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24 June 2010

This week in "Brussels"

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Financial Services Policy Banking Securities
Asset Management Corporate Governance/Accounting Competition: Financial Services
Edited Minutes of key legislative Bodies Brief Opinions/Commentaries Financial stability - policy analysis
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Articles from 17 June 2010 - 24 June 2010

Financial Services Policy

European Council: Europe to propose bank levy in the G20 meeting
The EU leaders approved a 10-year plan to boost the 27-nation bloc’s competitiveness. The European Council also agreed to disclose the results of ongoing stress tests by banking supervisors in the second half of July.  View Article
ECON committee vote on the own initiative report on cross-border banking crises and remuneration
Both resolutions call on the Commission to draw up legislative proposals that go beyond the current model of recommendations and loose co-ordination, which had only a limited impact in controlling the build-up of risk. Both reports will be voted in plenary during the July session.   View Article
ECON committee follow-up study to Financial Supervision and Crisis Management in the EU
The study states the difficulties for regulators to control systemic risks in liberalised international financial markets and calls for consideration for an alternative regulatory approach.  View Article
ECON committee: ECB president Trichet backs MEPs on new economic governance
Trichet said that policy-makers needed to follow up their words with deeds and advocated for strong surveillance of economic policies, "quasi-automatic" sanctions under-performing countries, and much more binding power to Commission proposals regarding budget corrections.   View Article
Twenty-two MEPs call for counter-expertise that reports a different point of view from the banking lobby
ECON MEPs are frustrated that all the expert opinion it receives stems from the banking sector itself, which constitutes asymmetry and a danger to democracy. Unlike in other areas, such as environmental policies, there is not sufficient expertise to counterbalance the lobbying power of banks.   View Article
EC, ECB and IMF Interim review of Greece: Fiscal developments are positive
The mission did not undertake a comprehensive review. However, the discussions suggest that the agreed policies including fiscal developments, pension reform, privatisation and tax administration are being implemented as envisaged.   View Article
G20: sense of urgency has faded
The G20 members will warn against taking the global economic recovery for granted while also noting that the huge costs of stimulus could hurt long-term growth, a draft G20 document shows.   View Article
Barroso and Van Rompuy joint letter on the EU goals for the Toronto G20 summit - Securing strong and sustainable growth
The two Presidents call on the G20 to reaffirm its commitment to reform financial markets and they stressed that there is a need to focus on and regulate OTC derivatives market. Moreover, the cumulative impact and macroeconomic effect of financial reforms should be taken into account.  View Article
US agenda for G20 meeting
We need to accelerate efforts to establish a global framework for financial regulation, Geithner said. Critically, we need to reach agreement internationally on reducing leverage and raising capital requirements, improving both the quantity and quality of capital.   View Article
Volcker rule under attack in US financial reform negotiations
Senate negotiators are expected to offer changes to the financial bill that would soften the Volcker rule. There is widespread speculation that the Senate negotiators will propose language that would allow banks to invest a small ammount of their capital in internal hedge funds.   View Article
Geithner: TARP investments generated additional revenue
Banks have repaid approximately 75 percent of TARP funds they received, and TARP investments in banks have generated taxpayers $21 billion in income, US Treasury Secretary Timothy Geithner said. However, TARP investments in AIG will likely still result in some loss.   View Article
US authorities issue final guidance on incentive compensation
The guidance is designed to ensure that incentive compensation arrangements at banking organizations appropriately tie rewards to longer-term performance and do not undermine the safety and soundness of the firm or create undue risks to the financial system.   View Article
SIFMA roundtable of economists: positive trends exit, but concerns on economic growth remain for 2010 and 2011
Concerns were raised that the overall impact on economic growth would be negative, ultimately making credit more expensive and more difficult to acquire. One commentator suggested that “even if Congress gets it all right, financial regulatory reform will reduce credit availability and hurt growth.”   View Article
The Squam Lake Report: Fixing the Financial System
The Squam Lake report provides recommendations with the aim of lowering the risks of systemic failures, as well as increasing transparency in the CDS markets. Additional steps that would help further the goals of the report are moving end-user derivative trades onto CCPs.  View Article


