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European Commission: Revision Of The Financial Conglomerates Directive - Frequently Asked Questions
August 16, 2010--1) What are financial conglomerates?
Financial conglomerates are financial groups that are active in one or more country and operate in both the insurance and banking business. They are often large and complex. Due to their size, financial conglomerates are often of systemic importance to our economy: either for one or more Member States or even for the EU as a whole.
The fact that financial conglomerates can impact our economy was highlighted during the financial crisis in 2008. A number of financial conglomerates had difficulties and governments across Europe had to resort to large financial injections in order to keep these financial conglomerates afloat.
2) How are financial conglomerates currently supervised?
Currently, supervision in Europe is mainly done at the national level. Each single legal entity that wants to operate in the banking sector in an EU Member State needs authorisation from the national financial supervisor and needs to comply with the relevant banking regulation. The same applies for legal entities that want to operate in the insurance sector: such entities need to be authorized as insurance companies and must comply with the relevant insurance regulation. Supervision rules also allow for a group of authorised banking entities to be subject to consolidated banking supervision. Similarly, in the insurance sector, a group of authorised insurance entities can be subject to insurance group supervision.
Financial conglomerates are often active in both banking and insurance business and operate in several EU Member States. The Financial Conglomerate Directive (2002/87/EC) gives national financial supervisors additional powers and tools to watch over these firms. More specifically, the Directive requires supervisors to apply supplementary supervision on these conglomerates, in addition to the specific banking and insurance supervision.
3) What is supplementary supervision?
Supplementary supervision becomes relevant when a financial group (or a "conglomerate") consists of several legal entities that are authorised to do business in banking, insurance or other sectors of the financial services industry. The number of legal entities within a conglomerate can exceed 500 or even 1.000. All of these entities are controlled by a parent entity, where decisions are made regarding business strategies, internal governance and group-wide risk management. While a parent entity can be a regulated entity itself, such as a bank or an insurance company, it can also take the form of a holding company.
Supplementary supervision focuses on problems that can arise from:
Multiple use of capital: supervisors are to make sure that capital is not used twice or more within a conglomerate. For example, funds may not be included in the calculation of capital on both the level of the single entity and the parent entity.
Group risks: Group risks are risks that arise from the group structure and which are not related to specific banking or specific insurance business. They refer to risks of contagion (when risks spread from one end of the group to another), management complexity (managing more than 1.000 legal entities is a far more difficult challenge than managing 20 legal entities), risk concentration (the same risk materialising in several parts of the group at the same time), and conflicts of interest (e.g. one part of the group has an interest in selling an exposure, while another part of the group has an interest in keeping that exposure).
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Source: Europa
Euro tumbles after divergent GDP report
August 13, 2010--The clouds over the eurozone finally looked to be parting on Friday, after a jump in German economic output in the second quarter helped underpin a 1 per cent rise in gross domestic product across the currency bloc.
But Germany’s stellar performance – a 2.2 per cent rise quarter-on-quarter, equivalent to a rate of 9.1 per cent a year – stood in sharp contrast to sluggish performance of countries such as Italy, Spain and Greece.
After initially welcoming the news, stock markets fell back and bonds gained as investors fretted that the German-led recovery might not be enough to counter the risks posed by precarious finances elsewhere.
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Source: FT.com
Euro growth surges past US, hitting 1.0 per cent
August 13, 2010-- - Economic growth across Europe's core euro currency zone surged past retreating US levels, hitting 1.0 percent between April and June this year, the European Union said on Friday.
Driven by Germany posting its best quarterly growth since its 1990 reunification, Europe's main stock markets bounced upwards with recovery also gathering pace in Britain and France despite Greece slipping deeper into recession.
Growth across the United States slid back to just 0.6 percent in the second quarter of 2010, having touched 0.9 percent in the first three months of the year, whereas Europe had barely managed 0.2 percent growth up to March.
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Source: EUbusiness
9.6 bn euro deficit for EU27-Euro area external trade surplus 2.4 bn euro
August 13, 2010--The first estimate for the euro area1 (EA16) trade balance with the rest of the world in June 2010 gave a 2.4 bn euro surplus, compared with +5.2 bn in June 2009. The May 20102 balance was -3.3 bn, compared with +1.9 bn in May 2009. In June 2010 compared with May 2010, seasonally adjusted exports rose by 5.2% and imports by 4.3%.
The first estimate for the June 2010 extra-EU271 trade balance was a 9.6 bn euro deficit, compared with -4.1 bn in June 2009. In May 20102 the balance was -14.8 bn, compared with -7.0 bn in May 2009. In June 2010 compared with May 2010, seasonally adjusted exports rose by 5.8% and imports by 5.2%.
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Source: Eurostat
ETFs and ETPs Update July 2010 -London Stock Exchange
August 13, 2010--Statistics
ETFs and ETPs statistics for July 2010 is now available here.
