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07 February 2019

This week in "Brussels"



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  Articles from 31 January 2019 - 07 February 2019

  Banking Union
 
 
ECB 2018 stress test analysis shows improved capital basis of significant euro area banks
Banks directly supervised by ECB show improved capital basis with higher capital buffers than in 2016. The average final CET1 for all 87 banks after adverse stress scenario stood at 10.1%, up from 8.8% in 2016.   View Article
ECB Banking Supervision conducts sensitivity analysis of liquidity risk as its 2019 stress test
The European Central Bank (ECB) has launched a sensitivity analysis of liquidity risk to assess the ability of the banks it directly supervises to handle idiosyncratic liquidity shocks. The exercise will constitute the supervisory stress test of 2019.   View Article
BIS: An examination of initial experience with the global systemically important bank framework
This paper presents an analysis of experience to date with the G-SIB framework. The aim has been to investigate whether the behaviour of the indicators for the G-SIBs and non-G-SIBs with a Basel III leverage ratio exposure measure greater than EUR 200 billion since the framework’s implementation has been consistent with its objectives.   View Article
BIS: Jens Weidmann: The future of the European monetary union
Speech by Dr Jens Weidmann, President of the Deutsche Bundesbank and Chairman of the Board of Directors of the Bank for International Settlements, in which he also shares views on completing of the banking union.  View Article
New Europe: Eight banks formed European government bonds cartel EU watchdog finds
The European Union’s antitrust authority found and charged eight banks for operating a cartel while trading Eurozone government bonds between 2007 and 2012.  View Article
ECB working paper: Markets, banks, and shadow banks
This paper presents a model that studies the effects of bank capital regulation on the structure and risk of the financial system where direct market finance, regulated banks, and shadow banks coexist. The model builds on the idea that financial intermediaries can reduce the probability of default of their loans by screening their borrowers at a cost.   View Article
ECB occasional paper: Availability of high-quality liquid assets and monetary policy operations: an analysis for the euro area
This paper provides an overview of supply and demand factors influencing the availability of euro-denominated debt instruments that qualify as high-quality liquid assets (HQLA) in the euro area. The paper estimates the supply of HQLA issued by the public and private sectors as well as the aggregated impact of Eurosystem monetary policy operations on the amount and composition of HQLA held by banks and other economic agents.  View Article
ECB working paper: A dynamic model of bank behaviour under multiple regulatory constraints
This paper develops a structural model of bank behaviour that provides a microeconomic foundation for the observed fluctuations in bank asset and liability structures and for the response to changes in regulatory capital and liquidity requirements or economic shocks.   View Article
EBF: Technical Expert Group on Sustainable Finance – EBR response
The EBF answered to the Technical Expert Group (TEG) questionnaire on their report on climate-related disclosures.   View Article
ECB: Results of the December 2018 survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives markets
Credit terms tightened for all counterparts, but non-price terms offered to hedge funds remained stable. Banks and dealers increased resources and attention dedicated to managing concentrated credit exposures. Liquidity and general trading conditions for underlying collateral deteriorated slightly. Reduction in market-making activities was particularly visible for other government, sub-national and supra-national bonds, high-quality financial corporate bonds and derivatives  View Article
 
