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06 March 2014

This week in "Brussels"

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Articles from 27 February 2014 - 06 March 2014


Commission adopts new standards to increase transparency over bankers' pay and risk profiles
The Commission adopted RTS on criteria to identify categories of staff whose professional activities have a material impact on an institution's risk profile. The RTS will ensure that the CRD remuneration rules are applied consistently across the EU, however they risk provoking a backlash from the EP.   View Article
Council approves new rules on deposit guarantee schemes
The Council adopted its position at first reading on a draft directive aimed at further harmonising EU rules on deposit guarantee schemes and enhancing depositor protection. The coverage level was increased from €20,000 to €100,000 and the pay-out deadline reduced to 20 working days.  View Article
ECON Committee: Eurozone has come far, but strong Banking Union still needed, Draghi tells MEPs
Failing banks still need a "strong and swift" EU decision-making system, and the ECB supervisor alone should decide when they are in danger of becoming unviable, Draghi told the ECON Committee.  View Article
ECON Committee: MEPs lay out final offer on bank single resolution mechanism
The lead MEPs in charge of the SRM have drafted texts on the crucial issues for Parliament's April plenary vote. They restate that they will not sign up to a system which establishes a mechanism which is "unfit for purpose" and could potentially jeopardise Banking Union.  View Article
President Schulz launches tough attack on President Barroso for his complacency in defending the treaties
Schulz expressed his regret that the Commission, while expressing reservations on the IGA, had not taken a firm position objecting to the Council's unilateral decision.  View Article
Bloomberg: Euro banks in dark on payment rules for resolution fund
EU Member States are tussling with the EP and among themselves over how money should be paid in to the SRF. "It all seems to be getting far too complicated", said ECON chair Sharon Bowles.  View Article
FT: S&P says new bank bail-in plans could lead to downgrades for European lenders
Standard & Poor's has said that the introduction of new 'recovery and resolution' rules – under which banks will be rescued by bondholder 'bail-ins' rather than state bailouts – would negatively affect its ratings on major European lenders.   View Article
Lautenschläger, Schäuble question risk-free treatment of sovereign debt
ECB Executive Board member Sabine Lautenschläger and German Finance Minister Wolfgang Schäuble have both expressed concerns about the risk-free treatment of government bonds.   View Article
BCBS/Ingves: Restoring confidence in banks
Ingves outlined why confidence had been lost in the past, then highlighted what the Basel Committee is doing to help restore confidence. Until the question marks on the reliability and comparability of RWA calculations are resolved, confidence in capital ratios cannot be fully restored, he said.  View Article
BIS/Caruana: Global liquidity - Where it stands, and why it matters
Caruana explained how the challenges facing the global financial system can be monitored and addressed.  View Article
EBF publishes responses to EBA consultations
EBF published its responses to the following EBA consultations: 1) disclosure for the leverage ratio; 2) own funds (part IV); 3) guidelines related to the methodology for the identification of G-SIIs; and 4) methodology for the assessment of liquidity and funding risk under supervisory review.  View Article
EBA reports on impact of possible leverage ratio definitions
The report provides a policy analysis and a quantitative assessment of the impact that would derive from aligning the current CRR definitions of the leverage ratio's exposure measure to the revised standard published by the BCBS in January 2014 (Basel III).  View Article
£75 trillion payment systems industry to have new regulator – FCA will open the market to new entrants to improve competition
A new regulator to oversee UK payment systems will be introduced by April 2015. Payment systems make every payment to or from UK consumers possible, by allowing funds to be transferred between people and businesses. The FCA requests views on the key issues by 15 April, 2014.  View Article


EBA consults on draft RTS on the margin periods for risk used for the treatment of clearing members' exposures to clients
EBA launched a consultation on draft RTS aimed at specifying the minimum margin periods of risk (MPOR) that institutions acting as clearing members may use for the calculation of their capital requirements for exposures to clients. Deadline for comments is 9 May, 2014.  View Article
IFR: Options trading error heightens clearing fears
The latest clearing debacle in Korea is a stark reminder of the potentially risky path regulators have set upon as they mandate large chunks of the $693 trillion OTC derivatives market for central clearing. IOSCO also warned of rising CCP risk in its global outlook.  View Article
FN: EU hits back at UK in benchmark battle
The Commission has dismissed UK government concerns on its proposal for financial benchmarks, as the battle over the reach of post-crisis EU regulations continues.  View Article
Responses to FSB's consultation on approaches to aggregate OTC derivatives data: EACT
EACT repeated its plea that the opportunity of the FSB work should be used to bring more consistency in derivatives reporting at international level.  View Article
Bloomberg: BoE seeks derivatives pact to prevent repeat of Lehman cascade
The Bank of England is seeking a global pact among banks to suspend default clauses in some derivatives contracts during a crisis, in a bid to ward off bank death spirals that cascade through the financial system.  View Article
FN: Mid-cap trades threatened by dark pool rules
More than one quarter of mid-cap stocks would have been hit by new European rules designed to limit trading in private share-trading venues known as dark pools if they had been in force last year.  View Article Prop shops to rival dealer market-makers on broker SEFs
Rules that require SEFs to offer impartial access are set to bring years of over-the-counter market tradition to an end, by allowing hedge funds, proprietary traders and asset managers into the clubby, interdealer portion of the market.  View Article
ICMA ERC Guide to best practice in the European repo market
The updated Guide, adopted with the approval of the IRC Committee, sets out standards for the orderly trading and settlement of repos. The Guide also codifies market conventions, usually in response to queries from market participants.  View Article


