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03 April 2014

This week in "Brussels"

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Articles from 27 March 2014 - 03 April 2014


Expert Group publishes final report on debt redemption fund and eurobills
The final report concludes that both a debt redemption fund/pact and eurobills would have merits in stabilising government debt markets, supporting monetary policy transmission and promoting financial stability and integration, although in different ways and with different long-term implications.  View Article
SRM: Council confirms deal with EP
The Perm Reps Committee approved, on behalf of the Council, a compromise agreed with the EP on a regulation establishing a single resolution mechanism for failing banks. This enables the Parliament to approve the text at first reading before it adjourns for elections in May.  View Article
Bloomberg: EU bank-structure rule hits opposition from ministers at informal ECOFIN summit
The European Union’s bid to set out structure rules for about 30 of the bloc’s largest banks hit an early stumbling block as finance ministers challenged aspects of the plans that they said could harm lending to businesses.  View Article
European Banking Authority publishes final draft Technical Standards on liquidity requirements
The EBA published ITS and RTS related to liquidity requirements: ITS on currencies for which the justified demand for liquid assets exceeds their availability; RTS on derogations for eligible currencies; and ITS listing the currencies with an extremely narrow definition of CB eligibility.  View Article
EBA publishes final draft Technical Standards on additional collateral outflows
The EBA published its final draft RTS on additional collateral outflows. These final draft RTS aim at strengthening resilience against liquidity risk in the EU banking sector and will be part of the EU Single Rulebook aimed at enhancing regulatory harmonisation across the sector.  View Article
EBA publishes final draft technical standards on prudent valuation
This RTS lays out the requirements related to prudent valuation adjustments of fair valued positions. The objective of these draft RTS is to determine prudent values that can achieve an appropriate degree of certainty while taking into account the dynamic nature of trading book positions.   View Article
Bundesbank/Dombret: Regulatory reform - unresolved issues and the need for international cooperation
Regulatory reform has to continue, argued Andreas Dombret, highlighting outstanding issues such as "too-big-to-fail" banks, shadow banking, OTC derivatives and accounting standards. He stressed the need for international cooperation.  View Article


ECB/Cœuré: The known unknowns of central clearing
Benoît Cœuré argued that central clearing will make the global financial system safer, but also has the potential to redistribute risk. Its overall systemic effect will thus depend on the incentives for risk-taking and central clearing that accompany risk redistribution.  View Article
Report of the OTC Derivatives Regulators Group on cross-border implementation issues
The group, focused on derivatives regulation, said in their report that it is working on a number of remaining cross-border implementation issues, including substituted compliance, clearing determinations, margin requirements and access to trade repository data.  View Article
Markets Media: OTC marketplace takes shape
Adapting a CLOB to trading on SEFs presents significant obstacles: The idea of trading swaps in a CLOB, which essentially alters relationship with counterparties, is a somewhat new concept.  View Article
Eurofi: Financial Market Infrastructure reforms
This Eurofi High Level Seminar Paper on Financial Market Infrastructure argues that defining an appropriate recovery and resolution framework for Financial Market Infrastructures (FMIs) is the main forthcoming challenge following the adoption of EMIR and the CSDR.  View Article
BIS: The standardised approach for measuring counterparty credit risk exposures
The Basel Committee's final document on 'the standardised approach for measuring counterparty credit risk exposures' includes a comprehensive, non-modelled approach for measuring counterparty credit risk associated with OTC derivatives, exchange-traded derivatives, and long settlement transactions.  View Article
ESMA publishes Trade Repository Supervision Work Plan 2014
ESMA has published a summary of its 2014 supervisory work plan in relation to trade repositories (TRs) with the aim of enhancing the transparency of its actions regarding TRs in the European Union.  View Article
Bank of England: Shadow banks and macroeconomic instability
Authors develop a macroeconomic model in which commercial banks can offload risky loans to a ‘shadow’ banking sector, and financial intermediaries trade in securitised assets. They analyse the responses of aggregate activity, credit supply and credit spreads to business cycle and financial shocks.   View Article
SIFMA and FSR comment on dissemination of asset-level data by ABS issuers
SIFMA and the Financial Services Roundtable expressed significant concerns with the SEC’s February staff memorandum that suggests a framework under which securitisation issuers would disseminate asset-level and other information to investors and potential investors.  View Article

