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Financial regulation and supervision under the spotlight at EP special committee
February 26, 2010--A wide range of major financial issues thrown up by the economic crisis were aired at a hearing held on Thursday by Parliament's Special Committee on Financial, Economic and Social Crisis (CRIS) with Bank of France governor Christian Noyer and other experts.
Calls for strengthening banks’ capital requirements, the idea of setting up a European guarantee fond, issue of institutions that are “too big to fail”, the new supervisory architecture, consumer protection and the need to overhaul international accounting rules were amongst the key questions raised at the committee's Public hearing on financial regulation and supervision.
Introducing the debate, which focused on the degree to which financial regulation and supervision failed in preventing the crisis and on future models for Europe, Special Committee chair Wolf KLINZ (ALDE, DE) said that in the EP Economics Committee, which is also discussing this issue, there “seems to be a cross-party view that financial markets need supranational supervision”. However, Member States' reservations on this were “natural” as “we are transferring their competences from national to European level”.
The session's keynote address was delivered by Mr Christian NOYER, Governor of the Banque de France, who pointed to the need to update capital requirements, reform credit rating agencies and harmonise definitions of several financial instruments.
He stressed the need to find a way “how to measure liquidity risks and how to calibrate these measures” which he saw as “very sensitive”. Re-nationalisation of the banking system was not a step in the right direction, in his view, and caution was needed so as “not to kill off banking activity”. In any case, “we need to test the macroeconomic outcome of measures that are being proposed”, so as “to find the right balance”.
Financial crisis response: Commission asks stakeholders for views on further possible changes to Capital Requirements Directive ('CRD IV')
February 26, 2010--The European Commission has launched a public consultation on further possible changes to the Capital Requirements Directive (CRD) aimed at strengthening the resilience of the banking sector and the financial system as a whole. The proposed changes, known as 'CRD IV', following two earlier Commission proposals amending the CRD, relate to seven specific policy areas, most of which reflect commitments made by G20 leaders at summits in London and Pittsburgh during 2009.
These commitments included building high-quality capital, strengthening risk coverage, mitigating pro-cyclicality and discouraging leverage, as well as strengthening liquidity risk requirements and forward-looking provisioning for credit losses. All interested stakeholders are invited to reply to the consultation by 16 April 2010, indicating what impact the potential changes would have on their activities. The results will feed into a legislative proposal scheduled for the second half of 2010.
Internal Market and Services Commissioner Michel Barnier said: "It is essential that we learn all the lessons from the crisis. In that context, I want to ensure an effective follow-up of international decisions. It is vital that we further strengthen the solidity of financial institutions and put in place new rules in order to be better prepared for the crises of tomorrow. But before making a proposal on 'CRD IV', I want to ensure that we have consulted widely and assessed the impact of the potential changes. I encourage all interested parties to reply and make their views known."
About the consultation
The purpose of the CRD (2006/48/EC and 2006/49/EC) is to ensure the financial soundness of banks and investment firms. Together they stipulate how much of their own financial resources banks and investment firms must have in order to cover their risks and protect depositors.
The Commission is asking all interested stakeholders for their views on further possible changes to the CRD. These possible changes ('CRD IV') will supplement the two existing sets of revisions adopted in October 2008 ('CRD II', IP/08/1433 ) and July 2009 ('CRD III', IP/09/1120 ).
The seven areas of potential action are as follows:
Liquidity standards: Introducing liquidity standards that include a liquidity coverage ratio requirement underpinned by a longer-term structural liquidity ratio.
Definition of capital: Raising the quality, consistency and transparency of the capital base.
Leverage ratio: Introducing a leverage ratio as a supplementary measure to the Basel II risk-based framework based on appropriate review and calibration.
Counterparty credit risk: S trengthening the capital requirements for counterparty credit risk exposures arising from derivatives, repos and securities financing activities.
Countercyclical measures: A countercyclical capital framework will contribute to a more stable banking system, which will help dampen, instead of amplify, economic and financial shocks.
Systemically important financial institutions: The Commission is consulting on appropriate measures to deal with the risk posed by such institutions.
Single rule book in banking: The Commission is consulting on areas where more stringent requirements might be necessary. In addition, the Commission is consulting on the appropriate prudential treatment of real estate lending. This is part of the Commission's commitment to create a single rule book in Europe.
