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22 December 2011

This week in "Brussels"
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Banking Securities Insurance
Asset Management Corporate Governance/Accounting Financial Services Policy
Financial Stability - Policy Analysis European Council/Parliament International/G20
Graham Bishop’s Articles About this email

Articles from 15 December 2011 - 22 December 2011

Banking

Commissioner Barnier welcomes agreement by Council and Parliament establishing SEPA migration end-dates
By February 2014, SEPA credit transfers and direct debits across the euro area will be as easy as domestic payments within one country are now. The reasonable transition periods applied will allow customers and banks to get used to the adjustments in domestic payment transactions.  View Article
ECON Committee: Cheaper, faster and safer cross-border payment services
The deal reached by MEPs and Member State negotiators, which has still to be approved by the full Parliament and the Council, lays down EU-wide rules which should ensure that payment service providers compete fairly, eliminate hidden national bank charges, and accelerate transfers.   View Article
FAQs on the Single Euro Payments Area (SEPA) Migration
SEPA will establish a set of uniform standards, rules and conditions for transactions in euros, allowing them to be processed as easily, safely and efficiently as operations within national markets.  View Article
Government sets out plans to reform the structure of banking in the UK
The UK Government will legislate to create a stable banking sector that supports lending to businesses and families, and removes the implicit taxpayer guarantee in the event of a bank failure.   View Article
TheCityUK: Comment on HM Treasury response to ICB final report
CEO Chris Cummings stressed that financial services employ over 1 million people in the UK, providing 10 per cent of GDP, and therefore have a vital role to play in supporting business growth, creating jobs and putting the economy on a sustainable path.  View Article
FT: EU will not impede Vickers reforms
Brussels would not stand in the way of a tough new capital regime for Britain's banks, in spite of claims by David Cameron that the implementation of the Vickers banking reforms could be impeded by EU law.  View Article
BIS: Consultative paper on "Principles for the supervision of financial conglomerates" released by the Joint Forum
The proposed principles provide national authorities, standard-setters and supervisors with a set of internationally-agreed principles that support consistent and effective supervision of financial conglomerates, and in particular those financial conglomerates that are active across borders.  View Article
Proposed regulatory capital disclosure requirements issued by the Basel Committee
The Basel Committee on Banking Supervision published for consultation a set of requirements for banks to disclose the composition of their regulatory capital. These aim to improve the transparency and comparability of banks' capital bases, including on a cross border basis.  View Article
High cost credit protection: Statement issued by the Basel Committee
The guidance is intended to ensure that the costs, as well as the benefits, of purchased credit protection are appropriately recognised in regulatory and other capital adequacy assessments.  View Article
Basel III definition of capital: Frequently asked questions (update of FAQs published in October 2011)
The Basel Committee on Banking Supervision has reviewed frequently asked questions (FAQs) and this publication provides answers to these, together with technical elaboration of the rules text and interpretative guidance where necessary.   View Article
EBA published compliance table regarding Guidelines on Internal Governance (GL44)
The European Banking Authority (EBA) has published the compliance table regarding its Guidelines on Internal Governance. These guidelines aim at enhancing and consolidating supervisory expectations, and ultimately at improving the sound implementation of internal governance arrangements.   View Article
VoxEU: A short guide to the EBA’s recapitalisation results
The European Banking Authority (EBA) has recommended a plan to raise the required capital buffers of major European banks by summer 2012. This column describes how the capital targets have been calculated and outlines the main drivers of bank shortfalls with respect to these targets.  View Article
VoxEU: Deleveraging in the eurozone
The capital shortfall at EU banks is 8 per cent higher than originally thought, according to the latest assessment from the European Banking Authority. This column examines the evolution of loan-to-deposit ratios in big European banks.  View Article
FSA: CP11/31 - Mortgage Market Review: Proposed package of reforms
The Financial Services Authority (FSA) announced plans to prevent a return of the risky mortgage lending seen in boom times, by ensuring that common sense standards continue to apply in future.  View Article
Basel Committee consultative document: Application of own credit risk adjustments to derivatives
The Basel Committee issued a consultative document on the application of own credit risk adjustments to derivatives.   View Article
Basel Committee issues consultative paper on revised "Core principles for effective banking supervision"
The Basel Committee on Banking Supervision issued for public comment its revised Core principles for effective banking supervision.   View Article
Commission approved split-up of WestLB
According to the restructuring plan submitted by the German government with the agreement of the shareholders, the so-called Verbundbank activities will be carved out in order to accommodate the Verbundbank.  View Article
Commission approved second restructuring plan of Bank of Ireland
In particular, the restructuring plan contains a major restructuring effort ensuring that BoI will refocus its business model and will considerably reduce its dependence on wholesale funding.   View Article
Commissioner Almunia presented the Commission's decisions on WestLB and Bank of Ireland
Almunia stressed that the first concern of the Commission is that an aided bank is ultimately viable to avoid it asking for repeated rescues. Rescue and restructuring aid distorts the conditions of competition more than any other aid.   View Article