BCBS Chairman on the regulatory reform: raising minimum capital will raise the stability of the system and promote more sustainable growth
Nout Wellink, BCBS Chairman, urged banks to use the “return to profitability to boost capital and liquidity buffers” through earnings retention and reasonable capital raising. He noted that raising minimum capital requirements will involve large and permanent net benefits.   View Article
AFME statement on UK bank tax: it is effective regulation - not taxation - that will help prevent a future crisis
AFME warns that the tax does not reduce risk in the financial system. Moreover, AFME believes that a unilateral UK bank levy could adversely affect an important sector of the UK economy and threaten the UK’s future as the world’s leading financial centre.   View Article
BCBS: Adjustments to the Basel II market risk framework
BCBS has re-confirmed the capital charge for non-correlation trading securitisation positions. However, for a transition period of two years following the implementation of the market risk revisions the charges may be based on the larger of the capital charges for net long and net short positions.   View Article
Chancellor of the Exchequer: A bank levy will be introduced from January 2011
George Osborne said that the French and Germans have joined the UK in committing to introduce a bank balance sheet levy to ensure banks make a fair contribution to reflect the risks they pose. Once fully in place, it is expected the levy to generate over £2 billion of annual revenues.   View Article


AFME / ESF conference delivers latest ABS credit performance insights
AFME presented the performance figures which confirm that most types of European securitisations are not ‘toxic’ and show that the credit performance of the triple-A tranches of consumer and residential mortgage securitisations have largely performed well in Europe.  View Article
ISDA welcomes EC consultations on OTC derivatives
ISDA supports financial regulatory reform, in the interest of ensuring market stability and reducing systemic risk. ISDA also supports proposals that will require the use of, and reporting to, trade repositories for OTC derivatives.  View Article
CESR published 2009 annual report marked by the financial crisis
The regulatory follow-up of the financial crisis has greatly dominated CESR agenda, evidenced by CESR's work on financial reporting in times of crises, follow-up work on Lehman's default and on short selling.  View Article

Asset Management

AIFMD State of play: most probable scenario will be a postponement of the vote until September
The prevalence of national interest of Member States and the difference of opinions between the Council and the European Parliament could cause the postponement which would move the implementation of the Directive to 2014 or 2015.   View Article

Corporate Governance/Accounting

EBF: Basic features of an alternative to IASB expected cash flow model
EBF does not fully support the IASB model and proposed the “Expected Loss over the Life of the Portfolio” model. The model is built around the key principles which include alternative application of the concept of expected loss for impairment.  View Article

Competition: Financial Services

Commission prolongs temporary approval of aid to German WestLB and to Austrian Hypo Alpe Adria Group
The EC has prolonged its temporary approval of the WestLB "bad bank", a wind-down vehicle created to take over the impaired assets of the bank. On HGAA, the EC has doubts whether the bank has sufficiently refocused its business activities.  View Article

Brief Opinions/Commentaries

Wolfgang Münchau: We need the figures on Europe’s toxic banks
Münchau welcomes the stress test announcement, but is sceptical that the tests will make a lot of difference. What is really important is the willingness to restructure the banking sector, and he has no indication from Germany that the government is undertaking any attempts to fix the problem.  View Article

Financial stability - policy analysis

Businesseurope: Financial reforms and the recovery
In a joint report with other associations from the financial services sector, Businesseurope concludes that comprehensive impact assessments on the new financial regulation must be carried out to address the cumulative and/or systemic impact of different pieces of regulation.   View Article
ESFRC: Insolvency procedures and market discipline for banks and Euro Area countries
The ESFRC believes credible rules for allocation of banks’ losses must be in place, including a system of “Structured Early Intervention” based on trigger points for a leverage ratio, as well as legally mandated procedures for restructuring or closing severely distressed financial institutions.   View Article
BIS Caruana on macroprudential policy: what we have learned and where we are going
Caruana said that pre-emptive prudential measures can make financial institutions and markets more resilient to systemic risk and perhaps moderate credit and asset price booms as well. He also stressed the importance of central banks in macroprudential policies.   View Article

© Graham Bishop

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