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Potential Risks Associated with Investing in Contingent Convertible Instruments
July 31, 2014--The European Securities and Markets Authority (ESMA) is issuing this statement to clarify to institutional investors risks from a newly emerging asset class referred to by most market participants as contingent convertibles instruments (CoCos).
If they work as intended in a crisis CoCos will play an important role to inhibit risk transfer from debt holders to taxpayers. They along with standards to improve the quality and quantity of bank capital reflect a considerate response to the former regulatory capital framework. However, it is unclear as to whether investors fully consider the risks of CoCos and correctly factor those risks into their valuation. ESMA believes there are specific risks to CoCos and that investors should take those risks into consideration prior to investing in these instruments.
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Source: ESMA
Business Climate Indicator decreases marginally in July
July 30, 2014--In July 2014 the Business Climate Indicator (BCI) for the euro area decreased marginally by 0.04 points to +0.17. Managers' more optimistic views on expected production and, to a lesser extent, the current level of overall order books were offset by an important decline in their assessments of past production.
Managers' assessment of stocks of finished products and export order books remained broadly unchanged.
The BCI is based on a factor analysis of the euro area aggregate balances (seasonally adjusted) of five of the monthly questions in the industry survey (only employment and selling-price expectations are excluded).
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Source: Europa
July 2014: Economic Sentiment stable in the euro area, decreasing slightly in the EU
July 30, 2014--In July the Economic Sentiment Indicator (ESI) remained broadly stable in the euro area (+0.1 points at 102.2),1 while it decreased slightly in the EU (by 0.6 points to 105.8).
Euro area developments
The virtually flat euro area outcome perpetuates the sideways movement observed in recent months.
It resulted from confidence improvements in industry and construction which were offset by decreases in services, retail trade and among consumers. Amongst the largest euro area economies, the ESI eased in Germany (-0.5) and Spain (‑0.6), while it increased in the Netherlands (+0.4), France (+0.5) and Italy (+1.6).
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Source: Europa
IMF-United Kingdom: Selected Issues
July 28, 2014--HOUSING AND BUSINESS CYCLES: IS THE UK
DIFFERENT FROM OTHER ADVANCED ECONOMIES?1
In contrast to other OECD countries, housing cycles in the UK are marked by sharp movements in
prices and an inelastic response of residential investment, owing notably to supply constraints. Housing
cycles in the UK also tend to have a large impact on economic activity, with booms generally associated with a worsening of household balance sheets and a rise in relatively high-risk mortgages.
Alleviating supply-side constraints, notably pertaining to planning restrictions, is imperative for a
moderation of housing cycles in the UK, while risks to financial stability in the context of the current
house price inflation could be addressed by pursuing targeted macroprudential measures.
view the report
Source: IMF
London banks and brokers face research business shake-up
July 24, 2014--The City of London's biggest brokers are contemplating far-reaching changes to their business
models ahead of proposed rule changes that could hit profits at smaller brokers and fund managers
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Source: FT.com
July 2014: Flash Consumer Confidence Indicator
July 23, 2014--In July 2014, the DG ECFIN flash estimate of the consumer confidence indicator decreased in both the EU (by -1.2 points to -5.5) and the euro area (by -0.9 points to -8.4) compared to June.
Computation of Flash CCI
To compute the flash consumer confidence indicator for the EU and euro area, DG ECFIN uses the data available on the cut-off date. The estimation procedure combines historical data with information from those Member States for which data are available in the reference month.
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Source: Europa
ESMA consults on counterparty risk calculation methods for UCITS subject to central clearing
July 22, 2014--The European Securities and Markets Authority (ESMA) has launched
a consultation on the calculation
of counterparty risk by Undertakings for Collective Investment in Transferable Securities (UCITS) which enter into OTC derivative transactions which need to be centrally cleared under the European Markets Infrastructure Regulation
(EMIR).
The UCITS Directive allows UCITS to invest in both
exchange-traded derivatives (ETDs) and OTC derivatives. However, only
investments in OTC derivatives are subject to counterparty risk exposure
limits.
Turquoise expands clearing choice for ETF trades
July 21, 2014-Turquoise, the London Stock Exchange's alternative equity market, will start offering a choice of clearing house for exchange-traded funds from Monday,
joining rival Bats Chi-X Europe.
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Source: Financial News
ESMA issues updated Q&A on the application of the Alternative Investment Managers Directive (AIFMD)
July 21, 2014--The European Securities and Markets Authority (ESMA) published today an update of its Questions & Answers (Q&A) document on the application of the Alternative Investment Managers Directive (AIFMD).
The updated Q&A clarifies:
the reporting obligations to national competent authorities; as well as
the obligations for depositaries and the calculation of leverage.
view the Questions and Answers-Application of the AIFMD
Source: ESMA
IMF Country Report-Germany: Selected Issues
July 21, 2014--I. THE GERMAN CURRENT ACCOUNT: A RETROSPECTIVE1
The build-up of Germany's current account surplus over the last decade does not lend itself to a single-factor explanation, as both global and domestic factors, as well as policy changes led to increased savings and lower investment.
All sectors contributed to the build-up of the surplus. While fiscal consolidation and higher
household savings played a role, the corporate sector experienced a more
pronounced shift. This note provides a retrospective on these developments and
explores whether the factors contributing to the surplus are likely to be reversed
going forward.
view the IMF Country Report-Germany: Selected Issues
Source: IMF
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