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29 July 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 Graham Bishop’s Articles
Financial stability - policy analysis About this email

Articles from 22 July 2010 - 29 July 2010

Financial Services Policy

ECB Tumpel-Gugerell: Central banks will now have new tasks, and responsibilities to address financial stability
She highlighted that stress tests contribute to the effectiveness of financial intermediation by providing more information about the financial system, and particularly about the condition of financial institutions.  View Article
IIF: Global financial services industry urges regulatory action to mitigate fragmentation
IIF urges the G20 to continue to place a high priority on global coordination and to ensure that national authorities are able to work towards international coordination through the use of administrative discretion and regulatory flexibility when implementing reforms.   View Article
UK Treasury report on a new approach to financial regulation
The report describes future changes to the Bank of England and the creation of the Financial Policy Committee as the macro-prudential authority. It also considers the issue of market regulation and the coordination of the regulatory bodies in a potential crisis.  View Article
CESR publishes report on trends, risks and vulnerabilities in financial markets
The report includes a cross-sector dimension analysis, as well as a thorough focus on financial innovations and incentives related to market practices both at the wholesale and retail level.  View Article
ECB reviews risk control measures in its collateral framework
The new schedule duly graduates haircuts according to differences in maturities, liquidity categories and the credit quality of the assets concerned, based on an updated assessment of risk characteristics of eligible assets and the actual use of eligible assets by counterparties.  View Article


CEBS published the results of the EU-wide stress-testing exercise
The stress tests focus mainly on credit and market risks, including the exposures to European sovereign debt. CEBS has conducted extensive cross-checks over the results. As a result of the adverse scenario after a sovereign shock, 7 banks would see their Tier 1 capital ratios fall below 6%.  View Article
FSB welcomed European bank stress tests: The results provide additional clarity and transparency
FSB Chairman Mario Draghi stressed that EU stress test exercise is an important contribution to bolstering confidence in the European banking system and strengthening the resilience and robustness of the global financial system.  View Article
FBF state that financial reforms must take into account the G20’s growth target
FBF is pleased with the G20’s objective of a more resilient financial system, but highlights the importance of the effects of the implementation timeframe of prudential standards, the risk in increasing the pro-cyclicality of accounting standards and the validation of bank taxes on growth targets.   View Article
BBA statement regarding CEBS Bank Stress Test announcements
The BBA says “It’s no surprise that the UK banks have excelled at the stress tests set by CEBS to ensure European Banks are well placed to weather future financial problems". They however feel scenario tests are a better approach.   View Article
Deutsche Bundesbank and BaFin on the results of the stress tests: German banks prove to be robust and resilient
German banks coped very well with the simulated drop in government bonds prices paired with rise in risk premiums. HRE is the only German bank to fall short of the 6% Tier 1 capital ratio in the most severe stress scenario.  View Article
Italian Bank Association: stress test were serious, our system is solid
Giuseppe Mussari, new president of ABI, said the stress tests were severe by definition. I have no doubts about their validity and quality.‘ The biggest task now will be to improve the relations between banks and firms.  View Article
El País: Santander and BBVA among the most profitable banks in Europe according to the stress tests results
The figures provided by CEBS shows that Santander is one of the most profitable banks in Europe. Even in the worst scenario, the bank would generate 45.737 million Euro which could cope with credit losses.  View Article
Wolfgang Münchau: A test cynically calibrated to fix the result
Writing in the Financial Times about the Stress test results, Münchau said that one of the fundamental problems of the tests is that they left out some important institutions, whose financial health is not entirely clear as it is the case with the German KfW.  View Article
Paul Goldschmidt: The ‘Stress Tests’ - Why is the methodology subject to controversy?
Goldschmidt argues that the stress test results have been polemic due to the authorities’ incapacity to prevent the crisis, as well as the difficulties they continue to face in the implementation of the necessary reforms.   View Article
The Group of Governors and Heads of Supervision reached broad agreement on Basel Committee capital and liquidity reform package
The agreement defines the capital, the treatment of counterparty credit risk, the leverage ratio, and the global liquidity standard. The Basel Committee will issue publicly its economic impact assessment in August and finalise the calibration and phase-in arrangements in September.  View Article
ECB published results of the July 2010 bank lending survey for the Euro area
With regards to loans to enterprises, Euro area banks reported an increase in the net tightening of credit standards compared with the first quarter, exceeding expectations from the previous survey round.  View Article


ECON committee published draft report on dark pool
The draft report, written by MEP Kay Swinburne, calls for a regulatory level playing field between Multilateral Trading Facilities, Regulated Markets and Systematic Internalizers. It also introduces new requirements for Broker Crossing Networks to submit certain information to authorities.   View Article
CESR proposes changes to MiFID to improve securities markets’ functioning, transparency and investor protection
CESR’s recommendations include creating new rules for broker crossing networks that match client stock trades. CESR also called for a mandatory consolidated tape for stock trades to be designed by the industry and run by a not-for-profit manager.  View Article
European Issuers’ response to the revision of the Market Abuse Directive
European Issuers’ proposals to the Commission recommend that the MAD regime should be simplified for all companies in the EU before extending it to MTFs and that the threshold for the notification of transactions by managers should be higher and restart from zero every time it is reached.  View Article
FESE responded to the EC Consultation on the Market Abuse Directive review
FESE members believe that the requirements of the MAD review related to disclosure of inside information, directors’ dealings and insider lists should not apply to financial instruments when they are admitted to trading on a MTF.  View Article

Asset Management

CESR sets out final guidelines on risk measurement and the calculation of global exposure and counterparty risk for UCITS
The key purpose of the guidelines is to provide both regulators and companies managing UCITS with detailed methodologies to calculate the global exposure and counterparty risk for UCITS, whilst at the same time, fostering a level-playing-field in the area of risk measurement among EU Member States.  View Article

Corporate Governance/Accounting

EFRAG's draft comment letter on the IASB's ED revenue from contracts with customers
EFRAG does not support the control model for revenue recognition proposed in the ED and considers that the IASB has not explained why the proposals would result in useful information. EFRAG believes that financial statements would be most decision-useful.   View Article
IFRS Foundation published illustrative examples in XBRL for the IFRS Taxonomy 2010
The examples include statement of financial position; of comprehensive income; of cash flows and of changes in equity.  View Article

Competition: Financial Services

Commission clears extension of bank support measures in Portugal and Spain
A majority of support schemes for financial institutions put in place in 2008 and 2009 to ensure financial stability have been periodically extended, generally for six months, when requested by the Member States concerned and justified.  View Article

Graham Bishop’s Articles

Europe in Crisis or a Closer Union?
Article for Japanese FACTA magazine: Europe appears to be in a deep crisis but governments have responded by agreeing a stabilisation fund and economic surveillance to restore competitiveness amongst eurozone economies. This may tip the eurozone into a closer union.  View Article

Financial stability - policy analysis

BIS report on long-term issues in international banking
This report documents general trends in the historical evolution of international banking, discusses various drivers of this evolution and examines the impact of international banking on financial stability and the macroeconomy.   View Article

© Graham Bishop

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