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06 December 2016

125th Brussels for Breakfast – Notes

Organised by the Centre for the Study of Financial Innovation (CSFI), hosted by Grant Thornton with co-presenter Karel Lanoo (CEPS).

By Paula Martín/Graham Bishop


This blog covers the key subjects since our last meeting that I hoped to cover but, as always, we ran out of time to deal with them all. As a Friend, you can watch the `structured’ CPD web-cast with CISI – this month running for 45 minutes on 20th December. These Notes may be read to record a further 30 minutes of `structured CPD’, including a dipping into the links to the underlying stories.

Highlights from the “Brussels for Breakfast” meeting

Inevitably, we had to start with the Supreme Court hearing on Article 50 but not much new light could be shed on it at this stage – more in the St Valentine’s Day B4B when we will have the actual judgment to chew over. The Brussels decision-making process is beginning to crystallise but that just highlights the magnitude of the task – even for a transitional arrangement. If there is agreement in principle, then the standard EU democratic process will have to amend perhaps 100 financial services Directives and Regulations. As the EU does not have a “royal prerogative”, it will require detailed analysis and proposals on ‘000s of pages of law – easily five years before coming into force. What happens in the interim?

Given the absurdity of UK MEPs being elected in May 2019 to the Parliament, Brussels seems to regard the December 2018 European Council as an effective deadline for agreement. In the meantime, both Draghi and Dijsselbloem gave some very hard-line comments about retaining the integrity of the Single Market and arguing that the EU’s financial centre must remain in the EU - “we can’t allow” it to be outside.

The `banking package’ came out with many detailed proposals to `re-calibrate’ rather than `de-regulate’ – as the EBF put it. The debate highlighted some of the divisions within Europe and the determination not to have EU banks forced to uncompetitive capital standards. But the elephant in the room was the possibility the President-elect Trump might repeal some aspects of Dodd-Frank.

However, the debate on the CCP resolution proposal was even more heated as the scale of the contracts cleared in the UK was laid bare. The key question is the power of the EU authorities to intervene in the running of a non-EU CCP located in the UK after Brexit. It all revolves around the question of who pays, and it became apparent that the idea of automatic swap lines to the UK from the ECB was indeed a myth.  “All swap lines are discretionary”!!

The new proposal on business insolvency from the Commission also raised questions about whether this was just “nice to have” for CMU or was it a pre-requisite. The need for training practitioners and adequate methods for bond-holders to seize their collateral was clear. Also in the corporate governance space, IFRS9 is now in force and the swing to expected-loss provisioning may be quite significant for most banks that replied to the EBA’s survey. Though it comes into force on 1 Jan 2018, ESMA is expecting both 2016 and 2017 accounts to reflect the new rules. [...]

Full article available for consultancy clients here

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