In order to achieve the dual objective of improving the resilience of the global financial system and ensuring a level playing field, it will be essential that a more robust and consistent set of prudential capital requirements is applied across the world. Consequently, the possible changes set out in the consultation document are closely aligned with the forthcoming amendments to the Basel II framework and the introduction of a global liquidity standard that are currently being drawn up by the Basel Committee on Banking Supervision (BCBS, http://www.bis.org ). In this context, as part of the countercyclical measures, the Commission puts greater emphasis on dynamic 'through-the-cycle' provisioning.
Next steps
In the second half of 2010 the Commission intends to adopt and publish a legislative proposal dealing with some or all of the areas discussed in this and previous consultations. Any such proposal will be developed in the light of both responses to the consultations and an impact assessment examining the anticipated effects of options for achieving the outlined policy objectives. In this respect, the Commission has also invited the Committee of the European Banking Supervisors (CEBS) to carry out a European Quantitative Impact Study to aid the assessment of the aggregate effect of the proposed revisions.
The consultation is available at:
http://ec.europa.eu/internal_market/bank/regcapital/index_en.htm
Markets show slight recovery after fears of political instability
January 26, 2010--Turkey’s markets recovered slightly yesterday, after a massive slide on Wednesday as confidence in the stock exchange slipped on domestic political tensions and news from the US that home sales had reached their lowest levels in January since 1963.
The market saw a slight recovery from the losses of Wednesday by the end of the first session of trading, starting the day off on a positive note. Trading at the close of the first session ended at 50,356.15, a 1.40 percent gain from 49,659.56, its standing at the end of the day on Wednesday.
Increase in products predicted to drive future cross-border market
February 8, 2010--Hewitt Associates has claimed a third of multi-national companies could have pan-European pension arrangements by 2015, as increased offerings from financial services providers could open the market to mid-sized companies.
Findings from a survey of 14 major financial services providers across Europe, including insurance organisations, suggest 75% of respondents have already implemented some form of cross-border pension product, and most have undertaken feasibility studies on behalf of multi-national companies.
Profit-linked pensions creep in from US
February 26, 2010--Companies in the UK are starting to link pension payments to profits, with employees set to receive lower pay-outs in leaner years.
US companies with UK subsidiaries have been introducing the schemes over the past 18 months, but consultants say that UK-owned companies are now also considering the move.
Linking pensions to profits would allow companies to minimise contributions in difficult years, while avoiding the need to stop them entirely.
Fund for Greek companies launched
February 26, 2010--A Greek advisory firm has launched the first fund that will specifically target the needs of financially troubled Greek companies
Lead Finance, which specialises in distressed financing and restructuring and is run run by an ex-Goldman Sachs banker, has raised $100m for the fund, called Lead Recovery Capital 1, from five US distress investors.
DB Index Research -- Weekly ETF Reports - Europe
February 25, 2010--Highlights
ETF Volume
Exchange based Equity ETF turnover declined by 2.9% on the previous week. Daily turnover for the previous week was E1.6bn. European fixed income ETF turnover declined by 6.4% to E252.3m.
In exchange based bond ETFs, db x-trackers US Dollar Money Market ETF has the highest daily turnover of E26.66m. Among the Equity ETFs, iShares DAX (DE) has the highest daily turnover of E86.23m.
There was one new listing last week. Source issued one new ETF on Deutsche Borse. The ETF listed was primary listing.
Style ETFs remained at the top position as leading product area with total turnover of E486m with 29.91% of total ETF turnover followed by European Regional ETFs with total turnover of E473m accounting for 29.12% of total ETF turnover. The DAX ETFs remain the dominant country products with total average daily volume of E183m across the fourteen listed products and accounting for 11.3% of all equity ETF volume.
DJ Euro STOXX 50 ETFs accounted for 15.6% of turnover trading E254m per day with liquidity split across 17 ETFs and 44 different listings on 9 exchanges.
Market Share
The Deutsche Borse XTF platform has the largest market share with 36.5% of total turnover. The Euronext NextTrack platform has 23.5% market share. The LSE’s combined Italian Exchange and London market share is now 25.3%.
