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04 February 2010

This week in "Brussels" + Podcast

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Competition: Financial Services Edited Minutes of key legislative Bodies Financial stability - policy analysis
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  Articles from 28 January 2010 - 04 February 2010

  Financial Services Policy

Commission assesses Greek Stability Programme - recommendations for correcting excessive budget deficit and improving competitiveness
The Commission is recommending a comprehensive structural reform package aimed at increasing the effectiveness of public administration, stepping up pension and healthcare reform, and maintaining banking and financial sector stability. Greece must submit a first report by mid-March 2010.  View Article
SEC-FSA strategic dialogue meeting – special attention to hedge fund regulation
The purpose of the dialogue is for the two agencies to engage at senior level in current issues affecting the US and UK capital markets and areas of future collaboration. Cooperative efforts in areas such as CRAs, AIFM and the clearing of OTC derivatives are increasing.  View Article
CRIS committee: workshop on impact of crisis on SMEs
“SMEs represent the backbone of the European economy, provide most jobs and are the most creative; therefore, they contribute considerably to the EU's success”, declared CRIS Chairman Wolf Klinz (ALDE, DE). MEPs also want to find a way of helping SMEs to easily access credit.  View Article
World Economic Forum debate: “A Roadmap out of the economic crisis”
French Economy Minister Lagarde strongly objected to the Bush administration’s decision not to bail out Lehman Brothers. Looking towards the future, she said, “We have avoided catastrophe and collapse of the financial system. Now we need to decide what to do next.”  View Article
IIF statement on financial regulatory reform and industry practices - global coordination is key to success
Without global coordination there is a risk of undermining the process of global reform agreed at the Pittsburgh Summit and the follow-on work of the Financial Stability Board. Furthermore, lack of global coordination will create regulatory arbitrage through an unlevel playing field.   View Article
World Economic Forum: IMF Head urges caution on winding down economic stimulus
Another problem highlighted by the IMF chief is the uneven pace at which the recovery is taking place around the world. Asia and some other emerging market countries lead the way, while the United States and Europe lag behind.  View Article
ECON hearing on financial supervisory package – de Larosière stresses progress has been satisfactory
Mario Draghi shares de Larosière’s fear concerning the extent to which the ESRB’s decisions will be effective if they are not binding. ESRB having the same structure as the FSB should contribute to its effectiveness.  View Article
World Economic Forum: Papandreou acknowledges Greece faces credibility gap
In Davos this week the Greek Prime Minister denied the country is seeking to raise loans either from its fellow European Union members or from China to help meet its financing needs. He said that a public offering of government debt paper earlier this week was heavily oversubscribed.  View Article
Eurofinas: financial education has a key role to play
EU lawmakers underline the importance of efforts aimed at increasing levels of financial literacy among EU citizens, depicting financial education as a ‘never-ending task’ requiring the attention of public authorities, consumers and industry alike.  View Article
FT: “Volker rule” and “Obama levy” attract the attention of bankers and regulators around the world
The Financial Times reports that the debate on these two proposals is worldwide and that bankers will in the end accept some of the ideas under discussion. A global levy is the proposal that appears to be gaining support fastest.  View Article
World Economic Forum in Davos: Democrats and Republicans agree financial regulation imperative
Tough regulation from the Obama Administration on financial services, as well as an energy package, is expected this spring. US congressmen and senators confirmed that, despite bipartisan differences, there is agreement that financial regulation is urgently needed.  View Article


BBA/IBM joint white paper on restoring loyalty, trust and industry profitability in UK retail banking
This paper focuses on the challenges faced by UK retail banking, including how to control and keep onside “data-hungry” regulators. It also illustrates how to become a “smarter bank”, one that is instrumented, intelligent and more interconnected.  View Article
EP Vice-President Silvana Koch-Mehrin: bankers have lost their friends in Davos
Reform of the banking system was one of the key themes at this year's World Economic Forum in Davos, with bankers coming in for a lot of criticism. Obama's plans to regulate and reform the banking sector, including curbing the size of banks, were widely discussed.  View Article
CEBS’s comments on EU framework for cross-border crisis management in the banking sector
CEBS comments are focused on the definition of the common minimum toolbox available to competent authorities in each member state to enable them to identify at an early stage potential problems in a bank, and to take appropriate action. It also addresses the conditions for the use of these tools.   View Article
ECB publishes January 2010 bank lending survey (BLS) for the euro area
The January 2010 BLS shows a further decline in the net tightening of credit standards, although at a slower pace than in previous quarters. The decline in net tightening was stronger for mortgages than for consumer credit or for loans to non-financial corporations.  View Article


CPSS-IOSCO review of standards for payment, clearing and settlement systems
The review, in which both the IMF and the World Bank are participating, is part of the Financial Stability Board's work to reduce risks arising from interconnectedness in the financial system. The aim is to issue a draft of all the revised standards for public consultation by early 2011.   View Article
How to report transactions on OTC derivative instruments: CESR consults on guidance
Competent authorities (CAs) say there is a range of OTC derivatives used for the purposes of market abuse. Some CAs have extended the collection of transaction reports to include OTC instruments. CESR has decided to exchange transactions, among others, on options and complex derivatives.  View Article
Japanese FSA extends temporary measures regarding restrictions on short selling and purchase of own stocks by listed companies
The Japanese Financial Services Agency has extended temporary measures including the prohibition of naked short selling and the compulsory report to exchange authorities from holders of a short position of a certain level or more (0.25 % or more of outstanding issued stocks).  View Article


