This week in "Brussels"
12 January 2017
EBA, banks regulatory capital, LCR, internal models, Basel III, ringfencing, Prospectus Directive, CCPs, MiFID II, MAR, PRIIPs, Solvency II, IFRS 9, benchmarks and more.
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Articles from 15 December 2016 - 12 January 2017 |
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Banking |
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EBA recommends retaining risk-sensitive framework for banks regulatory capital
The EBA’s report on cyclicality of banks' capital requirements aims at clarifying whether risk-sensitive bank capital requirements as laid down in the CRR and CRD create unintended pro-cyclical effects by reinforcing the endogenous relationships between the financial system and the real economy. View Article |
Financial Times: French banks to sue ECB over capital requirements
France’s largest banks are suing the European Central Bank in an attempt to get an exemption from holding capital against certain state-backed deposits, in the first time that a group of large European lenders have taken the supervisor to court. View Article |
EBA recommends a harmonised EU-wide framework for covered bonds
This report seeks to ensure that only those financial instruments that comply with the harmonised structural, credit risk and prudential standards can be branded as ‘covered bonds' and have access to special regulatory and capital treatment as provided in the current EU financial regulation. View Article |
EBA sees considerable improvement in the average LCR across EU banks
The EBA published its third impact assessment Report for the liquidity coverage ratio (LCR), together with a review of its phasing-in period. The Report shows a constant improvement of the average LCR across EU banks since 2011. View Article |
European Banking Federation: European Interbank Compensation Guidelines – Revision 2017
In view of the existence of negative interest rates in the euro area, an Appendix has been added giving guidance when the deposit facility rate published by the European Central Bank is below zero. View Article |
EBA to run its next EU-wide stress test in 2018
The Board of Supervisors of the European Banking Authority decided to carry out its next EU-wide stress test in 2018, in line with its previous decision to aim for a biennial exercise. View Article |
EBA launches qualitative survey on internal models
The EBA launched a qualitative survey on IRB models to analyse the impact of the EBA draft Guidelines on the estimation of risk parameters for non-defaulted exposures, namely of the PD and the LGD, and on the treatment of defaulted assets, which are currently under consultation. View Article |
BIS: Finalising Basel III reforms
The Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of the Basel Committee on Banking Supervision, postponed its January meeting so as to allow more time to properly finalise the package of proposals. View Article |
EBF letter to the Basel Committee: Finalisation of Basel III without output floors
The European Banking Federation (EBF) would like to reiterate their support to the finalisation of the Basel III reform with no significant impact on any jurisdiction and in terms that truly respect the international level playing field. View Article |
Financial Times: Basel postpones bank reform vote amid policy differences
European banks have won a reprieve from new post-crisis reforms they fear will disproportionately hit their balance sheets. View Article |
ESBG: New leasing standard presents big challenge for banks
ESBG warned in its response to the EFRAG consultation on the accounting standard that leasing products provided by savings and retail banks would be jeopardized under the new proposed IFRS16 on leases. View Article |
EIOPA: Opinion on disclosure of information related to the use of transitional measures in the calculation of technical provisions
The objective of the Opinion is to clarify expectations of National Supervisory Authorities on the disclosure of information in the SFCR regarding the use of the transitional measures, in particular considering the impact of the methodology used for the decrease of the transitional. View Article |
Financial Times: A make-or-break moment for Europe’s rules on bank crises
Rome’s late-December pledge of state support – by setting aside €20bn for troubled banks including Monte dei Paschi di Siena – may have shored-up market confidence and placated Brussels by accepting that some junior creditors would also take a hit. But this was not the end. View Article |
Financial Times: Ringfencing will help in the next banking crisis
Financial regulation is back in focus. In the US, the talk is of reversing post-crisis regulation; in the UK, implementation of new rules grinds on - to the industry’s chagrin. The latest source of friction is ringfencing rules. View Article |
Financial Times: Banks risk missing 2019 ringfence deadline
UK regulators are concerned that banks may fail to meet a 2019 deadline for separating retail money from riskier investment banking activity, under rules aimed at preventing a re-run of the financial crisis. View Article |
Reuters: ECB lending guidelines could drive riskier LBOs underground
Proposed leveraged lending guidelines from the European Central Bank could force riskier lending into unregulated channels and create unintended opportunities for arbitrage as well as breed market distortion. View Article |
ECB: 2017 – a decisive year for innovative retail payment services
Keynote speech by ECB's Yves Mersch at a conference on “Technological innovations in payments and beyond”, in which he discusses why 2017 is going to be a decisive year for the success of innovative retail payments services in Europe. View Article |
EPC: Javier Santamaría is re-elected as chair of the European Payments Council for a two year mandate
