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16 January 2014

This week in "Brussels"
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Articles from 09 January 2014 - 16 January 2014

Banking

Letter from ECON Chair and members of SRM negotiating team to Council Presidency regarding IGA
In its letter to Ambassador Sotiropoulos, the SRM team disagrees with the substance of the planned intergovernmental agreement (IGA), saying that it jeopardises the establishment and smooth functioning of the SRM.  View Article
Letter from ECB/Draghi to ECON/Bowles on ECB's preparations for the SSM
Replying to the ECON chair's letter of 6 December, Draghi clarified questions raised i.a. on accounting rules, NCAs and the comprehensive assessment/AQR.   View Article
Bloomberg: ECB sees bad debt rules as threat to credible bank review
The ECB is concerned that national differences in how bad debt is classified could cripple its probe into the health of euro area banks, according to an internal ECB document.  View Article
CEPS/Acharya & Steffen: Falling short of expectations? Stress-testing the European banking system
This study finds that a comprehensive and decisive AQR will most likely reveal a substantial lack of capital in many peripheral and core European banks.  View Article
Bruegel/Merler & Wolff: 2014 Financial Odyssey
The authors look at how the first steps of the Banking Union should be implemented.  View Article
BIS: Important steps towards completion of post-crisis regulatory reforms endorsed by GHOS
The Basel Committee's oversight body endorsed a number of important steps in the completion of the post-crisis reform agenda.  View Article
Amendments to Basel III's leverage ratio issued by the Basel Committee
BCBS issued the full text of Basel III's leverage ratio framework and disclosure requirements, following endorsement on 12 January 2014 by its governing body. ECON chair Bowles welcomed the concessions on trade finance but said more could be done. Banks say the new rules may force CSA restructuring.  View Article
Fitch: Dilution of Basel leverage ratio assists trading banks
The changes, involving reverse repos and derivatives, reduce the assets included in the calculation and make it easier for them to meet leverage ratio requirements, depending on the final rules adopted by national regulators.  View Article
Bloomberg: Debt rule faces dilution as regulators heed bank warnings
Lenders are poised to win concessions from central bank chiefs and global regulators over a debt limit they criticised as a blunt instrument that would penalise low-risk activities and curtail lending.  View Article
Work on the Liquidity Coverage Ratio finalised by the Basel Committee
The Committee completed work on liquidity disclosure, the use of market-based indicators of liquidity within the regulatory framework, and the interaction between the LCR and the provision of central bank facilities. It subsequently published a package of material that responds to these requests.   View Article
BIS: On the economics of committed liquidity facilities
This working paper studies the effects of the new Basel III liquidity regulations in jurisdictions with a limited supply of high-quality liquid assets. It shows how introducing a liquidity coverage ratio in such settings can have significant side effects.  View Article
Revisions to the Net Stable Funding Ratio proposed by the Basel Committee
BCBS issued proposed revisions to the Basel framework's Net Stable Funding Ratio (NSFR), following endorsement by the Committee's governing body. Comments should be uploaded by 11 April, 2014.  View Article
Reuters: German banks urge clarity on contingent bond rules
Germany's commercial banks urged regulators to clarify quickly whether they can issue billions of euros in bonds to fulfil new capital requirements aimed at limiting the damage from future financial crises.  View Article
Reuters: EU plans for trading rules widen global gap in bank regulations
Banks were pleased by the news that Europe would impose less restrictive rules on trading than the US, but the announcement proves that global regulations are likely to remain inconsistent, despite pledges to unify them.  View Article

Securities

ECON Committee: Deal to regulate financial markets and products and curb high-frequency trading
Comprehensive rules to govern financial markets were agreed informally by negotiators for Parliament and the Council of Ministers. However, Commissioner Barnier said that the Commission would have preferred a more ambitious implementation period.  View Article
EP groups comment on MiFID II agreement: ALDE, EPP, S&D
ECON chair Bowles commented: "MiFID II will begin a new era for the structure of European financial markets, ensuring much greater transparency in how financial instruments are sold, traded and used". The plenary vote is expected for the March session of the European Parliament.  View Article
Industry comments on MiFID II agreement: AFME, BVI, DK, PwC
The agreement on the primary (Level 1) legislative texts represents a critical milestone of the Review that has been over two years in development since the Commission's proposals were first published.  View Article
ECB publishes opinion on indices used as benchmarks
While progress has been made in strengthening the governance process and restoring credibility, further steps need to be taken.  View Article
Rosa M Abrantes-Metz: Time is nigh to rethink the role of benchmarks
Market innovation will provide new, robust indices, reflecting the lessons learned from recent scandals. Such developments should be encouraged and welcomed, writes Abrantes-Metz in the FT.  View Article
FT: Traders struggle to meet European reporting deadline
Fund managers, banks, investors and corporations trading in Europe are struggling to meet a deadline for mandatory reporting of all their trades to regulators. Ca. 1 million legal entities operating in the region will have to report trade data from across all their asset classes after February 12.  View Article
Hedgeweek: Regulatory changes will drive FX trading volumes to futures, says report
New regulations will drive trading activity in foreign exchange away from options and non-deliverable forwards (NDFs) to futures, which will become a much bigger and more important part of the FX market.  View Article
Economist: The return of securitisation - Back from the dead
After once looking as if it was heading for extinction, securitisation is making a recovery. Issuance of ABSs is at double the 2010 nadir. Issuance of paper backed by non-residential mortgages is up from just $4 billion in 2009 to more than $100 billion last year.   View Article
ISDA/FOA EMIR Reporting Delegation Agreement published
ISDA and the FOA have published the ISDA/FOA EMIR Reporting Delegation Agreement. This document is intended to help market participants meet their reporting obligations by providing a bilateral standard form of reporting delegation agreement.  View Article
Clearstream will make eurobonds and securities from non-T2S markets eligible for settlement in T2S
Clearstream will extend the range of securities eligible for settlement in the future pan-European settlement platform TARGET2-Securities by leveraging the network of cross-border links to non-T2S markets of its international central securities depository.  View Article
ESMA publishes updated Q&A on the Prospectus Directive
The purpose of the document is to promote common supervisory approaches and practices in the application of the Prospectus Directive (PD) and its implementing measures.  View Article