There are currently 279 ETFs and 307 other ETPs available on the London Stock Exchange from 14 issuers.
In July, 9 new ETFs and 11 new ETCs were admitted to trading. Issuers include Deutsche Bank, HSBC and Market Access.
Average daily value traded has increased 57% year on year to £362 million, the average number of trades is up 34% to 4,390.
There is now a total of 20 registered market makers providing continuous, electronically executable liquidity for ETFs and other ETPs.
Event News
The London Stock Exchange is holding its annual ETF Seminar on 8th October 2010. This seminar will be chaired by Anthony Hilton of the Evening Standard and includes a panel session with leading institutional investors. A full agenda will be published in the coming weeks.
This seminar is free to attend. To register, email academy_uk@londonstockexchange.com or call the UK Academy team on +44 207 797 1739.
view ETFs and ETPs statistics for July 2010
Source: London Stock Exchange Group
German juggernaut propels eurozone GDP 1 percent jump
August 13, 2010--European economic growth accelerated sharply in the second quarter of 2010 as Germany’s best performance since reunification more than made up for the struggles of Spain, Ireland and recession-ravaged Greece.
A forecast-beating surge in German gross domestic product combined with a solid if less impressive rise in France to push the aggregate GDP growth rate of the 16-country eurozone to 1 percent from the previous quarter and past that of the United States, which is showing signs of flagging.
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Source: Todays Zaman
Europe squares up to taxing budget questions
August 12, 2010--Europe geared up on Thursday for battle over EU funding, with a drive to slash contributions leaving a hole Brussels says can be filled only by new cross-border taxes or an end to political rebates.
Under pressure from European Union member states, the bloc's Polish budget commissioner Janusz Lewandowski has proposed lowering contributions by a combined 30-40 billion euros a year (up to 50 billion dollars).
He has suggested a variety of ways in which that can be done, so as to maintain the bloc's budget in the region of 140 billion euros per year (or just more than one percent of combined European gross domestic product).
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Source: EUbusiness
June 2010 compared with May 2010-Industrial production down by 0.1% in euro area-
Stable in EU27
August 12, 2010--In June 2010 compared with May 2010, seasonally adjusted industrial production1 decreased by 0.1% in the euro area2 (EA16) and remained stable in the EU272. In May3 production increased by 1.1% and 1.3% respectively.
In June 2010 compared with June 2009, industrial production increased by 8.2% in the euro area and by 7.7% in the EU27
These estimates are released by Eurostat, the statistical office of the European Union.
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Source: Eurostat
ETF Statistics of July 2010-Borsa Italiana
August 12, 2010--The ETF Statistics of the ETF Plus Market are now available.
view report
Source: Borsa Italiana
Eurex to Offer Euro Gold Contract
December 12, 2010--The international derivatives exchange Eurex today announced that it will launch futures and options on Xetra-Gold, the leading exchange-traded commodity (ETC) in Germany by order book turnover. The new gold contracts are set to launch on 28 September 2010.
Xetra-Gold is a zero-coupon bond denominated in euro and issued by Deutsche Börse Commodities GmbH. Launched in December 2007, Xetra-Gold is traded on Xetra®, Deutsche Börse AG’s pan-European electronic trading platform for the cash market.
“Commodities are a widely used asset class for its diversification benefits and low correlation to other markets. In particular, gold tends to be a popular investment as it’s considered a safe haven during uncertain economic times. Combining two benchmark currencies, euro and gold, in a single product, Xetra-Gold has proven to be a highly liquid and widely traded instrument among European investors. The new futures and options give our members further access to the gold market and will provide more flexibility to suit their specific needs,” said Peter Reitz, Eurex Executive Board member. “Furthermore, Eurex Clearing will accept Xetra-Gold as collateral starting on 27 August.”
The Xetra-Gold derivatives are the latest addition to Eurex’s precious metals derivatives. Since February 2009, Eurex has been offering US-dollar denominated gold futures and options based on fixing prices of the London Bullion Market. Silver futures and options based on the London Silver Fixing followed shortly after in June 2009.
The new contracts will be denominated in euro and will be physically settled with the delivery of the underlying Xetra-Gold ETC. Additionally, in a separate transaction between the holder of the ETC and Deutsche Börse Commodities, he has the right to request delivery of physical gold. Expiration dates of the derivatives will be on the third Friday of the next three calendar months as well as in March, June, September and December.
In the second quarter of 2010, Xetra-Gold achieved record inflows of 9.6 tons of gold. Electronic trading volume also totaled 757.3 million euro, an increase of 55 percent over the first quarter of 2010. Xetra-Gold is the most traded ETC available on Xetra, representing a 37 percent share of order book volume in the ETC segment.
Source: Eurex
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