Assets under Management (AUM)
Total European Equity related AUM rose by 3.3% to E114.4bn during last week. AUM for DJ Euro STOXX 50 ETFs was E21.5bn accounting for 18.8% of total European AUM. Fixed Income ETF AUM remained at about the same level at E36.7bn.
Overall, the largest ETF by AUM was Lyxor ETF DJ Euro STOXX 50, an Equity based ETF, with AUM of E5.2bn. The largest Fixed Income ETF by AUM was the iShares € Corporate Bond with AUM of E3.2bn.
To request a copy of the report
Investors say transparency is key in product choice: study
February 25, 2010--German institutional investors see transparency, and not performance, as crucial when they choose a product. This is one of the more surprising findings of portfolio Verlag’s asset allocation study, which was published in English last week
In the study, 67 percent of the investors cited transparency as the most important factor, followed by counterparty risk (54 percent) and performance (40 percent). Other factors mentioned included liquidity (36.5 percent), cost (35 percent) and volatility (19 percent). A total of 337 German investors with €570 billion in assets were queried for the study.
Another surprise was the investors’ choice of a vehicle. Around 35 percent said they preferred exchange traded funds (ETFs), only ten percentage points below those who said they liked German institutional funds (Spezialfonds) or actively-managed Ucits funds.
Nine Barclays Bank ETCs Launched on Xetra
February 25, 2010--Nine exchange traded commodities (ETCs) issued by Barclays Bank have been tradable on Xetra® since Thursday, under the product name iPath.
Seven of the nine ETCs track the performance of sub-indices of the S&P GSCI Total Return Index. These indices track the performance of agricultural products and commodities, grains, livestock, industrial metals, precious metals and the energy sector. Investors can also track the performance of the commodities index S&P GSCI Total Return with the iPath S&P GSCI Total Return ETN. The index comprises agricultural products, energy, livestock, and industrial and precious metals.
Another of the ETCs tracks the performance of the Dow Jones–UBS Commodity Index, which contains energy, liquid fuels, precious and industrial metals, grains, livestock, and agricultural commodities and products.
iPath Dow Jones-UBS Commodity Index Total Return ETN
DE000BC1C7J1
iPath S&P GSCI Agriculture Index Total Return ETN
DE000BC1DBJ5
iPath S&P GSCI Energy Index Total Return ETN
DE000BC1DBH9
iPath S&P GSCI Grains Index Total Return ETN
DE000BC1DBK3
iPath S&P GSCI Total Return ETN
DE000BC1DBG1
iPath S&P GSCI Industrial Metals Index Total Return ETN
DE000BC1C7K9
iPath S&P GSCI Livestock Index Total Return ETN
DE000BC1DBM9
iPath S&P GSCI Precious Metals Index Total Return ETN
DE000BC1C7L7
iPath S&P GSCI Softs Index Total Return ETN
DE000BC1DBL1
Investment Funds: Finesti and Clearstream Optimize Allocation of ISIN Codes
February 25, 2010-- Finesti S.A. and Clearstream Banking Luxembourg have concluded a technology partnership agreement to simplify and optimize the allocation of ISIN (International Securities Identification Number) codes for all investment funds under Luxembourg law.
Under the terms of the agreement, Finesti’s e-file.lu application will become one of the channels for the electronic submission of requests for the allocation of ISIN codes within Clearstream, in its capacity as a national numbering agency. This entirely electronic solution offers promoters of investment funds several advantages, including traceability and security for allocation requests as well as real-time tracking.
In order to be officially processed, all issued securities, equities, bonds and investment funds must feature an ISIN code allocated by a national agency. Clearstream undertakes this task in Luxembourg. Each year, Clearstream allocates around 15,000 new ISIN codes to Luxembourg funds.
Philippe Seyll, Head of Investment Fund Services at Clearstream, is delighted about “this initial cooperation between Finesti and Clearstream which is a new step towards further improving efficiency and the infrastructure for handling Luxembourg investment funds”.
For his part, Dominique Valschaerts, Finesti’s CEO, stated that “this new procedure, which is based on Finesti’s e-file tool, complements the already extensive range of its functions, thereby contributing to optimizing the registration procedure of Luxembourg funds”.
