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06 February 2014

This week in "Brussels"

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Articles from 30 January 2014 - 06 February 2014


Plenary Session: Winding up banks - EP reconfirms mandate and criticises Council for timewasting
Parliament's negotiators on the proposed SRM for ailing banks won its support for the line they have taken in talks with EU Member States on the last block of legislation needed to establish an EU Banking Union. (Includes EP group comments.)  View Article
Plenary Session: Total cross-party unity against bad deal on bank resolution
MEPs across the political spectrum have refused to back a bad deal on the arrangements for winding up ailing banks. They said the Member States' position undermined the core aim of ensuring that taxpayers were not first in line to pay when banks ran into trouble.  View Article
ECON Committee: No strong bank supervision without single bank resolution system - ECB/Lautenschläger
The new bank EU supervisory structure will do away with "biased national practices", but the system for dealing with troubled banks must be ambitious, too. "Banking Union needs two legs to be strong", said Lautenschläger.  View Article
CEPS/Valiante: Framing Banking Union in the euro area - Some empirical evidence
This paper proposes two remedies to deal with moral hazard in a common currency area: a common (unlimited) financial backstop to a privately-funded recapitalisation/resolution fund; and a blanket prohibition on state aids.  View Article
ECB makes progress with AQR, confirms stress test parameters for comprehensive assessment
The collection of the first set of data has been completed. Portfolio selection closes in mid-February. As announced by the EBA, the capital thresholds for the baseline and adverse scenarios will be 8 per cent and 5.5 per cent CET1 capital, respectively.  View Article
EBA announces key features of the 2014 EU-wide stress test
EBA announced the key components of the forthcoming 2014 EU-wide stress test that will be conducted on a wide sample of EU banks. These EU-wide stress tests are to help supervisors assess the resilience of financial institutions in the EU to adverse market developments. (Includes AGB/Fitch comments.)  View Article
Commissioner Barnier welcomes EP vote on additional six-month transition period for non-SEPA payments
Barnier called on Member States to assume their responsibilities fully, and accelerate and intensify efforts to migrate to SEPA so that all can enjoy faster and cheaper payments across Europe. The transition period will not be extended after 1 August, he said.  View Article
ECB endorses new guide to help assess security of internet payments
"The Assessment guide for the security of internet payments", prepared by the European Forum on the Security of Retail Payments, covers governance, risk management and mitigation, and protection of sensitive data.  View Article
EPC Newsletter: Focus on legal and regulatory developments impacting the euro payments market
This newsletter offers information on the SEPA and EPC activities, looking at the latest related developments and market reactions. It also includes the EPC's analysis of the Commission's PSD2 proposal.  View Article
BIS: Trade finance - Developments and issues
This report reviews the available data sources and examines how ongoing structural changes may affect the market's future resilience.  View Article
BBA/Browne: The EU is good for us – but it needs to change
The BBA has some concerns about the prospect of Banking Union, frequent attempts to harmonise retail banking, and the way the 'Brussels machine' draws up legislation.   View Article


Plenary Session: Financial market manipulators may face at least four years in jail
Judges imposing their countries' maximum penalties for serious offences such as manipulating the Libor benchmark interest rate would have to stipulate at least four years in jail, under draft rules in the Market Abuse Directive approved by the EP. (Includes Commission/EP groups comments.)  View Article
Comments on final agreement on market abuse rules: ECON/Bowles, S&D, ALDE, Greens
Commenting on the approved legislation that will impose criminal sanctions on insider dealing and market manipulation, Sharon Bowles said that much had been improved, but that there was always room for improvement.  View Article
ESAs consult on draft ITS on the mapping of ECAIs' credit assessments
The Joint Committee of the European Supervisory Authorities launched a consultation on draft ITS on the mapping of the credit assessments to risk weights of External Credit Assessment Institution (ECAIs). The consultation runs until 5 May, 2014.  View Article
ESAs publish final Report on mechanistic references to credit ratings in the ESAs' guidelines and recommendations
In accordance with the Credit Rating Agencies Regulation, EBA, ESMA and EIOPA have reviewed all their existing guidelines and recommendations in order to identify, and where appropriate remove, references to external credit ratings that could trigger sole or mechanistic reliance on such ratings.  View Article
FSB Consultation Paper: Feasibility study on approaches to aggregate OTC derivatives data
The FSB is attempting to assess whether implementation of OTC derivatives reform is sufficient to improve transparency in the derivatives markets, mitigate systemic risk, and protect against market abuse. Responses are requested by 28 February, 2014.  View Article
Reuters: US, EU pledge better cooperation on derivatives reform
"When new initiatives are finalised by either jurisdiction, staff (at regulators) will seek to reach consensus in as many areas as possible", a joint statement from the US and EU regulators said.  View Article
FN: How the EU can avoid own goals on swaps reform
Under MiFID, ESMA must work out the technicalities of how trading of OTC derivatives is to move to electronic venues. ESMA is expected to put a consultation paper to the industry by May.  View Article
Peter Fredriksson: The growth of 'twilight pools'
Writing for TABB Forum, Fredriksson says that an increasing number of market operators are now starting to adopt a "twilight pool" approach, where the level of trading venue opacity is controlled to match pre-defined conditions.  View Article
ISDA: Adverse liquidity effects of the EU uncovered sovereign CDS ban
In its report, ISDA examines the liquidity impact of the regulation one year after implementation. Amongst other conclusions, it reveals that the ban on uncovered sovereign CDS has had a significant impact on key hedging vehicles of sovereign risk.  View Article
Bloomberg: ICAP seeks CFTC oversight of London swap-trading amid US suit
ICAP is seeking US oversight of an overseas swap-trading platform a month after Wall Street lobbying groups sued the CFTC trying to curb the agency's international reach.  View Article


