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16 October 2008

This week in "Brussels"

Articles from 09 October 2008 - 16 October 2008

European Council 15-16 October
French President Sarkozy called for a new form of capitalism. No financial institution should escape regulation and supervision, he says in the statement introducing the meeting. The system must be completely overhauled.  View Article

ECB measures to expand collateral framework and enhance liquidity
The ECB decided to temporarily expand the list of assets eligible as collateral. The provision of longer-term refinancing will also be enhanced, and US dollar liquidity will also be offered through foreign exchange swaps.  View Article

Commission proposal on Deposit Guarantee Schemes
The proposal will increase minimum protection for bank deposits to € 100,000 within one year, the payout period will be reduced to three days, and co-insurance where the depositor bears part of the losses is abandoned.  View Article

Trichet – Time for immediate action
These are times where quick decisions are indispensable, Trichet said and underlined the importance of improving co-operation between national authorities, both for preventing and for resolving shocks.  View Article

ICMA Regulatory Policy Newsletter
Authorities have to decide whether more regulation would help to restore market confidence, Executive President Karsenti said. But although the authorities’ role is necessary in helping to restore market confidence, it is not sufficient on its own.  View Article

Barroso does not rule out legislation on hedge fund and private equity
We must rethink regulatory and supervision rules for financial markets, including banks, mortgage lenders, hedge funds and private equity, Barroso. There must be no more business as usual, he warned.  View Article

Commission non-paper on EU response to financial crisis
The Commission has issued a discussion document aimed at a more co-ordinated EU response to the financial crisis. It also promises an amendment to accounting rules.  View Article

ECON Draft Motion for a Resolution on the situation of the global financial system
The draft provides a catalogue of actions including an appropriate crises prevention mechanism, more ambitious economic co-ordination, further measures on executive pay and credit rating agencies, and a European supervisory structure.  View Article

Overview of national rescue measures and deposit guarantee schemes
The Commission released a table of national rescue measures and deposit guarantee schemes compiled from a range of sources. Additionally, it published a FAQ on Europe's response to the Financial Crisis.   View Article

IMF to sharpen assessment of risks facing countries
The IMF agreed the new priorities as part of a major review of its surveillance work. The IMF agreed to focus more on linkages between the financial sector and the real economy as well as cross-country analysis.     View Article

UK FSA statement on remuneration policies
The Financial Services Authority urges firms to review compensation policies to make sure that these are consistent with sound risk management.   View Article

EU Governments announce rescue packages
EU governments announced their rescue packages for the financial markets. The packages include a guarantee fund to help the interbank lending market plus additional billions of Euros for recapitalization purpuses for banks.  View Article

Central Banks provide unlimited funding
Central Banks announced to provide unlimited dollar funding to improve liquidity in short-term US dollar funding markets. These measures will be in place as long as needed, and at least until January 2009, ECB states.  View Article

HM Treasury statement on financial support to the banking industry
The UK Government is making capital investments to RBS, and upon successful merger, HBOS and Lloyds TSB, totaling £37 billion, underlining that Government is not a permanent investor in UK banks.   View Article

Banque de France issues Financial Stability Review on valuation issues
In many respects, the current crisis is about valuation, Governor Christian Noyer says noting that the crisis has revived a complex discussion on how financial instruments should be reported under accounting standards.  View Article

EU leaders agree on rescue plan - summit declaration
European leaders agreed on a co-ordinated plan to rescue the financial service sector on a meeting in Paris on Sunday. Governments agreed on a set of tools member states can choose to provide capital to their financial institutions.  View Article

IIF chair calls for global regulatory coordinating body
We agree that some new modalities for supervision of large, complex international institutions may be needed, Mr Ackermann said stressing that the focus needs to be on increasing the efficiency of supervision and enhancing international coordination.  View Article

IMF presses four-step plan to halt financial spiral
Some explicit guarantee of financial system liabilities is unavoidable and a high degree of international co-operation has become urgent, the IMF says.  View Article

G-7 Plan of Action
The action plan provides a framework for individual and collective policy steps to provide liquidity to markets, strengthen financial institutions, protect savers, and enforce investor protections.  View Article