Insurance

Risk.net: 'No appetite to reopen Solvency II' in face of global capital standards - Balz
Moves to change Solvency II to bring it in line with developing global capital requirements for insurance companies could face opposition from members of the EP, according to the Omnibus II rapporteur, Burkhard Balz.  View Article
Fitch: European insurers can accommodate low bond yields
Fitch Ratings says in a new report that current low bond yields are not an immediate threat to the ratings of European insurers.  View Article
EIOPA publishes review of consumer trends methodology
In order to develop a regular consumer trends report for the insurance sector, EIOPA has developed a methodology for producing the annual Consumer Trends Reports. The methodology report suggested a number of issues to be considered in the future.  View Article
Risk.net: Private equity funds set to enjoy insurer cash injection in 2014
Insurers are set to plough billions into private equity assets over the coming years. After companies recoiled from investing in the sector in the wake of the 2007–08 financial crisis, they are now funnelling money back into the class.  View Article
Risk.net: Reinsurance sidecars evolving as competition for third-party capital hots up
Reinsurers are developing new sidecar structures in a bid to attract investors, as competition with insurance-linked securities funds intensifies.  View Article
Fitch: Ownership restricts German PS insurers' merger potential
According to Fitch's report, while pressure continues to mount for consolidation within Germany's highly fragmented public sector insurance sector, the prospect of mergers is restricted by PS insurers' ownership structure.  View Article

Asset Management

IPE: EC's long-term investment funds should adopt 'comply or explain' on SRI
The Commission should require asset managers launching European Long-Term Investment Funds (ELTIF) to disclose the social impact of all investments, asset manager Mirova has suggested.  View Article
Risk.net: Pension funds call for clearing exemption extension
Pension funds are pushing the Commission to extend the EMIR clearing exemption until 2018, due to their inability to post non-cash variation margin for swaps.  View Article
FN: A long-term investment approach pays
Pension schemes that take a long-term approach to investing in equities have handsomely beaten the index, according to a review by consultant Towers Watson. Annualised returns of 7.5 per cent a year beat the MSCI All Country index by 2.5 percentage points a year.  View Article
Fitch updates Money Market Fund Ratings criteria
Fitch Ratings has updated its global criteria for rating MMFs, consistent with its practice of reviewing rating criteria annually. The changes to the criteria are limited, reflecting certain market developments and clarifying some aspects of criteria application. No rating changes are expected.  View Article

Corporate Governance/Accounting

FRC challenges the reporting of companies classifying pension liabilities as equity
The FRC warns Boards against entering into arrangements that turn pension obligations into equity instruments in their accounts. Several companies that used Scottish Limited Partnerships to achieve this outcome have taken steps to address the FRC’s regulatory enquiries.  View Article
Responses to IASB's conceptual framework for financial reporting: ACCA, Deloitte, EBA, EBF, FRC
The IASB's July 2013 Discussion Paper set out the concepts that underlie the preparation and presentation of financial statements, identifying principles for the IASB to use when it develops and revises IFRSs.  View Article
EFRAG: Draft comment letter to the IASB on equity method in separate financial statements
EFRAG published its draft comment letter on the IASB's ED/2013/10 Equity Method in Separate Financial Statements (Proposed amendments to IAS 27). Comments are requested by 30 January, 2014.  View Article

Financial Services Policy

ECON Committee publishes responses to consultation on the coherence of EU financial services legislation: BoE, BBA, EBA, EBF, EFAMA et al
ECON held a consultation on enhancing the coherence of EU financial services legislation, which closed in June 2013. The responses are now being analysed to determine the best way to follow up on the issues raised.  View Article

International/G20

IIF: Views on the way forward for strengthening the framework for sovereign debt restructuring
This note from the IIF's Special Committee on Financial Crisis Prevention and Resolution is intended to contribute constructively to the ongoing discussions on possible refinements to the existing contractual, market-based approach to sovereign debt restructuring.  View Article
FSB: Senior Supervisors Group Progress Report on Counterparty Data
Observations in this report indicate that firms' progress toward consistent, timely and accurate reporting of top counterparty exposures fails to meet supervisory expectations, as well as industry self-identified best practices.  View Article

Graham Bishop’s Articles and Speeches

UK Chancellor Osborne speech to the Open Europe Conference - Graham Bishop comments
By May 2015, Chancellor Osborne may discover that his example of a 'double majority' has come back to haunt him and he has to propose the UK leaves the EU – or eat a lot of these words. But Johnny Foreigner may have noticed the soaring current account deficit before then.  View Article
95th 'Brussels for Breakfast' meeting at the BBA on 14 January
Matters of discussion at our monthly roundtable discussion on the developments in Financial Services Regulation included: the CSD regulation, the SRM/SRF and the Basel negotiations.  View Article
Graham Bishop: Welcome to the 2014 Timeline
Graham sets out the 2014 timeline for the political, financial, economic and budgetary fields, with a focus on the forthcoming EU elections.  View Article





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