FT: Solvency rules could raise capital needs
The Financial Times reports that Solvency II has raised the strongest reaction from UK life assurers who feared they might have to raise £30bn-£70bn in fresh capital. The biggest non-life insurers hope to avoid the capital requirements by using sophisticated models to manage risk and capital.  View Article
CEIOPS publishes final advice on Solvency II Level 2 implementing measures
CEIOPS’ final set of advice consists of calibrations for most Solvency II risk modules. It comes with an assurance that it benefits from improved data collection, as well as from information gathered during the financial crisis.   View Article
CEIOPS publishes the list of insurance groups for which a college is in place
As part of its convergence-related commitments, CEIOPS updates on an on-going basis its databases in relation to insurance groups supervision. CEIOPS legally recognizes the Swiss Financial Market Supervisory Authority (FINMA) inside the list of colleges of supervisors.  View Article

  Asset Management

Financial Markets Law Committee (FMLC) publishes report analysing AIFMD legal risks
The report highlights fundamental issues which would, in the FMLC’s view, create legal uncertainty leading potentially to systemic failure and widespread market disruption, unless they are amended appropriately. FMLC’s concerns include the definition of leverage and the scope of the AIFMD.  View Article
First Spanish Presidency Compromise text on AIFM Directive
The Financial Times, having analysed the text, reports that the proposals attracted a mixed response. While praising improvements in some areas, the industry complained the proposals would make it harder for funds outside the EU to access investors inside the bloc, thereby creating protectionism.  View Article
BDO: investment managers underestimate impact of AIFM directive
In a BDO survey few fund managers cited the AIFMD as a key risk for 2010 due to the implementation timeline. Moreover, there is a fear that regulations will be so stringent on AIFM, fund managers in the US and Asia will be less willing to provide access to European institutional investors.  View Article
CESR reviews the application of guidelines to simplify UCITS notification procedures across Europe
The report provides evidence of the level of application of the CESR guidelines on UCITS notification procedures within the CESR membership. Belgium, Bulgaria, Italy, Luxembourg and Norway are the only members currently applying CEBS guidelines in full.   View Article
EP CRIS Committee briefing paper on impact of crisis on EU pensions systems
This looks into the wider context of the financial and economic crisis, taking into account the already existing demographic expectations and challenges in the EU; especially the state of the diverse EU pension systems and the extra impact of the crisis on already existing challenges.   View Article

  Corporate Governance/Accounting

FSA consults on effective governance standards within firms – follow-up on Walker review
The FSA is consulting on extending the scope of the significant influence functions (SIF) regime and introducing a detailed framework of controlled functions. This will make clearer the role an individual is performing within a firm and increase the FSA’s ability to track individuals as they move role.   View Article
EFRAG: final endorsement advice and effects study report on IAS 24, IFRIC 14 and IFRIC 19
EFRAG recommends the adoption of IAS 24 related party disclosures, IFRIC 14 pre-payments of a minimum funding requirement and IFRIC 19 extinguishing financial liabilities with equity instruments. EFRAG has evaluated these standards and confirms that they comply with the criteria for EU endorsement.  View Article
EFRAG/ANC joint research paper on proposed new definition of ‘asset’ adopted by IASB and FASB
The main outcome of the research paper is that the proposed new definition removes problems related to the ambiguity of the notion of “control” included in the previous definition. It also clarifies the identification of a “past event”.  View Article
EFRAG consults on amendment to IFRS 1: limited exemption from comparative IFRS 7 disclosures for first-time adopters
EFRAG is consulting both on its assessment of the interpretation against the EU endorsement criteria and on its initial assessment of the costs and benefits that would arise from its application in the EU.   View Article
IASB issues limited exemption amendment to IFRS 1
The amendment relieves first-time adopters of IFRSs from providing the additional disclosures introduced in March 2009. It thereby ensures that first-time adopters benefit from the same transition provisions that Amendments to IFRS 7 provide to current IFRS preparers.  View Article

  Competition: Financial Services

Commission approves Spanish recapitalisation scheme for credit institutions
Effective until 30 June 2010, the Commission has approved a Spanish recapitalisation scheme (FROB) for savings. Before each individual bank recapitalisation, the FROB will communicate to the Commission the results of an assessment of the beneficiary's risk profile by the Bank of Spain.  View Article
Commission approves recapitalisation for Dutch bancassurance company SNS REAAL
The viability plan refocuses SNS’s business model on its core activities in the Dutch retail and SME market. The plan aims to improve the risk profile of its insurance and banking business by reducing the size of its equity portfolio.  View Article

  Financial stability - policy analysis

Bruegel: best option for solving Greek crisis
Pisani-Ferry and Sapir argue that the best option for saving Greece is to bring in the IMF for a stand-by agreement. While the EU is hesitant about this, both experts maintain that the IMF is better suited to handling the political problems that would accompany such a bailout.   View Article



© Graham Bishop

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