The General Assembly of the European Payments Council (EPC) has re-elected Javier Santamaría as its Chair and Narinda You as its Vice-Chair. Their mandates take effect immediately and will run for the next two years – a period during which exciting changes are expected in the payments industry. View Article |
Money laundering and terrorist financing: Council agrees its negotiating stance
The Council has agreed its negotiating stance on strengthened EU rules to prevent money laundering and terrorist financing. View Article |
EBA updates recommendation on the equivalence of supervisory regimes
The EBA published an amended Recommendation on the equivalence of confidentiality regimes. Several additional non-EU supervisory authorities were added to the list of non-EU or third country supervisory authorities whose confidentiality regimes can be regarded as equivalent. View Article |
EBA advises on the equivalence of supervisory and regulatory requirements for Turkey and New Zealand
The European Banking Authority (EBA) published its Opinion, whereby it concluded that the supervisory and regulatory framework applicable to credit institutions in Turkey and New Zealand can be regarded as equivalent to that applied in the Union. View Article |
EBA consults on supervision of significant branches
The EBA launched a consultation on its draft Guidelines on the supervision of significant branches. Prompted by the increasing demand to establish branches across the European Union, these Guidelines are designed to facilitate cooperation and coordination between the CAs. View Article |
BIS: Multiplex interbank networks and systemic importance - An application to European data
Research on interbank networks and systemic importance is recognising that the web of exposures linking banks’ balance sheets is more complex than the single-layer-of-exposure approach suggests. Authors characterise the main features of the multiplex structure of the network of large European banks. View Article |
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Securities |
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Capital markets union: Council confirms deal on prospectus rules
The Permanent Representatives Committee approved, on behalf of the Council, an agreement with the European Parliament on prospectuses for the issuing and offering of securities. View Article |
ESMA updates Q&A on Prospectus Directive
ESMA published an updated questions and answers document on the application of the Prospectus Directive. View Article |
ESMA identifies areas for improvement in EU CCP supervision
ESMA presented the results of a peer review, it conducted into how national competent authorities ensure that central counterparties comply with margin and collateral requirements under the European Markets Infrastructure Regulation. View Article |
European Commission adopts equivalence decisions for CCPs and trading venues in ten non-EU jurisdictions
The European Commission has determined that India, Brazil, New Zealand, Japan Commodities, United Arab Emirates and Dubai International Financial Centre have equivalent regulatory regimes for central counterparties to the European Union. View Article |
ESMA consults on extending aggregated trade repository data
The European Securities and Markets Authority opened a public consultation on the extension of data available to the public in trade repositories as stipulated in the European Market Infrastructure Regulation. View Article |
ESMA consults on supervision fees for trade repositories under SFTR and EMIR
ESMA published a consultation paper on draft technical advice to the European Commission on formulating an EU Regulation on ESMA’s fees for Trade Repositories under the Securities Financing Transactions Regulation. View Article |
IOSCO/CPMI: Harmonisation of the Unique Product Identifier
The consultative report makes proposals for the harmonised global UPI, whose purpose is to uniquely identify over-the-counter derivatives products that authorities require to be reported to trade repositories. View Article |
ESMA finds improvement in regulators’ supervision of MiFID best execution requirements
ESMA finds that national regulators are giving greater attention to best execution requirements under the Markets in Financial Instruments Directive in the follow-up report to its Peer Review published in 2015. View Article |
AFME response to consultation paper FCA CP16/29 (Markets in Financial Instruments Directive II Implementation Paper III)
Overall, AFME supports the steps taken in the CP to align the Handbook with the measures due to come into effect with the application of MiFID II. AFME does not however support the gold-plating of EU Directives as this leads to differences of regulation across Europe and consequent confusion. View Article |
ESMA sets timetable for MiFID II waiver applications
ESMA updated two Q&A documents regarding implementation issues relating to transparency topics and market structures topics under the Market in Financial Instruments Directive and Regulation. View Article |
ESMA updates MiFID II Q&A on Investor Protection
ESMA added new Q&As to its Q&A document on the implementation of investor protection topics under the Market in Financial Instruments Directive and Regulation. View Article |
ESMA publishes MiFIR Q&A regarding data reporting
ESMA published its Questions and Answers document regarding the implementation of the Market in Financial Instruments Directive and Regulation. View Article |
ESMA prepares for MiFID II commodity derivatives regime
ESMA published a new questions and answers document on commodity derivatives topics under the revised Markets in Financial Instruments Directive and Regulation. View Article |
EBA launches data collection addressed to commodity derivatives firms to review the prudential framework for investment firms
