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EU eyes new rules to supervise financial giants
August 16, 2010-- The European Union's executive arm proposed on Monday to give national supervisors more power to oversee financial conglomerates as part of efforts to prevent any new crisis.
The new rules would give authorities the ability to get better information at an earlier stage when large financial groups "run into trouble" and be better equipped to intervene, the European Commission said.
The proposed rules would affect complex financial groups -- such as Germany's Allianz -- which operate both in the banking and insurance sectors and are often active in more than one country in the 27-nation EU.
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Source: EUbusiness
Eurozone inflation rises to 1.7 per cent in July
EU up to 2.1%
August 16, 2010--Euro area1 annual inflation was 1.7% in July 20102, up from 1.4% in June. A year earlier the rate was -0.6%. Monthly inflation was -0.3% in July 2010.
EU3 annual inflation was 2.1% in July 2010, up from 1.9% in June. A year earlier the rate was 0.2%. Monthly inflation was -0.2% in July 2010.
These figures come from Eurostat, the statistical office of the European Union.
Inflation in the EU Member States
In July 2010, the lowest annual rates were observed in Ireland (-1.2%), Latvia (-0.7%) and Slovakia (1.0%), and the highest in Romania (7.1%), Greece (5.5%) and Hungary (3.6%). Compared with June 2010, annual inflation rose in nineteen Member States, remained stable in one and fell in six.
The lowest 12-month averages4 up to July 2010 were registered in Ireland (-2.4%), Latvia (-1.8%) and Portugal (0.0%), and the highest in Hungary (5.1%), Romania (4.8%) and Poland (3.3%).
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Source: Eurostat
STOXX Launches New Set Of Non-Capped Supersector Indices For Europe
August 16, 2010--STOXX Limited, a global index provider and creator of the leading European equity indices, today announced the launch of the STOXX Europe 600 NC Supersector Indices, a set of non-capped (NC) supersector indices for the European region. The new indices are intended to be used for benchmarking purposes.
The launch of the STOXX Europe 600 NC Supersector Indices follows the decision to cap the component weights in the existing STOXX Europe 600 Supersectors Indices on a quarterly basis to ensure compliance with UCITS III standards for portfolio diversification. This will be implemented with the September Benchmark Review and become effective on September 20, 2010.
“The upcoming methodology change for the STOXX Europe 600 Supersector Indices in regard to capping of the component weights will allow passive investment products to follow the performance of the well-known supersector indices, while complying with the regulatory requirements of UCITS III,” said Hartmut Graf, chief executive officer, STOXX Ltd. “We are launching the STOXX Europe 600 NC Supersector Indices today to accommodate those market participants who prefer an un-capped benchmark, thus taking a further step to strengthen STOXX’s product offering for the buy-side business.”
The STOXX Europe 600 NC Supersector Indices aim to represent the largest European companies in each of the 19 ICB supersectors, and currently cover Austria, Belgium, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. The 19 supersectors are: Automobiles & Parts, Banks, Basic Resources, Chemicals, Construction & Materials, Financial Services, Food & Beverage, Health Care, Industrial Goods & Services, Insurance, Media, Oil & Gas, Personal & Household Goods, Real Estate, Retail, Technology, Telecommunications, Travel & Leisure and Utilities.
The STOXX Europe 600 NC Supersector Indices are weighted by free-float adjusted market capitalization, without capping of component weights. They are reviewed quarterly in March, June, September and December. Daily history is available back to December 31, 1986. The indices are available in price and net return versions, and are calculated in Euro and U.S. Dollar (USD).
Further information on the STOXX Europe NC Supersector Indices is available at www.stoxx.com.
Source: STOXX
CESR holds seminar for CRA on CEREP reporting instructions
August 16, 2010-- In order to facilitate the tasks of all Credit Rating Agencies’ organisations CESR will conduct a one-day seminar on the “CRAs Reporting Instructions” on 9 September 2010 at its Paris premises in France.
This seminar is indented to support credit rating agencies’ understanding of how to technically comply with the CEREP reporting requirements. It is addressed to persons in charge of the technical implementation of CEREP reporting project, including IT business analysts and/or IT specialists with knowledge of their internal ratings databases. Participants of this training will gain insight in how to develop the technical facilities and procedures needed to comply with the CEREP reporting requirements.
view consultation letter
Source: CESR
The Futures And Options Association Publishes Response To CESR OTC Standardisation Paper
The Futures and Options Association supports CESR’s targets for managing more closely the risks
associated with the trading of OTC derivatives – but not without reservations
August 16, 2010--In its response, published today, to the CESR Consultation Paper, “Standardisation
and Exchange Trading of OTC Derivatives”, the FOA welcomes CESR’s recognition of the advantages
of exchanges in terms of transparency, centralised supervision and post?trade processing.
On the other hand, the FOA does not accept that the trading of standardised contracts on organised trading
platforms (or the standardisation of OTC contracts) should be the subject of a regulatory mandate.
Regulatory concerns surrounding bilateral execution of OTC contracts are in the process of being
addressed by the industry and there is no reason why end?users should not continue to enjoy the
right to select their preferred execution methodologies for the contracts entered into by them.
The FOA supports CESR’s acknowledgement of the need to preserve the ability of non?financial institutions to use OTC derivatives to hedge their risks, but would urge CESR to consider extending that recognition to cover, for example, the equivalent risk management activities of fund managers.
The FOA notes the recognition given by CESR to market differentiation, particularly in relation to commodity markets, and the importance of sustaining the availability of bespoke contracts. It is important that this recognition is given full practical expression in developing new regulatory standards for the markets.
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Source: FOA
MiFID: CESR publishes responses to consultation on client categorisation
August 16, 2010-- CESR published today the responses received on its consultation on CESR's advice in the context of the MiFID Review – Client Categorisation.
view responses
Source: CESR
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
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