Securities

ECON Committee: Credit rating agencies - MEPs want less reliance on "big three"
MEPs called for measures to reduce reliance on the credit ratings of the "big three" agencies and limit their direct impact on countries' borrowing costs. Conflicts of interest between agencies and the companies that they assess should be addressed, e.g. by introducing civil liability for ratings.  View Article
Adoption of EMIR delayed until early 2012
No agreement on EMIR was reached during Monday's trialogue meeting between the European Parliament, Council of Ministers and officials from the European Commission. The key outstanding issues are ESMA's powers and third country jurisdictions.   View Article
ESMA publishes an updated opinion on waivers from Pre-trade Transparency
The update includes an opinion under article 18 (1)(A) of the Markets in Financial Instruments Directive (MiFID).  View Article
SIFMA statement on CFTC swaps reporting rules
SIFMA applauds the CFTC's adoption of a legal entity identifier (LEI) solution for use in the US derivatives markets. This is an important first step in the move towards a phased-in, global LEI solution.  View Article
AFME, ICMA and ISDA publish paper analysing the impact of European sovereigns' collateral policies
The paper discusses and analyses the impact of the collateral policies of European sovereigns. It identifies that such policies could significantly affect the liquidity and dynamics of the credit default swaps (CDS) market and create substantial additional bank liquidity requirements.  View Article
ECMI: The impact of collateral policies on sovereign CDS spreads
Giovanni Calice builds in this paper a new theoretical model for pricing of credit default swap (CDS) contracts with asymmetric collateralisation agreements.  View Article
FN: LSE in trade repository talks
The London Stock Exchange is in talks with UK regulators about the possibility of setting up a trade repository for over-the-counter derivatives, in the latest sign of the group's plans to diversify its revenues and benefit from new rules being formulated in reaction to the 2008 crisis.  View Article
Treasury Committee announces new inquiry into credit rating agencies
The Treasury Committee today published the terms of reference for an inquiry into credit rating agencies.  View Article
Bruegel: Rating agencies and sovereign credit risk assessment
In this latest Policy Contribution, Nicolas Véron and Guntram B Wolff say that credit rating agencies (CRAs) have not consistently met the expectations placed on them by investors and policymakers. They attempt to clarify key policy questions related to sovereign credit ratings.   View Article
Basel Committee consultative document: Application of own credit risk adjustments to derivatives
The Basel III rules seek to ensure that a deterioration in a bank's own creditworthiness does not at the same time lead to an increase in its common equity as a result of a reduction in the value of the bank's liabilities.  View Article
ISDA publishes draft OTC taxonomies for a 30-day comment period
The International Swaps and Derivatives Association (ISDA) published today its draft taxonomies for credit, interest rate, commodity, foreign exchange (FX) and equity derivatives. These taxonomies are currently open for a 30-day comment period.  View Article
CFTC issues final order amending the effective date for swap regulation
The Commodity Futures Trading Commission (CFTC) issued a Final Order regarding the effective date for swap regulation.  View Article
Mario Draghi: The euro, monetary policy and the design of a fiscal compact
Mr Draghi elaborated on the motivation for the monetary policy measures that the ECB announced last week, and he shared some views on the last European Council summit's decisions which he said brought important new elements to the economic and monetary union.  View Article
IOSCO Joint Forum releases consultative paper on principles for the supervision of financial conglomerates
The proposed principles provide national authorities, standard-setters and supervisors with a set of internationally-agreed principles that support consistent and effective supervision of financial conglomerates, and in particular those financial conglomerates that are active across borders.  View Article