  Capital Markets Union
 
 
ESMA agrees no-deal Brexit MoUs with the Bank of England for recognition of UK CCPs and the UK CSD
ESMA agreed MoUs with the Bank of England for the recognition of CCPs and of CSDs established in the UK, that would take effect should the UK leave the EU without a withdrawal agreement, the no-deal Brexit scenario.  View Article
ESMA and EU securities regulators agree no-deal Brexit MoUs with FCA
ESMA and European securities regulators have agreed Memoranda of Understanding with the Financial Conduct Authority of the United Kingdom.  View Article
ESMA clarifies the reporting and handling of derivatives data in case of no-deal Brexit
ESMA issued a public statement on how derivatives data reported under EMIR, should be handled in the event of the UK leaving the EU without a withdrawal agreement, the no-deal Brexit scenario.   View Article
ESMA Q&As clarify prospectus and transparency rules in case of no-deal Brexit
ESMA issued three Questions and Answers regarding the Prospectus Directive and the Transparency Directive.  View Article
ESMA sets out use of UK data in ESMA databases under a no-deal Brexit
ESMA published a statement on the use of UK data in ESMA databases and the performance of MiFID II calculations under a no-deal Brexit.  View Article
ICMA publishes briefing note on ESMA statement on the use of UK data in ESMA databases and performance of MiFID II calculations
ESMA published a statement on the use of UK data in ESMA databases and the performance of MiFID II calculations under a no-deal Brexit.  View Article
FCA approach to MiFID transparency calculations
FCA welcomes the statement published by ESMA on the use of UK data in ESMA databases and the performance of MiFID II calculations in the EU27 if the UK leaves the EU without a withdrawal agreement (a no-deal scenario).   View Article
MiFID II: ESMA publishes data for the systematic internaliser calculations for equity, equity-like instruments and bonds
ESMA published data for the systematic internaliser calculations for equity, equity-like instruments and bonds under the Markets in Financial Instruments Directive and Regulation.  View Article
MiFID II: ESMA makes new bond liquidity data available
ESMA made available new data for bonds subject to the pre- and post-trade requirements of the Markets in Financial Instruments Directive and Regulation through its data register.  View Article
ESMA updates Q&A on MiFIR data reporting
The purpose of this document is to promote common supervisory approaches and practices in the application of MiFIR.  View Article
ESMA updates its Q&As on MiFID II and MIFIR market structure and transparency topics
The purpose of these Q&As is to promote common supervisory approaches and practices in the application of MiFID II and MiFIR.  View Article
CEPS: MiFID II is working
Karel Lannoo, General Manager of ECMI, writes that one year on, MiFID II is working and firms have adapted to the burdensome new set of rules.  View Article
European Commission: Simpler EU rules for derivatives will reduce costs and regulatory burdens for market participants
The Commission welcomes the political agreement reached by the European Parliament and EU Member States on the targeted reform of the European Market Infrastructure Regulation.  View Article
ESMA updates Q&A on EMIR data reporting
The purpose of this document is to promote common supervisory approaches and practices in the application of EMIR.  View Article
ESMA issues statement to address upcoming EMIR Refit implementation issues
The European Securities and Markets Authority published a statement addressing EMIR Refit implementation.  View Article
European Council: Capital markets union: deal on updated rules for financial derivative products and clearing
EU institutions are simplifying rules applying to non-financial counterparties, small financial counterparties and pension funds using financial derivative products.  View Article
FIA-IIF-ISDA response to FSB CCP Equity DP
The associations believe that loss allocation and recapitalization need to be looked at separately and that whoever provides this capital should either receive equity in the CCP or the proceeds from any sale.  View Article
ESMA publishes Opinion and Q&A on disclosure technical standards under the Securitisation Regulation
ESMA published an Opinion containing a revised set of draft regulatory and implementing technical standards under the Securitisation Regulation, which concern the details of a securitisation to be published by the originator, sponsor and Securitisation Special Purpose Entity.  View Article
ESMA publishes supervisory briefing on the supervision of non-EU branches of EU firms
The supervisory briefing has been designed to assist national competent authorities (NCAs) in their supervision of the establishment by EU firms of branches in non-EU countries.  View Article
FSB publishes Global Monitoring Report on Non-Bank Financial Intermediation 2018
The report presents the results of the FSB’s eighth annual monitoring exercise that assesses global trends and risks from non-bank financial intermediation. It covers data up to end-2017 from 29 jurisdictions, which together represent over 80% of global GDP.  View Article
ESMA publishes guidelines on supervisory reporting for credit rating agencies
The Guidelines amend some sections of ESMA’s 2015 Guidelines on the reporting of periodic information to ensure they continue to support ESMA’s supervisory processes in an efficient and effective manner.  View Article
ESMA sets out 2019 priorities for supervisory convergence
ESMA published its 2019 Supervisory Convergence Work Programme, which sets out ESMA’s work streams to promote sound, efficient and consistent supervision across the European Union.   View Article
The Economist: Conflicts in the credit-derivatives market threaten to undermine it
A ruling on the exact meaning of a complex contract surprises markets.  View Article
ISDA: A solution for the IM big bang
ISDA Chief Executive Officer Scott O'Malia writes that the derivatives markets are changing, with a greater focus on automation and cost reduction.  View Article
 
