This week in "Brussels"

14 November 2013



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Articles from 07 November 2013 - 14 November 2013

Banking

Lithuanian Presidency: Agreement on Single Resolution Mechanism needed
ECOFIN Ministers are expected to discuss all key elements of the SRM, including the scope and financing arrangements, decision-making and voting mechanisms, as well as other related questions. 
ECB publishes its opinion on the Single Resolution Mechanism (SRM)
The ECB fully supports the establishment of an SRM. It believes that centralised decision-making on resolution matters will strengthen the stability of EMU, and that the SRM will provide a necessary complement to the SSM. 
VP Almunia: A stronger regulatory framework and the Banking Union will support a return to growth
Almunia discussed i.a. the SRM and the upcoming ECB review. He said bank bailouts remained a possibility if the stress test revealed significant capital shortfalls or if the debt crisis were to flare up again. 
ECB/Asmussen: The public and the private Banking Union
Asmussen said he was 'adamantly convinced' that the Banking Union would only function if the SSM was complemented by an SRM, and that it was of 'utmost importance' to have a political agreement on the SRM by the end of this year. 
Plan to raid bank creditors could shatter Europe's calm
Support appears to be growing for the EU to accelerate implementation of a law that allows raids on creditors and major depositors at banks that are on the verge of failure. Meanwhile, the Bank of Italy has said bail-in by bank creditors could result in a human rights case. 
EBA publishes peer review on the implementation of the stress-testing guidelines
The aim of the peer review was to assess and compare the effectiveness of the supervisory activities related to the review of credit institutions' own stress-testing frameworks across the EU, as well as the implementation of related provisions by competent authorities.  
Reuters: EU banks outside eurozone likely to overcome stress test divide
EU nations that lie outside the eurozone plan largely to fall in behind the ECB when they check the health of their banks, helping them to avoid a "two tier" outcome in stress tests next year. 
G-SIBs: Information regarding the end-2012 exercise published by the Basel Committee
In conjunction with the publication by the FSB of the updated list of global systemically important banks, the BCBS has published additional information regarding the G-SIB methodology. 
ECB/Cœuré: Savers aren't losing out
Writing for the Handelsblatt, Cœuré defended the ECB against complaints that its low interest rate policy was favouring borrowers over savers, saying the current low return for savers was an ongoing result of the recession and the fragmentation in the euro area financial market. 
EBF publishes European Interbank Guidelines
The EBF published its European Interbank Compensation Guidelines and its European Interbank Liquidity Management Guidelines. 
Fitch: Bank regulation is substituting accounting prudence
Regulators are able to use capital adequacy requirements to employ a greater degree of prudence than currently allowed in financial reporting, Fitch Ratings says. 
EPC: Fact check - The rationale for SEPA
This blog cites the rationale for a Single Euro Payments Area, as defined by the EU governments and EU institutions, i.e. the Commission, the EP, the Council of the EU representing EU Member States and the ECB driving the SEPA programme. 
WSJ: German savings banks flex political muscle
Germany's public savings banks have become the most powerful little lenders in the world, exploiting their political clout to punch loopholes into Europe's post-crisis banking laws. 
BBA: PCBS conference
"There is no doubt the PCBS' [UK Parliamentary Commission on Banking Standards] report is the most substantial into banking in a generation and that its recommendations are critical to restoring trust and confidence in the sector." 

Securities

Commission intends not to endorse ESMA's proposal to delay reporting start date for ETDs
ESMA's request for a one-year delay for mandatory recording of derivatives traded on an exchange has been rejected, as the Commission believes the delay would hinder the ability of regulators to spot potentially destabilising risks building up in markets. 
ESMA approves registrations of first four TRs under EMIR
ESMA has approved the registrations of the first four trade repositories (DDRL, KDPW, Regis-TR and UnaVista) under EMIR. Chair Maijoor called it "an important component in making derivative markets more transparent and resilient". (Includes industry comments.) 
Risk.net: FX market faces challenges to meet EMIR start date for trade reporting
Mandatory trade reporting for all asset classes will begin on February 12, but the forex industry is still grappling with the challenges of dual reporting. 
Philip Stafford: Europe learns from CFTC on trade reporting
The Commission's decision to force mandatory reporting of all derivatives trades by mid-February seems remarkably similar to the hardline stance the CFTC took as the industry got into a panic about issues such as "certainty of clearing" on SEFs, comments Stafford in the FT. 
Fitch: Europe investors see challenges for Basel III securities
Most European investors consider there to be several challenges to investing in Basel III-compliant capital instruments, according to a Fitch Ratings' quarterly investor survey conducted in October. The key issues arise from regulatory uncertainty. 
ESAs consult on the removal of mechanistic reliance on credit ratings
The Joint Committee of the ESAs (EBA, ESMA and EIOPA) is launching a one-month public consultation on the removal of mechanistic references to credit ratings in their guidelines, and on the definition of sole and mechanistic reliance on such ratings. The consultation closes on 5 December, 2013. 
Reuters: Multi-national ratings agency to launch as alternative to Big Three
Credit ratings organisations from five countries are launching a new global agency, touting it as an alternative to the Big Three agencies which they say no longer meet the needs of the new globalised world. 
ESMA begins preparatory work for new Market Abuse Regime
ESMA has published a Discussion Paper setting out its initial views on the implementing measures it will have to develop for the new Market Abuse Regulation (MAR). The closing date for responses is 27 January, 2014. 
CPSS-IOSCO publish responses to consultation on recovery of FMIs: AIMA/MFA, EBA Clearing, Eurex Clearing, EACH
CPSS and the IOSCO Board published the public responses to the consultative report on the Recovery of financial market infrastructures. 
The Trade: Disagreement over waivers risks pushing MiFID decision to 2014
A lack of consensus over dark pools and pre-trade transparency waivers risks pushing a conclusion to the trialogue on MiFID II into the first quarter of next year, according to those familiar with the situation. 
FN: Euro regulations face delays as election looms
European regulations on financial benchmarks, money market funds and long-term investment funds are facing extensive delays because they may not get passed before European elections due next May. 
Bloomberg: Swaps secrets demands said to put brakes on EU's antitrust probe
The EU's antitrust probe into credit derivatives trading by 13 of the world's biggest banks stalled after the lenders' lawyers won the right to see confidential information compiled by investigators. 
IntercontinentalExchange completes acquisition of NYSE Euronext
IntercontinentalExchange Group, Inc announced the successful completion of its previously announced acquisition of NYSE Euronext. The stock-and-cash transaction has a total value of approximately $11 billion. 