Insurance

EIOPA launches public consultation on the add-on Quantitative Financial Stability Reporting Templates
The add-on templates are intended to provide a fair reflection of the financial stability in the insurance sector.  View Article
EIOPA published its second half-year financial stability report 2011
The risks stemming from exposures to sovereign and banking debt as well as the macro-economic outlook are the main factors which may jeopardise the financial stability of the European insurance and occupational pension sectors going into 2012.  View Article

Asset Management

FN: Asset management - a bigger economic role will mean more scrutiny
The asset managers are set to challenge investment banks as the financial backers of the global economy. The drawback is that they'll come under more scrutiny than they have experienced before.  View Article
Hedgeweek: Why Luxembourg will preserve its UCITS dominance
The author argues that the development of the UCITS framework and, more importantly, the recent introduction of UCITS IV which came into effect on July 1, will only serve to enhance Luxembourg's leading position.  View Article
IPE: The impact of Solvency II on pension costs and efficiency
Con Keating, head of research at Brighton Rock, argues that the complacency with which the decline of defined benefit (DB) has been met by authorities takes some explaining.  View Article
IPE: IORP Directive's Solvency II stance could 'stifle' cross-border pensions
According to Bart de Wit, adviser at the Belgian Association of Pension Institutions, changes to the EU's IORP Directive might dissuade pension fund sponsors from launching cross-border vehicles, as new Solvency II measures pose a serious threat to European schemes.   View Article
IPE: Pension reform could help Italian schemes to diversify further
Italian pension funds have predicted that reforms expected to be approved by the second chamber of parliament this week – together with an investment law change scheduled for 2012 – will help local schemes to diversify their portfolios further.  View Article
IPE: Hungarian move essentially spells end of mandatory funded pension pillar
Hungary's government has effectively dealt a death blow to the remnants of the country's mandatory funded pension pillar, after announcing that a 14-month temporary freeze to contributions would be extended indefinitely.  View Article
IPE: Lithuania fears nationalisation of second pillar assets
Pension assets in Lithuania are under threat of nationalisation, the chairman of the Lithuanian Pension Fund Member Association (LPFMA) has warned, as its parliament legislated a 25 per cent reduction in contributions to the second pillar.  View Article
EDHEC: Target-volatility strategies, a response to current investment dilemma
The study looks at the control of volatility as an objective and assesses various strategies to pursue this goal: a fixed mix of equity and risk-free assets, dynamic allocation between these assets targeting a fixed volatility, traditional portfolio insurance implementing a capital guarantee.  View Article

Corporate Governance/Accounting

IASB: Amendments of offsetting financial instruments
The IASB clarified its requirements for offsetting financial instruments by issuing 'Offsetting Financial Assets and Financial Liabilities' (Amendments to IAS 32).  View Article
IASB and FASB: Common offsetting disclosure requirements
The IASB and the FASB published common disclosure requirements that are intended to help investors and other financial statement users to assess better the effect or potential effect of offsetting arrangements on a company's financial position.  View Article
IASB referred mandatory effective date of IFRS 9
The IASB issued amendments to IFRS 9 Financial Instruments that defer the mandatory effective date from 1 January 2013 to 1 January 2015. The deferral will make it possible for all phases of the project to have the same mandatory effective date.   View Article
IASB: Proposed amendments to IFRS 10 Consolidated Financial Statements
The IASB published for public comment proposed amendments to IFRS 10 Consolidated Financial Statements to clarify the transition guidance.  View Article
EFRAG requests extension of comment period for the ED Revenue from Contracts with Customers and the Review Draft on General Hedge Accounting
EFRAG published its request to the IASB that the comment period on the ED 'Revenue from Contracts with Customers' be extended by 60 days and that the comment period on the Review Draft on General Hedge Accounting be set such that constituents have enough time to respond to field-testing activities.  View Article
IFAC: IAASB considers audit of financial instruments
The IAASB published International Auditing Practice Note (IAPN) 1000, 'Special Considerations in Auditing Financial Instruments', to provide important practical assistance to auditors when addressing valuation and other considerations pertaining to financial instruments.   View Article
ECIIA: Press conference in Brussels announcing new guidance on the 8th EU Company Law Directive
According to ECIIA and FERMA, the practical guidance on implementing European company law requirements on risk management, internal control and internal audit can help reduce further regulatory attention.  View Article
FEE: European accountancy profession needs to play key role by contributing transparency and reliability
FEE emphasises challenges facing management, accountants and auditors because more than ever in a crisis situation, management's and governments' decisions should be supported by information provided through high-quality information systems, including effective and efficient internal controls.  View Article
IAASB focuses on capital markets with new assurance standard
Recognising the need for reliable information in domestic and cross-border securities offerings and other fundraising activities, the IAASB released new ISAE 3420, Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus.  View Article

