  View Article
SEPA: Commission introduces an additional transition period of six months
During the six months, payments which differ from the SEPA format can still be accepted in order to minimise any possible risk of disruption to payments for consumers and businesses. The proposal does not change the formal deadline for migration of 1 February, 2014. (Includes Eurosystem statement.)  View Article
ECB: New Euro Retail Payments Board will reinforce market governance
This new entity, which replaces the SEPA Council, will help foster the development of an integrated, innovative and competitive market for retail payments in euro in the EU.  View Article
EPC & Cards Stakeholders Group publish SEPA Cards Standardisation Volume ready for market implementation
This document defines a standard set of requirements to ensure an interoperable and scalable card and terminal infrastructure across SEPA, based on open international card standards. The SCS Volume does not establish specifications or standards as such, but rather sets standardisation requirements.  View Article
FT: Banks to exploit delays to planned Fed capital rule changes
European and Asian banks will have more time to fight possible US additional capital rules, after the Federal Reserve pushed plans to implement final measures into 2014, according to people familiar with the matter.  View Article
EBA publishes technical advice to Commission on possible treatments of unrealised gains measured at fair value
The advice provides specific recommendations that will inform the Commission as to whether changes to legislation should be introduced in order to sterilise the effect of unrealised gains on regulatory capital (so-called "prudential filters").  View Article
EBA publishes report on risks and vulnerabilities of the EU banking sector
The report identifies improvements in market confidence, funding and capital positions. However, it cautions about ongoing uncertainties on asset valuations and future profitability in a fragile economic environment.   View Article
EBA publishes two reports on liquidity
EBA published two reports on liquidity: (i) on the impact assessment for liquidity coverage requirements, and (ii) on appropriate uniform definitions of extremely high quality liquid assets (extremely HQLA) and high quality liquid assets (HQLA) and on operational requirements for liquid assets.   View Article
EBA: Discussion on the methodology for the assessment of liquidity and funding risk under supervisory review
The document aims at helping competent authorities and colleges of supervisors assess liquidity and funding risk, and reach joint decisions on liquidity. Deadline for comments is 28 February, 2014.  View Article
EBA publishes final draft RTS for the identification of the geographical location of credit exposures
These RTS ensure a consistent EU-wide implementation of the countercyclical buffer (CCB) to protect against excess credit growth.  View Article
EBA consults on harmonised definitions and templates for funding plans of credit institutions
These Guidelines aim at harmonising the way the reporting of funding plans is conducted. The consultation runs until 20 March, 2014.  View Article
EBA consults on Professional Indemnity Insurance for mortgage credit intermediaries
The EBA launched a public consultation on a draft RTS on the minimum monetary amount of the professional indemnity insurance or comparable guarantee for mortgage credit intermediaries. Deadline for comments is 18 March, 2014.  View Article
EBA consults on disclosure of encumbered and unencumbered assets
The EBA launched a public consultation on draft Guidelines on disclosure of encumbered and unencumbered assets aimed at providing transparent and harmonised information on the subject across EU Member States. The consultation runs until 20 March, 2014.  View Article
EBA publishes final Guidelines on capital measures for FX lending to unhedged borrowers under the SREP
These Guidelines bring forward supervisory convergence across the EU and address the ESRB Recommendation.  View Article
EBA publishes final draft TS on definition of market and CVA risk
The EBA published its final draft RTS on the definition of market, and its final draft RTS on CVA risk. The latter is supplemented by an Opinion on CVA risk which further elaborates on the approach taken by the EBA in determining a proxy spread.   View Article
EBA publishes final draft ITS on supervisory disclosure
EBA published final draft ITS which specify the format, structure, contents list and annual publication date of the supervisory information to be disclosed by competent authorities in the banking sector.  View Article
EBA publishes final draft ITS on the Reporting of the Hypothetical Capital of a Central Counterparty
These final draft ITS specify calculations and reporting frequencies/templates for the information relating to hypothetical capital that a CCP has to deliver to all the credit institutions and investment firms that are clearing members for the purpose of calculating their own capital requirements.  View Article