EIOPA sets up timeline for delivery of Solvency II ITS and Guidelines
The overall goal of the project is to deliver the regulatory and supervisory framework for the technical implementation of the Solvency II regime from the first day of application, 1 January 2016.   View Article
EIOPA: Report on good practices on comparison websites
This Report summarises the findings of EIOPA with the aim of establishing good practices on comparison websites.   View Article Commission proposals to ease look-through rules 'require clarification'
The Commission's proposals to ease Solvency II's strict look-through rules for investments in collective funds are unclear, and could be detrimental to insurers' investment plans, legal experts and asset managers are warning.  View Article Asset managers lure insurers with new exchange-traded funds
Asset managers are refining their ETF products in a bid to attract insurers seeking to invest in a wider range of credit securities.  View Article Insurers hunt for 'scale premium' in infrastructure assets
Insurers will need to invest in large, long-term infrastructure projects to achieve desired returns, as burgeoning demand is forcing down yields on smaller projects.  View Article
Responses to IAIS BCR consultation: GFIA, GIAJ, Insurance Europe
On 16 December, IAIS released for public consultation proposed options for the development of basic capital requirements for G-SIIs. Insurance Europe believes the BCR need to strike the correct balance between risk-sensitivity and complexity.  View Article
Comments on FSB consultation on Guidance on Supervisory Interaction with Financial Institutions on Risk Culture: GFIA, Insurance Europe
On 18 November, the FSB issued its consultation, "Increasing the Intensity and Effectiveness of Supervision: Guidance on Supervisory Interaction with Financial Institutions on Risk Culture".  View Article

Asset Management

Responses to ESMA's consultation on proposals to amend collateral diversification rules for ETFs and other UCITS: EFAMA, ISLA
On 20 December, ESMA sought stakeholders' views on the merits of revising the requirements on collateral diversification and, if necessary, on the best ways to address stakeholders' concerns while retaining the appropriate level of investor protection.  View Article
FCA: General guidance on the AIFM Remuneration Code
The FCA published its final guidance on the AIFMD remuneration regime. This guidance, with immediate effect, sets out how the AIFM Remuneration Code should be interpreted and applied by alternative investment fund managers.   View Article

Corporate Governance/Accounting

Commissioner Barnier prolongs Philippe Maystadt's mission with a view to ensuring adequate and timely follow-up of EFRAG reform
Barnier said that the EU needed a sound framework for the development of high quality accounting standards, and that the extension of Maystadt's mission would ensure that the system for the adoption of IFRS was effective and enabled the EU to play its full role in the debate.   View Article
FEE: ECB comprehensive assessment of 124 European banks - Possible consequences for the accountancy profession
FEE issued a letter to the ECB which recommended that the ECB address certain issues before executing the ECB Comprehensive Assessment.  View Article
IASB/Hoogervorst: 'Defining profit or loss and OCI... can it be done?'
Speaking in Tokyo, Hoogervorst gave an update on three standards in the making - revenue recognition, leases and financial instruments. He went on to talk about the feedback received from the review of the Conceptual Framework.  View Article
ESMA publishes comments on IFRS IC's tentative agenda on IAS 8, IAS 39 and IFRS 10
ESMA has issued its comment letters to IFRS IC's tentative agenda on: the distinction between a change in an accounting policy and a change in an accounting estimate (IAS 8); accounting for term-structured repo transactions (IAS 39); and a definition of investment related services (IFRS 10).  View Article
IFAC and ICAS highlight financial reporting challenges for IASB
The joint IFAC/ICAS paper, 'Do We Need a Roadmap for Financial Reporting?', seeks to align the theoretical considerations with the practical ones, and generate debate and discussion that can assist the IASB as it begins to consider revisions to the existing Conceptual Framework.  View Article
SEC plans to consider whether global standards are achievable
The SEC has published a draft Strategic Plan for the 2014-2018 period. According to one initiative described, the SEC plans to consider whether a single set of high-quality global accounting standards is achievable.  View Article


US-EU Financial Markets Regulatory Dialogue (FMRD)
EU/US officials held productive discussions on key G20 commitments, including the implementation of Basel III capital and liquidity rules, the status of implementation of derivatives reforms, the development of resolution regimes and strategies, and structural proposals in their banking systems.   View Article

European Council/Parliament

Interventions by Minister Venizelos and Commissioner Šemeta at the EP Plenary on the need to approve an FTT
"The Presidency of this semester will make every effort to bring this issue forward again and make it one of our policy priorities, so that there can be a specific and tangible result", said Venizelos. Šemeta said it was now time to "engage, compromise and deliver" on the FTT.  View Article

Graham Bishop’s Articles and Speeches

Financial World: All change in 2014 (Graham Bishop article)
This year will usher in a new European Commission, President and Parliament, all of which will have important consequences for investors, says Graham Bishop.  View Article

© Graham Bishop

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