Insurance

Commissioner Barnier welcomes trilogue agreement by Council and Parliament on the "Omnibus II" Directive
"This agreement is a very important step towards the introduction of a modern and risk-based solvency regime for the insurance industry in Europe as of 1 January 2016, making it both safer and more competitive. In practice it makes the implementation of Solvency II possible." 
Insurers welcome EU agreement on Omnibus II
Among the industry comments, Insurance Europe said the agreement reached on the Omnibus II Directive was an important milestone in the path towards the new Solvency II risk-based regulatory regime for EU insurers. 
FTAdviser: Solvency II may stifle innovation - Dowthwaite
Solvency II's latest proposals could hinder the ability of firms to launch innovative products in the annuity market, the group commercial actuary for Legal & General has warned. 
EDHEC: "LTGA Impact Assessment and Bond Management - Has Solvency II reached a Deadlock?"
A new EDHEC study shows that LTGA calibration continues to favour short-duration bonds, and could undermine the financial stability and financing of both sovereigns and corporates. 
Bundesbank/Dombret: Low interest rate environment puts German insurers under pressure
Presenting the German Financial Stability Review, Dombret said that the low interest rate environment was weighing increasingly on German life insurers, meaning that it was increasingly difficult for them to generate the guaranteed returns. 

Asset Management

Hedgeweek: Static allocations may foil growth ambitions of hedge funds
As the hedge fund industry matures, managers who survived the financial crisis are now beginning to focus on growing beyond their original business models. 
Risk.net: Index-based longevity solutions continue to face challenges, experts say
Deutsche Bank hopes to provide a boost to the longevity risk market with the launch of a new index-based hedging product, but experts say it will struggle to attract insurers and pension schemes looking for customised protection. 
IPE: Long-term investing shattered by credit crisis
Jeroen Trip of Dutch fiduciary manager MN said that the ability to act as a long-term investor had been "shattered" by the 2008 credit crisis. 
IPE: Germany's aba blasts inclusion of occupational pensions in KID regulation
The German pension fund association (aba) has criticised the fact that an ECON report on Key Information Documents for investment products – also known as PRIPs regulation – will include occupational pension plans within its scope. 
Fitch: German corporates most affected by new pension accounting
Defined-benefit pension provisions for corporates, particularly in Germany, may rise in 2013 year-end results as new accounting rule changes come into effect, Fitch Ratings says.  
IPE: UK looks to Netherlands with defined ambition pension proposals
The UK could look to develop collective risk-sharing models inspired by the Dutch collective defined contribution (CDC) or the Danish ATP model, according to the DWP's consultation paper which runs until 19 December, 2013.  

Corporate Governance/Accounting

Philippe Maystadt presents his recommendations for enhancing the EU's role in international accounting standard-setting
Maystadt, special adviser to Commissioner Barnier, proposed a three-fold approach for setting up a structure to carry out a strategic analysis of the economic impact of the standards which would enable better coordination of the European positions. (Includes link to ESMA comment.) 
IASB/Prada: 'À la carte accounting will not deliver globally consistent standards'
Speaking in Tokyo, Prada discussed the importance of the work to achieve a single set of high quality, global accounting standards and looked at the 'remarkable progress' towards this goal. 
ESMA/Maijoor: Keynote speech at Ernst & Young Financial Regulatory Outlook Conference
Maijoor's main message was that the quality of financial statements needed to be improved. He began by looking at the need for transparency and explaining what that meant for this year's financial statements, and concluded by looking at how Europe is adopting IFRSs.  
ESMA announces financial statements' enforcement priorities for 2013
ESMA has published its European Common Enforcement Priorities for 2013. These Priorities are to be used by EEA national authorities in their assessment of listed companies' 2013 financial statements.  
ESMA clarifies shareholder cooperation in takeover situations
ESMA has published a statement on practices governed by the Takeover Bid Directive (TBD), focusing on shareholder cooperation issues relating to acting in concert and the appointment of board members.  
IMF Working Paper: International corporate governance spillovers - Evidence from cross-border mergers and acquisitions
The authors develop and test the hypothesis that foreign direct investment promotes corporate governance spillovers in the host country.  
VoxEU: Good corporate governance is bad for bank capitalisation
In reform discussions since the crisis, the potentially nefarious impact of good corporate governance on bank risk-taking often fails to be recognised. 
ACCA: Global business services - Opportunity or risk for CFOs?
New research from ACCA suggests that finance leaders see challenges in implementing global business service models, as well as recognising the significant impact they may have on the traditional role of the finance organisation.  
FRC publishes new Auditor Regulatory Sanctions Procedure and Guidance
These came into effect on 11 November 2013 for all audit firms who are registered with the ICAEW and subject to independent monitoring by the FRC's Audit Quality Review. 




© Graham Bishop