ESMA consults on Revision of the provisions on diversification of collateral in ESMA's guidelines on ETFs and other UCITS issues
The consultation paper seeks stakeholders' views on the merits of revising the requirements on collateral diversification and on the best ways to address stakeholders' concerns, while retaining the appropriate level of investor protection. Comments are requested by 31 January, 2014.  View Article
FSB: Proposed assessment methodologies for identifying non-bank non-insurer G-SIFIs
The assessment methodologies for identifying NBNI G-SIFIs published for public consultation complement the methodologies that currently cover banks and insurers. Comments should be submitted by 7 April, 2014.  View Article
ECB: Framework for the assessment of securities settlement systems
The ECB published its Framework for the assessment of securities settlement systems and links to determine their eligibility for use in Eurosystem credit operations. The assessment of SSSs and links between SSSs to be used in Eurosystem credit operations is conducted under a two-layer approach.  View Article
ESMA clarifies reporting of on-exchange derivatives under EMIR
ESMA has issued updated Q&As on the implementation of EMIR. From 12 February 2014, EMIR requires all EU counterparties to a derivative contract to report their trades to a TR, irrespective of whether these are traded on or off exchange.  View Article Frontloading fears remain despite ESMA guidance
Despite new guidance provided by ESMA, dealers say they still do not know how to price swaps that could be caught by so-called frontloading requirements in Europe - under which a trade that has already been executed may have to be sent to a clearing house months or years later.  View Article
FN: Derivatives competition unlikely despite MiFID II push
Competition among derivatives trading venues and clearing houses in Europe may never materialise, even if ongoing regulatory efforts to open up the market are successful, according to new research from Bank of America Merrill Lynch.  View Article
ESMA publishes final report of draft TS under Article 10a(8) of MiFID
ESMA submitted the draft RTS and ITS to the Commission by 1 January, 2014. The Commission now has three months to decide whether to endorse ESMA's draft technical standards.  View Article
Trade News: Election timetable may compromise MiFID II
A crucial meeting of European legislators next week could see MiFID II finalised, but industry practitioners are concerned the legislation may be rushed due to electoral pressures.  View Article
CFTC approves comparability determinations for six jurisdictions for substituted compliance purposes
Australia, Canada, the EU, Hong Kong, Japan and Switzerland are deemed comparable with respect to certain swaps provisions of the Dodd-Frank Act. (Includes AGB response.)  View Article
CFTC issues extension to time-limited no-action letter on applicability of transaction-level requirements in certain cross-border situations
US regulators have said they will provide temporary relief to swap dealers affected by a November staff memo that expanded the scope of their power to regulate derivatives overseas.  View Article
FSB: Responses to August 2013 proposed regulatory framework for haircuts on non-centrally cleared securities: AIMA, BBVA, EFAMA et al
The FSB published comments on its August 2013 report that included consultative proposals on minimum standards for methodologies to calculate haircuts on non-centrally cleared securities financing transactions and a framework of numerical haircut floors.   View Article
Leading Parliamentary Committee backs criminal sanctions for market abuse
The ECON Committee has given its support to a Commission proposal for criminal sanctions to tackle the abuse and manipulation of financial markets.  View Article
ECON Committee: Market abusers should face jail
Financial market fraudsters across the EU could face jail under rules agreed by negotiators from the EP and Member States in a bid to restore confidence in the EU's financial markets and boost investor protection. (Includes statements from Commissioner Barnier and VP Reding.)  View Article
Council confirms agreement with EP on Market Abuse Directive
COREPER II has approved the agreement with the EP on the Directive on criminal sanctions for insider dealing and market manipulation (MAD), which aims to penalise market abuse and complements the Market Abuse Regulation (MAR). (Includes comments from Commissioner Barnier, VP Reding and Perm Reps chair.)  View Article
IOSCO publishes report on Regulation of Retail Structured Products
The report provides a toolkit outlining regulatory options that securities regulators may find useful to regulate retail structured products.  View Article

Insurance Commission urged to curb supervisors' leeway on volatility adjustment
The European Commission is under pressure to limit supervisors' flexibility to define the factors used to calculate the volatility adjustment, amid concerns that the impact of the measure could be diluted.  View Article
EIOPA proposes changes to capital requirements for debt securitisation
EIOPA published the Technical Report on Standard Formula Design and Calibration for Certain Long-Term Investments. Its purpose iss to examine whether the capital requirements for certain long-term investments under Solvency II can be reduced without jeopardising the prudential nature of the regime.  View Article
AFME comments on EIOPA's proposed changes to debt securitisation
AFME is concerned that EIOPA's proposed revisions to the capital charges will not be sufficient to encourage the return of insurance company investors.  View Article New Solvency II capital charges still threat to ABS demand
Proposals to reduce Solvency II's capital charges on debt securitisations are insufficient and could lead to European insurers' demand for such assets drying up, according to analysts and investment managers.  View Article France to require full ORSA as it rejects Solvency II interim measures on governance
France's insurance supervisor says it will not be complying with the interim guidelines on systems of governance during Solvency II's two-year preparatory phase, but the ACPR will ramp up pressure on firms to be compliant by 2016 and is requesting more demanding calculations for an ORSA.  View Article
CRE: Soft market to focus insurers' minds on service in 2014
The relatively soft insurance market for large European corporate buyers is unlikely to change significantly in 2014, according to brokers and insurers interviewed by CRE. The influx of new capacity and broker facilities could put rates under further pressure for good risks at upcoming renewals.  View Article
Patrick Jenkins: Insurers may be at the centre of the next big crisis
The most costly bailout of the 2008 financial crisis was not a bank but insurer AIG, writes Jenkins for the FT. Insurers must be watched as they pursue business that banks find too expensive because of capital rules.   View Article