EBA launched a data collection for commodity derivatives firms that will support the European Commission in the calibration of the new prudential regime for investment firms. View Article |
ESMA publishes updated MAR Q&A
The purpose of this Q&A document is to promote common supervisory approaches and practices in the application of the MAR and its implementing measures. View Article |
ESMA agrees with the MAR on liquidity contracts proposed by Spanish regulator CNMV
This Accepted Market Practice refers to liquidity contracts by which a credit institution or investment firm (financial intermediary) quotes in the equity market on behalf of the issuer, with a view of reinforcing liquidity in that share. View Article |
ISDA: Derivatives market analysis: interest rate derivatives
This report addresses the effects of clearing and compression on interest rate derivatives by adjusting reported notionals in order to provide a clearer estimate of derivative market trends. View Article |
IOSCO identifies risks to retail investors of OTC leveraged products
IOSCO issued a report that identifies various risks related to the marketing and sale of complex OTC leveraged products to retail investors, and describes how some regulators are responding to the challenges these products present. View Article |
ESMA publishes its CRA Market Share Calculation
ESMA published its annual market share calculation for EU registered credit rating agencies. View Article |
SEC issues annual staff reports on credit rating agencies
The Securities and Exchange Commission issued two annual staff reports that demonstrate compliance and competition continue to increase among the credit rating agencies under SEC oversight as nationally recognized statistical rating organizations. View Article |
ISDA Brexit FAQs
These FAQs address the possible UK position post-Brexit. The responses to these FAQs involve an assessment of the various outcomes of the exit negotiations and the consequences of those outcomes and it is not possible in all cases to give a definitive answer. View Article |
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Insurance |
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European Supervisory Authorities respond to European Commission on amendments to PRIIPs rules
ESAs published their response to the European Commission on the amendments the Commission proposes to make to the draft RTS on key information documents for packaged retail and insurance-based investment products. View Article |
EIOPA announces results of the 2016 EU-wide insurance stress test
The EIOPA announced the results of its 2016 EU-wide stress test for the European insurance sector. This year’s exercise assessed insurers’ vulnerabilities and resilience to two severe market developments: A prolonged low yield environment and a “double-hit” scenario. View Article |
Insurance Europe: Response to EIOPA 2016 Solvency II stress tests
Olav Jones, deputy director general of Insurance Europe, commented on the European Insurance and Occupational Pensions Authority 2016 Solvency II stress tests results. View Article |
Fitch: Life insurer stress tests highlight diverse risk exposure
EIOPA's life insurance stress tests highlight the significant differences in the sensitivity to market movements of life insurers in different countries, Fitch Ratings says. View Article |
Accountancy Europe: Scope of audit of Solvency II reporting by insurance undertakings
With this survey Accountancy Europe has taken stock of the requirements for an audit of the regulatory reporting in the insurance industry across Europe after the Solvency II regime has become applicable in January 2016. View Article |
ESBG: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts
ESBG submitted a strong response to a recent EFRAG consultation on the application of IFRS 9 with IFRS 4. The issue's main sticking point for ESBG members lies in the availability of the "Temporary Exemption" from the application of IFRS 9 for predominant insurers within a bank-led group. View Article |
EIOPA publishes the first report on long-term guarantees and measures on equity risk
It is first annual Report on Long-Term Guarantees Measures (LTG) and Measures on Equity Risk in particular on their use and impact on the financial position of insurers. A series of similar reports until 2021 is part of the overall review of Solvency II as foreseen in the Solvency II Directive. View Article |
EIOPA publishes information on the use of limitations from regular supervisory reporting
The European Insurance and Occupational Pensions Authority released its first report on the limitations from the regular supervisory reporting, used by insurance and reinsurance undertakings. View Article |
Insurance Europe: Concerns raised on European Commission legislative proposal for European Services e-card
Nicolas Jeanmart, head of personal insurance, general insurance and macroeconomics at Insurance Europe, commented the publication of the European Commission’s legislative proposal for a European Services e-card. View Article |
Commercial Risk Europe: Challenges mount for European insurers in 2017
Western European insurers are well-placed to withstand the significant challenges that will make 2017 a “pivotal” year for the industry, said Standard & Poor’s. View Article |
Commercial Risk Europe: Some reinsurers won’t stay the course as outlook remains negative
The rating outlook for the global reinsurance sector has been held at negative by AM Best. The operating environment is "concerning" despite signs that rates are bottoming out, it added. View Article |
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Asset Management |
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Capital markets union: Venture capital rules agreed by Council
The Council has agreed its negotiating stance on amendments to EU rules aimed at boosting investment in venture capital and social enterprises. View Article |