Insurance Commission takes stricter line on matching adjustment
Recently released draft Solvency II delegated acts from the European Commission propose a treatment of asset portfolios under the matching adjustment that is tougher than expected and would impose increased capital requirements on insurers.  View Article
EIOPA's opinion on use of common application packages for internal models
The EIOPA’s opinion is a response to the concerns from EU insurance groups about the diversity of information provided by undertakings in order to get approval to use an internal model under the Solvency II framework.  View Article
EIOPA consults on Set 1 of its Implementing Technical Standards for Solvency II
The European Insurance and Occupational Pensions Authority invites market participants and (re)insurance stakeholders to provide their feedback on the first set of draft Implementing Technical Standards (ITS) for Solvency II. The consultation closes on 30 June, 2014.  View Article
EIOPA consults on operational functioning of colleges of supervisors
EIOPA invites market participants and (re)insurance stakeholders to provide their feedback on the draft Guidelines on the Operational Functioning of Colleges of Supervisors. The consultation closes on 30 June, 2014.  View Article Solvency II proposals cause confusion on non-euro extrapolation
A draft of the Solvency II delegated acts circulated informally within the industry suggests the last liquid point for non-euro currencies could shift, making it harder for insurers to hedge long-term liabilities.  View Article International capital standards expected to merge, say insurers
The converging work of the IAIS on two international capital standards is leading insurers to question whether one standard will eventually replace the other, raising concerns about the care being taken by the IAIS over the first of the standards to come into effect.  View Article

Asset Management

Commission adopts legislative proposal for new rules on occupational pension funds (IORPs)
The proposal aims at improving governance and transparency of these funds in Europe, promoting cross-border activity, and helping long-term investment.  View Article
Comments on revised IORP Directive: Insurance Europe, NAPF, PensionsEurope
The organisations welcomed the Commission's proposal for a review of the IORPD but noted several areas of deficiency. The NAPF was deeply concerned by the lack of rigour behind the new IORP Directive proposal – particularly the absence of an approved impact assessment.   View Article
Barnier: Introductory remarks at the informal ECOFIN Council
Barnier said the Commission was ready to cooperate with EU Finance Ministers, the ECB and EIB to tackle Europe's needs and problems. He cited i.a. a European savings product that could be used to facilitate SME funding and the categorisation of "good" and "bad" securitisation.  View Article
Comments on Commission report on long-term financing: ACCA, AFME, EBF, Insurance Europe, NAPF, TheCityUK
The organisations called i.a. for long-term financing solutions for sustainable economic growth, high-quality securitisation, and enhancements to capital markets. They stressed the need for global coordination on initiatives, and urged the next Commission to promote a regulatory climate that supports long-term growth.  View Article
Robert Schuman Foundation/Maystadt: Investment in and the financing of the European economy
As the European Commission adopted a communication on the long term financing of the European economy on 27 March 2014, Philippe Maystadt, former President of the EIB, argues for the Robert Schuman Foundation that the European Union is facing an investment crisis.  View Article

