Bank of England financial stability paper. The Bank of England published a paper on sovereign debt restructuring. For reasons of equity and efficiency, private creditors should play a greater role in risk-sharing and helping to resolve sovereign debt crises. The paper proposes the introduction of two complementary types of state-continent bonds: “sovereign cocos” and “GDP-linked bonds.” (11/19/2013) Bank of England press release.
ESMA standards for non-EU derivatives transactions. The European Securities and Markets Authority issued final draft regulatory technical standards (RTS) related to derivative transactions by non-European Union (EU) counterparties. The RTS implement provisions of the Regulation on OTC derivatives, central counterparties and trade repositories (EMIR). The EMIR provisions regarding central clearing and risk mitigation techniques also apply to those OTC derivatives entered into by two non-EU counterparties which have a direct, substantial and foreseeable impact on EU financial markets. ESMA’s draft RTS clarify that OTC derivative contracts entered into by two counterparties established in one or more non-EU countries, for which a decision on equivalence of the jurisdiction’s regulatory regime has not been adopted, will be subject to EMIR where certain conditions are met. (11/18/2013) ESMA notice.
ESMA reviews financial reporting. The European Securities and Markets Authority published a review of the comparability and quality of disclosures in 2012 IFRS financial statements of listed financial institutions. The review makes recommendations aimed at enhancing the transparency of financial statements through the improvement of disclosures in certain key areas including credit risk and impact of forbearance practices; liquidity and funding risk; asset encumbrance; and fair value measurement of financial instruments. (11/18/2013) ESMA notice.
UK FCA proposes amendments to the Recognized Investment Exchanges sourcebook. The UK’s Financial Conduct Authority opened a consultation on changes to its Recognized Investment Exchanges sourcebook. The proposal would make clear how the FCA will take competition considerations into account when supervising Recognized Investment Exchanges and Recognized Overseas Investment Exchanges. Comments should be submitted by January 31, 2014. (11/18/2013) FCA press release.
UK systemic risk survey. The Bank of England published the results of its systemic risk survey which was conducted between September 23 and October 24, 2013. The survey quantifies and tracks market participants’ views of risks to, and their confidence in, the UK financial system. (11/18/2013)
Euro zone bailout. According to Reuters, finance ministers from the European Union have agreed that euro zone bailout funds may be used to support failing banks, if necessary. (11/15/2013) Agreement.
CCP default resources. The Bank of England published a paper on the adequacy of central counterparties’ default resources. The paper proposes a methodology in which daily data on a CCP’s member exposures would be used to form a top-down statistical model of the risk arising from the CCP’s exposures to its members. (11/15/2013) Bank of England press release.
ESMA risk dashboard. The European Securities and Markets Authority published its risk dashboard for the third quarter of 2013. (11/15/2013) ESMA notice.
Trilogue agreement on Omnibus II. EC Commissioner Michel Barnier discussed the November 13, 2013 trilogue agreement on draft Omnibus II measures implementing Solvency II. Omnibus II would create a risk-based regulatory and supervisory framework for the insurance sector, including measures to clarify the treatment of insurance products with long-term guarantees. (11/14/2013) Barnier Memo. Risk.net summarized the agreement’s provisions (11/14/2013) Summary.
ESMA consults on Market Abuse Regulation. The European Securities and Markets Authority published a discussion paper setting out the measures it will have to develop for the new Market Abuse Regulation. Comments should be submitted by January 27, 2014. (11/14/2013) ESMA notice.
ESMA clarifies shareholder cooperation in takeover situations. The European Securities and Markets Authority published a statement on practices governed by the Takeover Bid Directive (TBD), focused on shareholder cooperation issues relating to acting in concert and the appointment of board members. The statement contains a White List of activities on which shareholders can cooperate without the presumption of acting in concert. It also contains information on how shareholders may cooperate in order to secure board member appointments by setting out factors that national authorities may take into account when considering whether shareholders are acting in concert. (11/12/2013) ESMA notice.
EBA peer review on the implementation of stress testing. The European Banking Authority published the peer review on the implementation of the EBA guidelines on stress testing. The peer review assessed the effectiveness of the supervisory activities related to the review of credit institutions’ own stress testing frameworks across the EU, as well as the implementation of related provisions by competent authorities. The report found that National Competent Authorities largely comply with the assessed guidelines. (11/12/2013) EBA press release.
ESMA enforcement priorities. The European Securities and Markets Authority has published its European Common Enforcement Priorities for 2013. These Priorities are to be used by European Economic Area national authorities in their assessment of listed companies’ 2013 financial statements. The Priorities identified refer to the application of IFRS in relation to impairment of non-financial assets; measurement and disclosure of post-employment benefit obligations; fair value measurement and disclosure; disclosures related to significant accounting policies, judgments and estimates; and measurement of financial instruments and disclosure of related risks. (11/11/2013) ESMA notice.
Bank of England financial stability paper. The Bank of England published a paper analyzing the structure and dynamics of the UK single-name credit default swap market. (11/8/2013) Bank of England press release.
UK FCA statements on commodity markets. The UK Financial Conduct Authority issued two statements concerning the commodity markets. The first concerns the London Metal Exchange (LME). The FCA expects the LME to ensure that approved warehouses provide effective and efficient services for the receipt, holding and delivery of metal related to the trading of LME contracts, to support the LME in meeting its regulatory obligations as a recognized investment exchange. (11/7/2013) The second concerns the FCA’s review with Ofgem of allegations of manipulation of the gas market on September 28, 2012. The two agencies did not find evidence of market manipulation. (11/7/2013)
Four trade repositories approved. The European Securities and Markets Authority approved the registrations of four trade repositories under the European Market Infrastructure Regulation. They are: DTCC Derivatives Repository Ltd.; Krajowy Depozyt Papierów Wartosciowych S.A.; Regis-TR S.A; and UnaVista Ltd. (11/7/2013) ESMA notice.
European regulators proposal concerning credit rating reliance. The Joint Committee of the European Supervisory Authorities launched a public consultation on the removal of mechanistic references to credit ratings in their guidelines. Comments should be submitted by December 5, 2013. (11/7/2013) EBA press release.
ESMA and EBA consult on complaint handling. The European Securities and Markets Authority and the European Banking Authority jointly launched a consultation on guidelines for complaints handling in the securities and markets sectors. The proposed guidelines would build on the existing guidelines on complaint handling by insurance undertakings, which were published by the European Insurance and Occupational Pensions Authority in 2012. Comments should be submitted by February 7, 2014. (11/6/2013) ESMA notice.