18 posts categorized "EMEA Centre for Regulatory Strategy"
The housing market topped the list of concerns of the Bank of England’s Financial Policy Committee (FPC) in its latest assessment of the prospects for financial stability in the UK. The FPC fired a salvo of initiatives that together should ensure the financial system remains resilient as housing market activity continues to pick up. What stood out though was the suggestion the Committee might in future introduce a new macro prudential tool based on the affordability of mortgages. This would open up a new front in banking supervision, adding complexity to the regulatory framework for mortgage lending, changing the nature of the affordability assessment and potentially affecting the dynamics of the mortgage market itself.
The reach of the European Market Infrastructure Regulation (EMIR) is widening with branches of non-EU financial institutions clearly on the radar of European regulators. The recently published draft rules from the European Securities and Markets Authority (ESMA) make clear that EU regulators intend to have their arms around the widest possible set of OTC derivatives transactions if they could pose a threat to financial stability within the EU.
In an interview with German financial newspaper Handelsblatt on Wednesday, EU Commissioner Michel Barnier provided an update on the European Commission’s proposals on structural banking reform. He said he was going to put forward a legislative proposal for reform at the European level by the end of the year, and indicated that the proposal would prefer harmonisation over national flexibility: “we need to take care that national rules do not differ too much from each other so that comparative competitive conditions for banks are preserved”.
What has been decided?
The European Trialogue have agreed on the key details that have been holding up Omnibus II negotiations over the last few years via an 8 hour meeting held yesterday.
Agreement at the meeting between the European Parliament, European Committee and European Council paves the way for implementation of Solvency II from 1 January 2016 and provides insurers with much-needed clarity on timelines.
Fundamental Review of the Trading Book | Results from the publication of the second consultation paper
Banks are facing a world in which they will have less discretion and more intense supervisory oversight of their internal risk models, if the latest proposals for the Fundamental Review of the Trading Book (FRTB) from the Basel Committee on Banking Supervision (BCBS), published on 31 October, are adopted.
This second consultation incorporates feedback from industry delivered since the original consultation in May 2012, and many industry observations appear to have been taken into account. However, as currently drafted, various aspects of the new proposals may still prove challenging for the industry to implement.
The mammoth task of reporting OTC derivative transactions has moved a huge step closer with the authorisation of four trade repositories (TRs) by the European Securities and Markets Authority (ESMA). This is the final leg of a very long process. What started out as a political commitment back in September 2009 will become a reality for European counterparties, including corporates, on 12 February 2014 – now confirmed as the date on which reporting obligations under the European Market and Infrastructure Regulation (EMIR) will commence.
Before the European Central Bank (ECB) formally takes responsibility for bank supervision under the Single Supervisory Mechanism (SSM) – expected to be from November 2014 – it will conduct a thorough review of the assets of the banks that it will directly supervise. The comprehensive assessment, as it is called, nominally has three goals: to deliver greater transparency on balance sheets; to prompt the repair of impaired balance sheets; and to rebuild confidence in banks. More fundamentally though, the ECB considers the exercise essential, so that it can begin its supervisory confident in the knowledge that the major banks are on a sound capital footing.
The ECB today (23 October 2013) published details of the assessment exercise and the banks affected. This is essential reading for anyone with an interest in the banks concerned. The exercise is significant in size and scope. Banks will need to start preparing now and for many the exercise will consume significant management and financial resources.
Bank resolution is central to regulatory efforts to overcome ‘too big to fail’. Within this, proposals for a bail-in tool, and requirements for additional loss absorbing capacity (LAC) beyond minimum regulatory capital requirements, have the potential to constrain further the flexibility banks
have to manage their balance sheets.
The challenges of dealing with new resolution frameworks are compounded by an alphabet soup of acronyms in a minefield of jargon, which is not always consistent across borders. It can be difficult to keep track of the evolving policy agenda, and so here we attempt to shed some light.
On 15 October 2013, Europe’s Finance Ministers agreed the two Regulations which will put in place a Single Supervisory Mechanism (SSM) for banks in the Eurozone and EU member states which choose to opt-in to the SSM.
The ECOFIN vote is the last step in the EU legislative process for the SSM. The European Parliament has already voted in favour of the Regulations and their text can no longer be changed. Publication in the Official Journal (OJ) of the European Union, the legal pre-condition for entry into force, will shortly follow. Following OJ publication, the European Central Bank (ECB) – the body entrusted with new prudential supervisory responsibilities, including the direct supervision of around 130 of Europe’s most ‘significant’ banks – can officially begin preparations for SSM.
Paul Tucker, Deputy Governor of the Bank of England and Chair of the Financial Stability Board's (FSB) Resolution Steering Group gave a speech on solving Too Big To Fail (TBTF) at the Institute of International Finance 2013 Annual Membership Meeting in Washington on Saturday afternoon. It’s a short, punchy and important speech which deserves to be read in full (Paul Tucker Speech – Saturday 12 October).