  Insurance
 
 
EIOPA’s Risk Dashboard for the third quarter 2018 shows broadly unchanged risk levels for the European Union insurance sector
The European Insurance and Occupational Pensions Authority published its updated Risk Dashboard based on the third quarter 2018 data. The results of the third quarter 2018 show that the risk exposure of the European Union insurance sector remains stable overall.   View Article
Insurance Europe: Solvency II already supports the integration of material sustainability risks
Solvency II does not represent an obstacle to the integration of sustainability risks, according to Insurance Europe’s response to a consultation on the EIOPA’s draft technical advice on the integration of sustainability risks and factors in the delegated acts under Solvency II and the Insurance Distribution Directive (IDD).   View Article
EIOPA: updated work programme for 2019
EIOPA publishes updated work programme for 2019, highlighting and specifying the activities and tasks of the Authority for the coming year, within the framework of a multiannual work programme 2019 – 2021.  View Article
Insurance Europe: Insurers provide feedback on draft EC guidelines on ethical design of AI
Insurance Europe has published its response to a consultation by the European Commission’s High-Level Expert Group (HLEG) on draft guidelines for trustworthy artificial intelligence (AI).  View Article
 
  Asset Management
 
 
European Commission: Capital Markets Union: Agreement reached on measures to improve the EU's investment fund market
The Commission has welcomed the political agreement reached by the European Parliament and EU Member States on new rules to make it easier, quicker and cheaper for EU asset managers to sell funds to a wider range of investors.  View Article
ESMA consults on liquidity stress test guidance for investment funds
ESMA started a public consultation on its draft guidance regarding liquidity stress tests of investment funds – applicable to alternative investment funds (AIFs) and Undertakings for the Collective Investment in Transferable Securities (UCITS).  View Article
ICMA AMIC Response to IOSCO report: Leverage consultation paper
AMIC supports the work or IOSCO to examine risks associated with leverage in investment funds. This approach at each fund level is a welcome focus on the potentially risky activities of asset managers as compared to an approach at management company level.  View Article
FCA publishes its second set of rules following its Asset Management Market Study
The Financial Conduct Authority (FCA) has published new rules and guidance to improve the quality of the information available to consumers about the funds they invest in.  View Article
 
  Corporate Governance/Accounting
 
 
EFRAG Comment Letter on the IASB DP/2018/01 on the distinction between liabilities and equity
EFRAG has published its comment letter in response to the IASB's DP 2018/1 Financial Instruments with Characteristics of Equity which welcomes the IASB's efforts to address the issues that arise from IAS 32 but suggests the IASB to focus at this stage on targeted improvements to IAS 32.  View Article
IFAC: IPSASB delivers guidance on significant areas of public expenditure
The IPSASB has released a new standard and an ED on accounting for social benefits, and collective and individual services, respectively. They address a wide range of significant government expenditures that directly impact the lives of citizens globally.  View Article
WSBI-ESBG responds to IASB Tentative Agenda Decision curing of a credit-impaired financial asset
WSBI-ESBG agrees with the IFRS Interpretation Committee´s technical analysis based on the current IFRS 9 requirements concluding that unrecognised interest should be presented as a credit impairment gain in the profit and loss account following the cure of a credit-impaired financial asset.  View Article
FRC: Consultation into improvements to the reporting of intangibles
Possible improvements to the reporting of factors that are important to a business’ generation of value are discussed in a consultation launched by the FRC.  View Article
IFAC: IAASB future strategy & work plan consultation
The evolving environment in which the IAASB operates demands a strategy that reflects changing technology; a dynamic small- and medium-sized entity landscape; and emerging reporting needs. This is global stakeholders’ opportunity to shape the board’s strategy by commenting on the proposed draft.  View Article
ICGN comment on proposed revisions to the German Corporate Governance Code
The ICGN responded to the Regierungskommission’s (Commission’s) consultation on the German Corporate Governance Code (Kodex).  View Article
ECGI: The End of “Corporate” Governance (Hello “Platform” Governance)
Authors examine the distinctive features of this new business model and its implications for regulation, notably corporate governance.   View Article
ECIIA: EC’s climate-related reporting depends on robust governance
ECIIA has welcomed the EC’s latest proposals on the reporting requirements for businesses relating to how their activities impact the climate.   View Article
Financial Times: Auditors have a duty to follow the scent of fraud
Recent scandals show that accountants and auditors must do more to restore trust in financial reporting. If company accounts that have supposedly been scrutinised by auditors cannot be trusted, the faith of stakeholders in the corporate system will be eroded.  View Article
 
