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Statement of the Eurogroup
March 30, 2012--The stability and integrity of the Economic and Monetary Union have required swift and vigorous measures that had been implemented recently, together with further qualitative
moves towards a genuine Fiscal Stability Union.
In order to further improve market confidence and in accordance with the agreement reached
at the Euro Summit on 9 December 2011 and reiterated on 2 March 2012, we have reassessed the adequacy of the overall EFSF/ESM lending ceiling of EUR 500 billion which, given EUR
200 billion long term commitments of the EFSF, currently entails a 300 billion maximum
lending volume for the ESM.
We agreed on the following principles:
The paid-in capital of the ESM will be made available more quickly than initially foreseen in the ESM Treaty, in respect of national procedures. Two tranches of capital will be paid in 2012, a first one in July, a second one by October. Another two tranches will be paid in 2013 and a final tranche in the first half of 2014. In line with
the ESM Treaty, the payment of the capital will be further accelerated if needed to maintain a 15% ratio between the paid-in capital and the outstanding amount of ESM issuances.
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Source: Europa.eu
ESMA publishes the draft technical standards on short selling
March 30, 2012--Regulation (EU) No 236/2012 of the European Parliament and of the Council of 14 March on short selling and certain aspects of credit default swaps (the Regulation) requires ESMA to develop draft regulatory (RTS) and implementing technical standards (ITS) in relation to several provisions contained in Articles 9, 11, 12 and 16 of the Regulation.
The draft RTS and ITS published today will be submitted to the European Commission by 31 March 2012. The Commission has three months to decide whether to endorse ESMAs draft technical standards. A further regulatory technical standard, on the method of calculation of the fall in value of a financial instrument required under Article 24(8) of the Regulation will be submitted together with the technical advice in the course of April 2012.
Germany bids to break deadlock on disputed transactions tax
March 30, 2012-- Germany on Friday laid out proposals to break the deadlock on a controversial EU tax on financial transactions, arguing for a levy only on company shares as a first step before broadening it out.
German Finance Minister Wolfgang Schaeuble circulated the plan, obtained by AFP, to his EU counterparts ahead of a debate on the issue on the second and final day of a meeting here.
Schaeuble acknowledged "it will not be possible to attain unanimous approval of the FTT (financial transactions tax) proposal within an appropriate timeframe" given resistance to the idea primarily from Britain.
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Source: EUbusiness
Eurozone set for 'firewall' battle
March 30, 2012--Eurozone nations are set to clash Friday over boosting the zone's "firewall" against its debt crisis, as Spain's fiscal woes stokes fears that the bloc could yet be pitched into a new emergency.
Under huge international pressure, finance ministers from the 17-nation currency zone gather for a two-day meeting in Copenhagen to consider ways to bolster defences against a resurgence of the worst economic crisis in the bloc's history.
Ministers agree that the firewall needs to be strengthened from the current maximum lending capacity of 500 billion euros ($665 billion) which the eurozone permanent bailout pot, the ESM, will have when it comes into force in July.
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Source: EUbusiness
BlackRock asks European regulators to delay new ETF rules
March 30, 2012--BlackRock, the world's largest provider of exchange traded funds, is asking Europe’s main financial regulator to delay the implementation of any rule changes for ETFs until next year, arguing it is not practical to bring in new guidelines in 2012, the FT reports recently.
The European Securities and Markets Authority has said new rules for ETFs should be in place this year but BlackRock said it would require more time to update documentation and educate investors about the implications of any rule changes.
It is also resisting pressure from regulators to return all income generated by securities lending activities to its funds.
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Source: FT.com
EU Lawmakers Back Deal on Clearing Rules for OTC Derivatives
March 29, 2012--European Union lawmakers voted to approve a deal on legislation to force trading of some over-the-counter derivatives through clearinghouses to safeguard financial markets.
The deal, endorsed by the EU’s parliament in Brussels today, was reached last month by negotiators for the assembly and the region’s governments. The rules will empower EU regulators to decide on types of derivatives that should be centrally cleared. Traders who flout the rules would face penalties including fines.
“This is the cornerstone of our OTC derivatives legislation,” Sharon Bowles, chairwoman of the parliament’s economic and monetary affairs committee, told reporters.