Pension funds granted further one-year exemption from central clearing requirements
The European Commission adopted a Delegated Act in accordance with Article 85(2) of EMIR, further extending transitional relief for Pension Scheme Arrangements from central clearing requirements until 16 August 2018. View Article |
Investment & Pensions Europe: EIOPA chairman calls for debate on past pensions promises
Gabriel Bernardino, chairman at European supervisor EIOPA, called for a public debate on the issue of past pension promises becoming untenable as a result of the low-interest-rate environment. View Article |
Investment & Pensions Europe: PLSA rejects MiFID workaround for public pension schemes
The UK regulator has proposed a “costly, complex and difficult-to-apply” workaround for European rules on investor classification, according to the Pensions and Lifetime Savings Association (PLSA). View Article |
Investment & Pensions Europe: Politicians call for sweeping new powers for UK regulator
A group of British politicians have called for radical reform of the defined benefit (DB) sector to avoid future scheme failures. View Article |
Investment & Pensions Europe: Dutch regulator to reveal pension funds' liabilities, interest hedges
The Dutch regulator, De Nederlandsche Bank (DNB), is to start publishing pension funds’ liabilities, levels of interest hedge and scale of fixed income holdings. View Article |
Investment & Pensions Europe: German government ignores industry in revised pensions reform draft
The German government has decided against most of the amendments that were proposed for the new second pillar reform law during an extensive consultation phase with considerable input from the German pension industry and other stakeholders. View Article |
Investment & Pensions Europe: Amundi already wins business for Luxembourg-based pan-European IORP
French asset manager Amundi has said it has already attracted 10 multinational companies to use its pan-European pensions vehicle in Luxembourg for part of their pension arrangements. View Article |
Investment & Pensions Europe: France promulgates law paving way for pension fund vehicles
A French law providing for IORP-compliant pension vehicles in the country has been promulgated, and the decree creating the pension funds is due to be out in the first quarter of 2017. View Article |
Investment & Pensions Europe: Red light for proposed changes to Sweden’s traffic-light system
Sweden’s Financial Supervisory Authority (FSA) has dropped plans to change its traffic light model for insurance companies and pension funds after criticism that this would impose additional capital requirements on those companies. View Article |
Investment & Pensions Europe: Accounting roundup: IASB, EBIT, IAS 19 Employee Benefits
Members of the International Accounting Standards Board tentatively decided to explore whether they should require companies to present subtotals representing earnings before interest and tax (EBIT) and/or operating profit. View Article |
ESMA updates AIFMD Q&A
ESMA published an updated questions and answers document on the application of the Alternative Investment Fund Managers Directive. View Article |
IOSCO monitors growing use of automated advice tools to protect investors
On-line technology tools are having an important impact on the investment advice value chain, including services such as asset allocation, portfolio selection and trade execution, according to a report issued by the Board of the International Organization of Securities Commissions. View Article |
IOSCO consults on order routing incentives in ongoing effort to protect investors
The Board of the IOSCO published the Report on Order Routing Incentives for public consultation. The report provides an overview of the practices used by market regulators regarding incentives for order routing that may influence how intermediaries treat their clients. View Article |
EFAMA: Worldwide regulated open-ended fund assets continue to experience steady growth in Q3 2016
The European Fund and Asset Management Association has published its latest International Statistical Release, which describes the developments in the worldwide investment fund industry during the third quarter of 2016. View Article |
European Commission: Central clearing requirements: pension funds to benefit from further exemption
The Commission is further extending transitional relief for Pension Scheme Arrangements (PSAs) from central clearing for their over-the-counter (OTC) derivative transactions until 16 August 2018. View Article |
Investment & Pensions Europe: UK government consults on rule simplifications for DC transfers
The UK’s Department for Work and Pensions (DWP) wants to streamline rules governing defined contribution (DC) bulk transfers to remove barriers to consolidation. View Article |
Investment & Pensions Europe: Investment Association 'committed' to transparency after FCA report
The asset management industry is “100% committed” to meeting the transparency goals laid down by the Financial Conduct Authority (FCA), the chair of the UK’s asset management trade body has said. View Article |
ECB: Eurosystem adjusts purchase process in ABS purchase programme (ABSPP)
The Governing Council of the ECB decided that the ABSPP should be fully implemented by national central banks rather than relying on the support from external managers. This had been envisaged and announced when the programme was first launched. View Article |
New report from EFAMA and SWIFT confirms total industry automation rates at nearly 85% of fund orders
The EFAMA, in cooperation with SWIFT, published a new report about the evolution of automation and standardisation rates of fund orders received by transfer agents (TAs) in the cross-border fund centres of Luxembourg and Ireland during the first half of 2016. View Article |