FSF follow up report - Enhancing Market and Institutional Resilience
Market participants need to move ahead urgently to put in place central counterparty clearing for OTC credit derivatives and achieve more robust operational processes in OTC derivatives markets, FSF recommends.  View Article

World finance ministers back G-7 action plan
The IMFC endorsed a plan of action announced by the G-7 economies. Dominique Strauss-Kahn stressed that the IMF stands ready to lend quickly to any member country in financial difficulty.  View Article

Bernanke sees significant threat to US growth
Stabilization of the financial markets is a critical first step, Bernanke said, but even if they stabilize as we hope they will, broader economic recovery will not happen right away.   View Article

Treasury announces executive compensation rules under the EESA
The three programs under the Emergency Economic Stabilization Act include corresponding executive compensation and corporate governance standards. Any firm participating in the programs will be required to adopt these standards.   View Article

US Treasury announces Troubled Asset Relief Program - TARP
Treasury will purchase up to $250 billion of senior preferred shares on standardized terms as described in the program's term sheet. Participating companies must adopt the Treasury standards for executive compensation and corporate governance.  View Article

Fed announces Commercial Paper Funding Facility program - CPFF
The Federal Reserve announced a program to finance the purchase of unsecured and asset-backed commercial paper from eligible issuers through its primary dealers.   View Article

FDIC announces Temporary Liquidity Guarantee Program
The Program guarantees newly issued senior unsecured debt of banks, thrifts, and certain holding companies, and provides full coverage of non-interest bearing deposit transaction accounts, regardless of dollar amount.  View Article

Summary of US government actions to strengthen market stability
“These actions are not what we ever wanted to do”, Secretary Paulson said. Fed Chairman Bernanke commented that  “clearly the time had come for a more comprehensive and broad-based solution”.   View Article

PWG fourth quarter policy statement update
The report notes that significant progress has been made in many areas. The PWG does not believe that there is a need for additional specific recommendations at this time.   View Article

FASB clarifies fair value guidance for inactive markets
The FASB issued Final Staff Position, which clarifies the guidance for applying fair value accounting to financial instruments that are no longer trading in an open market.   View Article

FSA Japan enhanced information disclosure on short selling
The FSA requested exchanges to enhance their disclosure on information regarding short-selling.  View Article

FSA Japan relaxes market restrictions regarding purchase of own stocks by listed companies
The FSA temporarily relaxed the restrictions regarding the upper limit on the volume of purchase per day and the timing of purchase until the end of this year in order to facilitate the purchase of own stocks by listed companies.   View Article

Japan considers full protection of bank deposits
Japan considers guaranteeing all bank deposits. Finance Minister Nakagawa said he will examine what ever steps are needed to strengthen the financial system.  View Article

City of London Corporation report on Asian Financial Centres
It is likely that a number of Asian financial centres will become increasingly important globally, the report says. The centre of gravity in the international economy is increasingly shifting towards Asia and financial centres here are set to grow.  View Article

3L3 Committees common understanding on information accompanying fund transfers
The common understanding proposes some practical solutions in processing such messages, including suggested procedures and policies in seeking complete information, reporting, and internal controls.   View Article

ECB report on EU banking structures
The report reviews the main structural developments and contains two special features on the incentive structure of the ‘originate and distribute’ model and the on a survey of EU banks on major risks on the year ahead.  View Article

EBF/BusinessEurope warn against hurried solutions
Recent bank failures in Europe have exposed the pervasiveness of the turmoil, both institutions note underlining that hurried solutions would be counterproductive and merely lead to increased cost.   View Article

CEBS follow-up report on bank transparency
The report concludes that institutions need to make further efforts to bring their disclosures into line with the good practices identified in the June report. CEBS will consider to how the good practices should be applied in the longer run.  View Article

Overview of national rescue measures and deposit guarantee schemes
The Commission published a table providing information on national rescue measures and deposit guarantee schemes.  View Article

Commission proposal to extend rules on cross-border euro payments to direct debits
The proposal extends the principle of equality of charges to direct debit payments, which will become available on a cross-border basis as from November 2009.   View Article

Commission proposal on E-Money Directive
The Commission put forward a proposal revising the current rules governing the conditions for issuing electronic money in the EU and providing for a legal framework for issuing electronic money.   View Article