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Source: Bloomberg
Review into HM Treasury’s management of the financial crisis
March 29, 2012--HM Treasury is today publishing a review of its management response to the financial crisis of 2007-09. The review follows a request from the Public Accounts Committee for the Treasury to conduct a 'lessons learnt' exercise.
The review considers the Treasury’s management capability during the crisis. It does not assess the effectiveness of the policy decisions taken during the crisis, which have been the subject of a number of enquiries and reviews conducted by the Public Accounts Committee, Treasury Select Committee and National Audit Office.
The review makes a series of recommendations intended to improve the Treasury’s financial services capability, including contingency planning, and address wider management challenges including staff turnover. Its conclusions represent the views of the review team and the Treasury will publish its response to the review in the summer.
Commenting on the review, Sir Nicholas Macpherson, Permanent Secretary to the Treasury, said:
"I’m very grateful to Sharon and her team for their work over the past six months. This report will help the Treasury learn the lessons of its handling of the financial crisis which started five years ago and ensure the department has the right capability to fulfil its duties in relation to financial services in the future."
view the Review of HM Treasury’s management response to the financial crisis
Source: HM Treasury
European Bankers Project 2012 Economic Recession in FICO-Efma Survey
Spanish and Portuguese risk professionals unanimously forecast local recession
March 26, 2012-FICO (NYSE:FICO), the leading provider of analytics and decision management technology, and Efma today announced the results of the fourth European Credit Risk Survey, which shows a grim outlook for 2012.
In the survey, which queried credit risk management professionals in January and February, 79% of respondents forecast a new European recession for 2012.
Opinions on the likelihood of a new European recession varied by market. For example, in Germany, Austria and Switzerland (the DACH region), just 45 percent of respondents forecast recession, and in the UK and Ireland, the count went down to 40 percent. However, 76 percent of respondents in Central and Eastern Europe said a new European recession is likely this year.
When asked if they believed their own country would enter a new recession in 2012, 100 percent of Spanish and Portuguese respondents said yes, and 44 percent saying they strongly agreed with this statement. More than half (53 percent) of respondents from the UK and Ireland forecast a local recession, compared with just 25 percent from the DACH region.
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Source: FICO
Regulation on Over-the-Counter Derivatives and Market infrastructures -FAQs
March 29, 2012--What are derivatives?
A derivative is a financial contract linked to the future value or status of the underlying to which it refers (e.g. the development of interest rates or of a currency value, or the possible bankruptcy of a debtor).
Over-the-Counter (OTC) derivative contracts are not traded on an exchange (for example the London Stock Exchange) but instead privately negotiated between two counterparts (for example a bank and a manufacturer). The definition of OTC derivatives in EMIR refers to all derivatives contracts which are not "executed on a regulated market". As a result all derivatives contracts executed on a venue of execution which is not a regulated market (e.g. a Multilateral trading facility), is considered as an OTC derivative contract under EMIR.
What is the size of the market? What kinds of products are comprised?
OTC derivatives account for almost 95% of the derivatives markets. In June 2011, the notional value of outstanding OTC derivatives was around $707 trillion or €540 trillion. The OTC derivatives market comprises a wide variety of product types across several asset classes (interest rates, credit, equity, foreign exchange (FX) and commodities) with widely differing characteristics and levels of standardisation. OTC derivatives are used in a variety of ways, including for purposes of hedging, investing, and speculating. Contrary to derivatives traded on exchanges, OTC derivatives are not automatically cleared through Central Clearing Parties (cf next question) or subject to reporting rules.
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Source: Europa
Clamping down on the derivatives trade
March 29, 2012--EU legislation to make trade over-the-counter (OTC) derivatives safer and more transparent was approved by an overwhelming majority in Parliament on Thursday.
Derivatives trading is widely believed to have contributed to the global financial crisis. The draft regulation had been provisionally agreed by Parliament and Council negotiators on 9 February.
Obligatory clearing for OTC derivatives, reporting for all derivatives
The regulation lays down that OTC derivative contracts would have to be cleared through central counterparties (CCPs), thus reducing counterparty credit risk, i.e. the risk that one party to the contract may default.
In negotiations, MEPs secured a requirement that all derivative contracts (not only OTC derivatives), would have to be reported to central data centres or "trade repositories", which would have to publish aggregate positions by class of derivatives, thereby offering market players a clearer view of the market.
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Source: European Parliament
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