Hedgeweek: Regulations drive increased competition
One of the unintended consequences of market regulation is that it has leveled the playing field. In what was once a fiercely competitive environment dominated by bank-owned prime brokers, in recent years a slew of new entrants has emerged, offering different service models for managers to consider. View Article |
Investment & Pensions Europe: High-deficit pension sponsors ‘could outperform’ in 2017
Ankit Gheedia, European equity and derivative strategist at BNP Paribas, argued in a strategy note that a basket of 40 European companies with the highest pension deficits relative to their market capitalisation would outperform European equity indices if liabilities fell this year. View Article |
Hedgeweek: SEI identifies five key trends in disruptive technology
The Internet of Things and the rise of the gig economy are changing the way that businesses and consumers interact with each other. It is therefore incumbent upon the asset management industry to embrace technological change and reimagine what is a tried and tested business model. View Article |
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Corporate Governance/Accounting |
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EBA publishes final guidelines on revised Pillar 3 disclosures requirements
These Guidelines represent a significant step forward in the EBA's effort of improving and enhancing the consistency and comparability of institutions' regulatory disclosures. View Article |
ECIIA: New reporting requirements shift disclosure focus
ECIIA says the European Union has put plans to introduce country-by-country accounting disclosures on ice. Instead, it is revising the existing Shareholder Rights Directive in a move that could create new opportunities for internal auditors. View Article |
IASB: IFRS 9 and IFRS 15—one year to go
IASB is ready to assist to companies applying IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers for the first time. The final countdown has started to the effective date of IFRS 9 and IFRS 15. View Article |
IPE: IASB to push ahead with controversial changes to IAS 19 guidance
IPE has published an article dealing with the fact that the IASB has confirmed it will press ahead with a series of potentially controversial amendments to its IAS 19 asset-ceiling guidance known as IFRIC 14. View Article |
ESMA publishes extract on enforcement decisions on financial statements
The ESMA has published an extract from its confidential database of enforcement decisions on financial statements. The extract includes a selection of 14 decisions that were taken by national enforcers in the period from March 2014 to June 2016. View Article |
ESMA proposes new digital format for issuers’ financial reporting
ESMA published a feedback statement setting out the digital format which issuers in the European Union must use to report their company information from 1 January 2020. View Article |
Accountancy Europe: Auditor’s involvement regarding the ex-ante contributions to the Single Resolution Fund
Accountancy Europe has published an information paper that aims to raise awareness of the auditor’s involvement regarding the Single Resolution Board’s (SRB) responsibility for the calculation of ex-ante contributions to the Single Resolution Fund (SRF). View Article |
IFAC focuses on importance of integrated reporting
IFAC’s Policy Position Paper 8, Enhanced Organizational Reporting: Integrated Reporting Key, outlines IFAC position that integrated reporting is the way to achieve a more coherent corporate reporting system. View Article |
FRC: Rebuilding trust in business requires better governance practices
The FRC’s annual report, Developments in Corporate Governance and Stewardship 2016, is published against a backdrop of falling public trust in business. High standards of governance are a direct driver of investment into UK companies and play an important part in UK economic wellbeing. View Article |
Accountancy Europe: EU Business insolvency - a contribution from the accountancy profession
This paper provides an overview of accountants' and auditors' current contribution to insolvency proceedings in Europe. This is in support of the proposed EC Directive for an effective insolvency framework which signalled the role of insolvency practitioners. View Article |
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Financial Services Policy |
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European Commission appoints members of the High-Level Expert Group on sustainable finance
The European Commission has announced the composition of the High-Level Expert Group on sustainable finance. The Group, which will start meeting as of January 2017, comprises 20 policy leaders from civil society, the finance sector and academia. View Article |
IOSCO issues guidance to improve quality of reporting on compliance with Benchmarks Principles
IOSCO issued guidance that seeks to increase the consistency and quality of reporting by Benchmark Administrators on their compliance with the IOSCO Principles for Financial Benchmarks, which were published in July 2013. View Article |
European Supervisory Authorities consult on Big Data
The Joint Committee of ESAs launched a public consultation about the potential benefits and risks of Big Data for consumers and financial firms to determine whether any further regulatory or supervisory actions may be needed. View Article |
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Structured CPD: Workbook Brussels4Brunch |
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Brussels for Brunch Monthly Roundup End of year Roundup
This is the monthly Roundup that accompanies the end of the year roundup Webinar View Article |
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Graham's tweets |
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© Graham Bishop
Banking