Asset Management

ECFIN Economic Paper: Assessing the economic and budgetary impact of linking retirement ages and pension benefits to increases in longevity
This paper focuses on potential public pension expenditure, pension adequacy, and fiscal sustainability effects when linking retirement ages and pension benefits with future increases in longevity.  View Article
Fitch: New risk budgeting techniques challenged in multi-asset funds
Multi-asset funds which use new risk budgeting techniques, such as dynamic risk budgeting and risk parity approaches, were challenged in 2013, according to Fitch Ratings. More static funds with low exposure to duration and high exposure to equity and high yield have performed better.  View Article
IMA launches new Global Emerging Markets Bond Sector
IMA has launched a Global Emerging Markets Bond sector for funds that invest at least 80 per cent of their assets in emerging market bonds. The new sector went live from 31 December 2013, with 25 funds.  View Article

Corporate Governance/Accounting

IFAC calls for renewed focus on global regulatory convergence to advance sustainable economic recovery
IFAC reiterated its call on global policymakers to refocus on regulatory convergence, saying failure to do so was stifling business confidence, economic stability and ambitions for a sustainable recovery.  View Article
EFRAG: Draft comment letter on the IASB's ED/2013/11, Annual Improvements to IFRSs 2012-2014 Cycle
EFRAG is issuing its draft comment letter to the IASB on its ED Annual Improvements to IFRSs 2012-2014 Cycle seeking feedback from its constituents. Comments are invited on the letter by 7 February, 2014.  View Article
EFRAG/ICAS publish literature review on the Use of Information by Capital Providers
EFRAG and ICAS commissioned the literature review to identify, consider and evaluate, from a European perspective, the existing evidence on the use of information by capital providers for decision-making and assessing stewardship.  View Article
ESMA commented on lASB's Discussion Paper, A Review of the Conceptual Framework for Financial Reporting
According to ESMA, several concepts still need further analysis and clarification with respect to their impact on financial reporting. (Includes ESMA's comment on EFRAG's response.)  View Article
IPSASB publishes ED 54—Recommended Practice Guideline on Reporting Service Performance Information
The IPSASB has published Exposure Draft 54, Reporting Service Performance Information. Comments on the ED are requested by May 31, 2014.  View Article
EFRAG: Feedback statement on the IASB's revised ED, Insurance Contracts
EFRAG published a feedback statement following the publication of its final comment letter on the IASB's revised ED, Insurance Contracts.  View Article

European Council/Parliament

European Council Conclusions: Economic and Social Policy / EMU / Banking Union
The European Council welcomed the general approach reached by the Council on the SRM and called on legislators to adopt the SRM before the end of the current legislative period. It reviewed the economic situation and the progress in implementing the Compact for Growth, Jobs and Competitiveness.   View Article
Remarks by President van Rompuy following the first session of the European Council
Van Rompuy said that for the eurozone, the agreement by finance ministers on the SRM was "the biggest leap forward since the creation of the euro itself". He also said significant progress had been made by the Council on the "E" in EMU.  View Article

Graham Bishop’s Articles and Speeches

European Council 19/20 Dec 2013: Parliament declares war on ECOFIN (so no SRM in 2014); Where was the meat on EMU 2.0?
The December European Council came and went with barely a trace of last year's Four Presidents' report, "Towards a Genuine EMU". It welcomed ECOFIN's 'general approach' to the SRM whilst, in contrast, the European Parliament effectively declared war on ECOFIN.  View Article
Graham Bishop: Banking Union: Is it yet a deal? Is the SRM aspect even plausible?
Saying "no deal" on a botched SRM - which will not even be in force during the moments of peak stress - may be a good start for an EMU 2.0 functioning properly for the euro area as a whole.  View Article

© Graham Bishop

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