European Commission: Insurance Contract Law - Expert report pinpoints obstacles to cross-border trade
The report finds that differences in contract laws impede the cross-border supply of insurance products by increasing costs, creating legal uncertainty and making it hard for consumers and businesses to take out insurance in other EU Member States.  View Article
EIOPA/Bernardino: The Ambition of EIOPA - Making a difference for Europe and its citizens
Bernardino laid out EIOPA's vision and its ambitions for the future. Following the publication of the Solvency II level 2 delegated acts by the Commission in the summer, EIOPA will deliver, during 2014 and 2015, the technical standards and guidelines necessary to finalise the regulatory work.  View Article
EIOPA/Bernardino: Global Capital Standards - Laying down the future for global insurance supervision
"It is fundamental to achieve more comparability and a truly level playing field between the main competitors in the world insurance market. This can only be done if we work at the worldwide level in developing a more convergent global regulation and supervision."  View Article National regulators to consult on additional insurer reporting requirements
Europe's national regulators are gearing up to consult insurers on reporting requirements that go beyond those mandated by Solvency II, which stakeholder groups warn may undermine the goal of harmonised regulatory reporting across the EU.  View Article Insurers wrestle with EMIR reporting challenge
Given the crucial role that derivatives play in managing the risk of the insurance industry, few European insurers have been able to ignore new rules on reporting derivatives trades. But not everyone has been prepared for the requirements.  View Article

Asset Management

IPE: Leaked draft of IORP II Directive sets out to support long-term investment; reveals changes for cross-border schemes
A leaked copy of the Commission's long-awaited proposal for revising the IORPD sets out to "strengthen the capacity of IORPs to invest in assets with a long-term economic profile" and falls "well within the scope of the Commission's agenda towards a stronger sector to support growth".   View Article
IPE: Controlling the sale of pension products
Any chance for a tightening of rules controlling the sale of pension products looks lower than ever, if the EP in plenary session at Strasbourg - dealing with the Insurance Mediation Directive - is anything to go by.  View Article
FT: EU countries seek to rewrite deal on fund manager pay
11 EU countries and three political groups in the EP are seeking to rewrite a legislative deal struck last week, amid fears that the fine print on pay will affect the non-EU operations of fund groups. Even at this late stage, their combined votes are potentially enough to block a deal.  View Article
Fitch: More blending likely for asset manager platforms
The potential for increased equity valuation multiples and better access to retail investors could lead alternative asset managers (AAMs) to look for more opportunities to acquire their traditional manager counterparts, according to Fitch Ratings.  View Article
The Trade: LEIs fail to gain traction
Regulators' mixed messages on the requirement of legal entity identifiers for trade reporting are believed to be behind weak adoption of the 20-digit identity code. ESMA said the LEI is not specifically required under EMIR, while the FCA has interpreted it differently.  View Article
Hedgeweek: Hedge fund industry performance attracts institutional investors
Research from BlackRock suggests that low interest rates and unfunded pension fund liabilities are encouraging institutional investors to re-think allocations to traditional assets such as equities and bonds. A wave of new money could flow into hedge funds after strong recent industry performance.  View Article

Corporate Governance/Accounting

FEE: Opening a discussion - The future of audit and assurance
The discussion paper lays out initial observations which could result in potential longer-term developments in audit, assurance and other services. FEE is seeking answers from stakeholders and interested parties by 30 June, 2014.  View Article
Deloitte commented on credit and debit valuation adjustments
Deloitte has published its comment letter to the IVSC's Standards Board ED 'Credit and Debit Valuation Adjustments'. As auditors, Deloitte's primary interest was how this paper interacts with the fair value measurement requirements as set out in IFRSs and US GAAP.  View Article
IFAC: Developing and reporting supplementary financial measures
PAIB Committee has issued its International Good Practice Guidance, "Developing and Reporting Supplementary Financial Measures". Comments are requested by May 26, 2014.  View Article

Financial Services Policy

IMCO study: Consumer Protection Aspects of Financial Services
In the EU, mis-selling of financial products has resulted in significant consumer harm. The overarching recommendation of this study is that consumer protection in financial markets should be strengthened and consumers' financial capabilities should be raised.  View Article
EBA publishes consumer trends report
This annual report gives an overview of the analysis carried out in the areas of consumer protection and financial innovation. The report identifies the consumer issues that may arise, or have arisen, from these trends, and describes the approaches the EBA will be taking in 2014 to address them.   View Article

Graham Bishop’s Articles and Speeches

Financial World: Too little, too late, too light (Graham Bishop article)
Graham Bishop reviews the reactions to the European Commission's banking reform proposals.  View Article
European Integration Monitor - February 2014
The driving forces of politics, finance, economics and budgets are a powerful cocktail that will intensify in the years ahead.  View Article

© Graham Bishop

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