CESR/CEBS advice on commodities business
The advice concludes with recommendations in particular with regard to the future scope of the exemptions which exist in MiFID and the prudential treatment of specialist commodity derivatives firms.   View Article

NASDAQ OMX invests in European Multilateral Clearing Facility
The exchange entered into a binding agreement to acquire a 22% equity stake in EMCF from Fortis Bank, a central counterparty clearing house for European equity trading on exchanges and multilateral trading facilities.  View Article

Wall Street Systems launched a pay as you go post trade processing utility for the capital markets
The Electronic Settlement Network is launched in conjunction with Currenex, Bloomberg, ICAP and Logicscope and provides an outsourced, on-demand processing hub for financial institutions.  View Article

Nasdaq clearing service to compete with DTCC
Market operator Nasdaq OMX is gearing up to launch a clearing and settlement system for US cash equities that will compete directly with industry-owned Depository Trust and Clearing Corporation.  View Article

CME Group and Thomson Reuters to close FXMarketSpace Joint Venture
The centrally-cleared foreign exchange marketplace established last year failed to attract the liquidity levels expected.   View Article

Eurex presents CDS clearing solution
Eurex intends to build a consortium structure to provide shared governance and control. The proposal received support from European authorities, the derivatives exchange said.  View Article

CCorp unveils ICE alliance as Fed mulls CDS clearing proposals
CCorp recruited ICE to join its initiative to create a central clearing counterparty for the credit default swaps market shortly before the Fed is to discuss the establishment of a central clearing counterparty for CDSs.  View Article

IFSL fund management report 2008
Early indicators for 2008 show net outflows as banks have used their asset management arms to improve the liquidity of their banking operations. Worldwide assets of the global fund management industry probably totalled around $110 trillion.   View Article

IWG agreement on Generally Accepted Principles and Practices for Sovereign Wealth Funds
The Santiago Principles are composed of 24 principles that reflect the over-arching objectives for sovereign wealth funds.  View Article

McCreevy - Get corporate governance principles right
“Corporate governance codes should continue to play an important role”, McCreevy said underlining that regulations “cannot be, nor should they ever be viewed, as a substitute for proper corporate governance”.  View Article

Commission amends accounting standards on asset reclassification
The amendments will ensure that EU companies have the same flexibility as their American competitors to reclassify assets held-for-trading into the held-to-maturity category. The changes will apply as from the third quarter of 2008.   View Article

IASB proposes improvements to fair value measurements
The IASB consults on an exposure draft on amendments to IFRS 7 to enhance disclosures about valuations, methodologies and the uncertainty associated with fair value measurements. The amendments would affect the fair value and liquidity risk disclosures.   View Article

EFRAG recommends adoption on amendments to IAS 39 and IFRS 7
EFRAG recommends the adoption of the amendments made to IAS 39 and IFRS 7.    View Article

IASB update on applying fair value in inactive markets
The IASB reaffirms its belief that fair value measurement guidance under IFRSs and US GAAP is already consistent. Also, IASB and FASB intend to issue common guidance on any accounting questions arising from the US Emergency Economic Stabilization Act.  View Article

IASB amendments permit reclassification of financial instruments
The amendments to IAS 39 introduce the possibility of reclassifications for companies applying IFRSs, which were already permitted under US GAAP in rare circumstances.  View Article

Commission approves UK support scheme for financial institutions
The Commission approved the UK state aid package concluding that this is limited in time and scope and provides non-discriminatory access for financial institutions with substantial business in the UK.   View Article

Commission guidance on state aid measures for banks in crisis
The guidance indicates how the Commission intends to apply EC Treaty state aid rules to state support schemes and individual assistance for financial institutions in the current crisis. The Commission will aim to approve schemes within 24 hours.  View Article

Commission welcomes revised Irish guarantee scheme
The Commission welcomed the various changes and commitments made by the Irish authorities and will proceed urgently to the adoption of a decision on the Irish scheme in accordance with EU state aid rules.  View Article

Commission approves Danish state support scheme for banks
The Danish scheme includes a guarantee on claims by depositors and ordinary creditors, and a legally established company to wind up banks that do not fulfil statutory solvency requirements and for which no viable private solution could be achieved.  View Article

© Graham Bishop

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