  Financial Services Policy
 
 
IOSCO: Emerging Market regulators consult on recommendations related to sustainable finance
Securities regulators from growth and emerging markets are seeking public feedback on proposed recommendations related to the development of sustainable finance in capital markets and the role of securities regulators in this area.  View Article
Project Syndicate: A Second Chance to Fix Finance
Despite progress since the 2008 financial crisis, reforms of the financial sector have been fragmented rather than fundamental. In particular, the system still lacks the effective holistic regulations needed to encourage the optimal global allocation of capital.  View Article
 
  Political
 
 
EurActiv: Brexit dampens desires to leave EU
The Swedish far-right party, the Sweden Democrats, is no longer calling for the country to leave the EU and it is not the only one. Several European populist parties have backtracked on this issue.  View Article
POLITICO: Populism’s rising tide
Mujtaba Rahman warns that Eurosceptics will shake up status quo at the next European election.  View Article
Bloomberg: A high-stakes fight is brewing in Norway over EU relations
The deal that gives Norway unfettered access to Europe’s massive free-trade bloc is increasingly being derided and has come under legal attack from EU skeptics and labor unions who are questioning its impact on wages, labor laws and sovereignty.  View Article
 
  Economic
 
 
Project Syndicate: The threat of a eurozone recession
The eurozone may fall into a new recession by the end of this year, with potentially nasty political consequences. In addition to countering the cyclical slowdown, pro-European forces must urgently address the continent’s long-term structural economic problems.  View Article
Bloomberg: Italy’s broadening slump weighs down euro-area growth momentum
A manufacturing and export-led slump in Italy’s economy spilled into services at the start of the year, aggravating an already fragile economic situation in the euro area.  View Article
EU-Japan trade agreement enters into force
The Economic Partnership Agreement (EPA) between the EU and Japan enters into force on 1 February 2019. Businesses and consumers across Europe and in Japan can now take advantage of the largest open trade zone in the world.  View Article
BBC: US-China trade war: UN warns of 'massive' impact of tariff hike
A UN trade official has warned a US plan to raise tariffs on Chinese goods next month would have "massive" implications for the global economy.  View Article
POLITICO: Germany’s industrial plan signals Europe’s protectionist lurch
Germany will launch a new industrial strategy that will align it more closely with France in its desire to protect national champions against threats from China and the US.  View Article
BIS: Yves Mersch: The changing role of central banking
Yves Mersch, Member of the Executive Board of the ECB, shares his views on some pressing questions regarding current challenges and changes needed for central banks.  View Article
Project Syndicate: Three lessons from QE in Europe
With the European Central Bank having recently ended quantitative easing, three conclusions seem obvious: the ECB’s asset purchases had important macroeconomic benefits; the political costs of QE were much greater than anyone expected; and the whole episode was truly awful for the Bundesbank.  View Article
January 2019: Economic Sentiment decreases markedly in both the euro area and the EU
In January 2019, the Economic Sentiment Indicator (ESI) decreased markedly in both the euro area (by 1.2 points to 106.2) and the EU (by 1.4 points to 106.1).  View Article
GDP up by 0.2% in the euro area and by 0.3% the EU28
Seasonally adjusted GDP rose by 0.2% in the euro area (EA19) and by 0.3% in the EU28 during the fourth quarter of 2018, compared with the previous quarter, according to a preliminary flash estimate published by Eurostat.  View Article
Volume of retail trade down by 1.6% in euro area
In December 2018 compared with November 2018, the seasonally adjusted volume of retail trade decreased by 1.6% in the euro area (EA19) and by 1.4% in the EU28, according to estimates from Eurostat. In November, the retail trade volume increased by 0.8% in the euro area and by 1.0% in the EU28.  View Article
Euro area unemployment at 7.9%
The euro area (EA19) seasonally-adjusted unemployment rate was 7.9% in December 2018, stable compared with November 2018 and down from 8.6% in December 2017. This remains the lowest rate recorded in the euro area since October 2008.  View Article
 

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