Financial Services Policy

ECON Committee: Deeper economic governance and credit ratings dominated debate with ECB President Draghi
In his first exchange with the ECON Committee as ECB President, Mario Draghi again defended the ECB's traditional role as laid down in the EU treaty, and resisted calls for it to tackle the eurozone crisis more aggressively.  View Article
EP delegation joins working group drafting new intergovernmental agreement
At the recent summit, government leaders proposed the drafting of a new “intergovernmental agreement”. The working group, which has been created by the Council, will commence its work on December 19th.  View Article
EPC: Thinking beyond a fiscal union
Will the new fiscal compact, which adds to an already very complex crisis recipe, prove to be enough to manage and eventually to overcome the crisis? This commentary argues that it will not be sufficient. However, the new intergovernmental agreement might still be a significant milestone.  View Article
Graham Mather: A look at the new Treaty Draft "International Agreement on a Reinforced Economic Union"
Graham Mather presents a short commentary upon the new version of a draft European Treaty, which emerged from Brussels before the weekend.  View Article
FTT might raise "no additional money at all", claims UK Chancellor
Responding to a letter from the Chairman of the Treasury Select Committee asking for details of whether an EU-Financial Transaction Tax would cause UK revenues to rise or fall, Chancellor George Osborne wrote that such a tax might raise no additional money at all for the Exchequer.  View Article
IMA expresses reservations about Draft Financial Services Bill Report
Richard Saunders, IMA's CEO, said that IMA supports the call for the recommendations of the Independent Commission on Banking to be implemented early and is pleased that the Committee has proposed a single independent complaints commissioner to deal with both regulators.  View Article
EC: Modernising the Professional Qualifications Directive will make it easier for professionals to find skilled jobs across Europe
The Commission has today adopted a proposal for modernising the Professional Qualifications Directive (Directive 2005/36/EC), aimed at simplifying rules for the mobility of professionals within the EU by offering a European Professional Card to all interested professions.  View Article

Financial Stability - Policy Analysis

ECB Financial Stability Review – December 2011
The review states that contagion effects in larger euro area sovereigns gathered strength amid rising headwinds from the interplay between the vulnerability of public finances and the financial sector.  View Article

European Council/Parliament

ECON Committee: Eurozone crisis will not be solved by rolling back the EU
The goals of the international agreement for stronger economic governance could be better achieved through normal EU systems and rules, Parliament's representatives on the intergovernmental drafting working group told MEPs.  View Article
ECON Committee: Eurobonds for eurozone stability
Whilst continuing to advocate introducing eurobonds, MEPs also urge the European Commission to tackle short-term needs, e.g. through the "European redemption pact", proposed by the independent economic advisers to the German government.  View Article

International/G20

IMF: Greece needs deeper reforms to overcome crisis
Greece received €2.2 billion following approval of the programme review. Despite year-long efforts to revive the economy at the heart of Europe's sovereign debt crisis, Greece remains mired in a deep recession.  View Article

Graham Bishop’s Articles

Graham Bishop: After “HOSG's” December 9 agreement - the future of the euro should be brighter
Will the December 9th Summit of the EU Heads of State/Government (HOSG) be seen as the moment when society finally woke up to the scale of the problem? It is widely said that a momentous change to economic governance in the euro area has been proposed. The doubters ask: Will society accept it?  View Article
Graham Bishop's blog from Vienna: If the euro breaks up, will we go back to the 1930's?
This is the challenge for 2012: bind into national legislation sensible constraints on elected euro area ministers of finance, or face imminently a future that will probably be very unpleasant.  View Article




© Graham Bishop

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