European Commission executive testifies before UK Parliament. Patrick Pearson, head of Financial Markets Infrastructure in the European Commission’s Internal Market Directorate General, testified before the UK parliament about anticipated EC rulemakings. According to Reuters, Pearson said the EC will cautiously consider potential curbs to shadow banking and, in so doing, seek to avoid any unintended consequences. It is unlikely that the Commission will require banks to divest themselves of their proprietary trading activities. (12/10/2013) Testimony.
UK watchdog reports on annuities industry. The Telegraph summarized a report issued by the UK’s Financial Services Consumer Panel on insurance industry annuities. The report found that some firms are exacting excessive fees and charges from customers. (12/9/2013) Report.
EBA report on bank transparency. The European Banking Authority published a follow-up review which assesses the disclosures made by 19 European institutions in response to the Basel Pillar 3 requirements, as set out in the EU Capital Requirements Directive. Despite improvements in some specific areas, credit institutions’ compliance with disclosure requirements remains unchanged compared to last year’s assessment where no bank had fully met all the requirements. The report also highlighted that comparability and consistency of disclosures between the different institutions could be improved. (12/9/2013) EBA press release.
UK FCA quarterly consultation paper. The UK Financial Conduct Authority published its quarterly minor amendment proposals. These proposals relate to the transfer of consumer credit regulation from the Office of Fair Trading to the FCA, introduce an administrative charge to recover costs of dealing with late publication by listed issuers of periodic financial reports under the disclosure and transparency rules, extend the ability of authorized fund managers and others to communicate electronically with unitholders (including through website-based communications), and amend the procedure for processing a waiver application. Comments should be submitted by February 6, 2014. (12/6/2013) FCA press release.
EBA final draft standards for exposure determinations. The European Banking Authority published its final draft Regulatory Technical Standards (RTS) which define the conditions and methodologies used to determine the overall exposure to a client or group of connected clients resulting from an exposure to a transaction with underlying assets and the risks inherent in the structure of the transaction itself. The draft RTS set out the methodology for the calculation of the value of exposures to transactions with underlying assets, the procedure used to determine the contribution of underlying exposures to overall exposures to clients and groups of connected clients and the conditions under which the structure of the transaction does not constitute an additional exposure. (12/5/2013) EBA press release.
EBA final standards for assessing materiality of model extensions. The European Banking Authority published final regulatory technical standards (RTS) specifying the conditions for assessing the materiality of extensions and changes of internal approaches for credit and operational risk. Under the Capital Requirements Regulation, all institutions must apply for permission whenever they intend to implement any material extension and change to their internal approaches for credit and operational risk. The proposed RTS aim at harmonizing the assessment of the materiality of extensions, and changes to internal approaches, as well as at ensuring that approved internal approaches comply with the regulatory requirements. (12/5/2013) EBA press release.
EBA publishes XBRL taxonomy. The European Banking Authority published its XBRL taxonomy to be used for remittance of data under the Implementing Technical Standards (ITS) on supervisory reporting. The taxonomy defines a representation for data collection under the reporting requirements related to own funds, financial information, losses stemming from lending collateralized by immovable property, large exposures, leverage ratio and liquidity ratios. It presents the data items, business concepts, relations, visualizations and validation rules described by the EBA Data Point Model contained in the ITS. (12/2/2013) EBA press release.
ESMA report on credit rating agencies. The European Securities and Markets Authority published a report identifying a number of deficiencies in the processes for producing and issuing sovereign ratings at the three largest credit rating agencies: Fitch Ratings, Moody’s Investors Service and Standard & Poor’s. (12/2/2013) ESMA notice.
UK PRA capital standards. The UK Prudential Regulation Authority announced key decisions on capital standards ahead of the introduction of a new European capital regime next year. Specifically, the PRA has confirmed the minimum Pillar 1 capital requirements for firms and the dates from which they apply. The PRA will require firms to meet a 4 percent Pillar 1 CET1 requirement in 2014, rising to 4.5 percent from January 1, 2015. Similarly, during the same period the required Pillar 1 Tier 1 capital ratio will be 5.5 percent, rising to 6 percent from January 1, 2015, onwards. PRA will introduce the final definition of CET1 as quickly as possible. Firms will accordingly be required to make all necessary deductions to bring CET1 in line with the end-point definition from January 1, 2014. The PRA has further decided that firms should meet all Pillar 2A risks, including pension risk, with at least 56 percent CET1 capital from January 1, 2015, onwards. This matches the proportion of CET1 capital required for Pillar 1. (11/29/2013) PRA press release.
Adjustments to PRA’s capital regime for UK banks and building societies. The UK Prudential Regulation Authority announced that it will extend the capital offset for corporate lending which accompanies the Funding for Lending scheme but will not extend the capital offset for household lending, which will end on 31 December 2013. PRA press release. (11/28/2013)
Regulators publish principles for financial product oversight. The Joint Committee of the three European Supervisory Authorities published eight principles applicable to the oversight and governance processes of financial products. These principles cover the responsibilities of manufacturers and producers in setting up processes, functions and strategies for designing and marketing financial products. (11/28/2013) EBA press release.
ESMA approves two trade repositories. The European Securities and Markets Authority approved the registrations of two trade repositories under the European Market Infrastructure Regulation. They are ICE Trade Vault Europe Ltd. and CME Trade Repository Ltd. (11/28/2013) ESMA notice.
ESMA publishes updated guidance. The European Securities and Markets Authority published updated guidance concerning the Guidelines on ETFs and other UCITS issues. (11/27/2013) ESMA notice.
EBA consults on own funds. The European Banking Authority opened a consultation on Draft Regulatory Technical Standards (RTS) on own funds (Part IV) aimed at setting harmonized criteria for instruments with multiple distributions that would create a disproportionate drag on capital, as well as clarifying the meaning of preferential distributions. These RTS will be part of the Single Rulebook in banking. Comments should be submitted by January 24, 2014. (11/27/2013) EBA press release.
UK FCA proposes new rules for the use of dealing commissions. The UK Financial Conduct Authority published proposed changes to its rules concerning how investment managers may use dealing commissions - paid from their customers’ funds - to acquire execution-related and research goods and services. Comments should be submitted by February 25, 2014. (11/25/2013) FCA press release.
ESMA technical advice on credit rating agencies. The European Securities and Markets Authority finalized its Technical Advice to the European Commission on the feasibility of a network of small and medium sized credit rating agencies that would increase competition in the market. (11/21/2013) ESMA notice.
ECB consults on mobile banking. The European Central Bank launched a public consultation on the “Recommendations for the security of mobile payments.” Comments on the consultation should be submitted by January 31, 2014. (11/20/2013) ECB press release.