Corporate Governance/Accounting

EP Plenary: Reforming EU audit services to restore investors' confidence
A draft agreement with the Council of Ministers on legislation to open up the EU audit services market beyond the dominant "Big Four" firms and remedy auditing weaknesses revealed by the financial crisis was endorsed by Parliament. (Includes ACCA comment.)  View Article
BIS: Basel Committee's guidance on external audits of banks
The Basel Committee on Banking Supervision has published supervisory guidance on external audits of banks. The document describes supervisory expectations regarding audit quality and how that relates to the work of the external auditor and of the audit Committee in a bank.  View Article
ACCA: Auditors must act to halt waste of £billions of taxpayers’ money
Public audit has a crucial role to play in both preventing ongoing waste of taxpayer money and boosting society’s trust and confidence about how governments spend public money, say the world’s audit chiefs in a new ACCA report "Breaking out: public audit’s new role in a post-crash world".  View Article
ECIIA: Corporate governance reform not needed
According to Ashley Fox MEP, European Parliament’s Rapporteur on corporate governance in financial institutions, Europe’s corporate governance regime could be improved by the better enforcement of existing regulations, rather than through the creation of additional rules.  View Article
IASB: Improvements to the accounting for changes in own credit
Patricia McConnell, a member of the IASB, provides her perspectives on the IASB’s changes to accounting for own credit, saying that those who prefer to bifurcate complex financial liabilities rather than carry the whole instrument at fair value can continue to do so.  View Article
EFRAG expresses concern prior to publication of amendments to IAS 28
EFRAG has sent a letter to the IASB expressing concern that forthcoming amendments to IAS 28 would result in conflicts with existing IFRS, economically similar transactions being accounted for differently and deferred recognition of losses.   View Article

Financial Services Policy

EP and Council back Commission’s proposal on KID covering retail investments
Draft EU rules on key information small investors should be given before signing a contract were agreed by Parliament's negotiators and Council of Ministers representatives. Parliament will put the agreed rules to a plenary vote in April. (Includes comments by Barnier and InsuranceEurope.)  View Article
High-level Group at work on future financing of the EU
The high level group on own resources holds its first meeting in Brussels today under the chairmanship of Mario Monti, former Italian Prime Minister and European Commissioner.  View Article
Barnier: Turning a corner in financial services
In his closing remarks at the EUROFI High Level Seminar, Michel Barnier commended the progress made in financial regulation both in Europe and on a global level and defended the Commission's proposal to revive a sustainable securitisation markets to ensure long-term financing.  View Article
ESMA: European Supervisory Authorities highlight cross-sectoral risks
The Joint Committee of the European Supervisory Authorities (ESAs) published its third bi-annual report on risks and vulnerabilities in the European Union's financial system.  View Article
FSB Plenary meets in London
At its meeting in London, the Financial Stability Board (FSB) discussed vulnerabilities affecting the global financial system and reviewed work plans for completing core financial reforms.   View Article


IMF: Global Financial Stability Report
Western banking regulations could be 'mutually destructive' claims the international Monetary Fund's report, says policymakers have failed to stabilise the sector and protect taxpayers from banks "too big to fail".  View Article

Graham Bishop’s Articles and Speeches

Graham Bishop's presentation to ECON Committee of European Parliament: Eurobills
Graham Bishop presented his ideas on a Eurobill variant that is based on a pro rata guarantee and thus would be politically and legally feasible: a Temporary Eurobill Fund (TEF).  View Article
Graham Bishop's Blog: ECON Hearing on "Final Report of Expert Group on Debt Redemption Fund and Eurobills"
Judging by the questioning from MEPs, this ECON feels quite proprietorial about the Group’s work as it was only set up at their insistence. Parliament could push the Commission for a policy follow-up later this year - a Temporary Eurobill Fund (TEF) seems a step closer now.  View Article
Graham Bishop's Blog: Final Report of European Commission “Expert Group on Debt Redemption Fund and Eurobills”
The Expert Group was set up last June with a specific mandate to analyse the possibilities, rather than come forward with a recommendation. Graham Bishop was honoured to be part of this Group.  View Article
Financial World: SRM - Deal cobbled together (Graham Bishop article)
Graham Bishop examines why the deal on the single resolution mechanism, which took 16 hours of overnight talks, makes ultimate sense for the European Union.  View Article

© Graham Bishop

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