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EU watchdog placed at the heart of credit rating agency supervision
December 15, 2010--The latest amendments to the rules regulating credit rating agencies (CRAs) were approved by Parliament on Wednesday. These changes were needed to effectively entrust ESMA with the direct supervision of the agencies. MEPs, with Member State support, empowered ESMA, rather than the Commission, to impose fines on CRAs.
European Securities and Markets Authority (ESMA) to directly supervise agencies by July 2011
ESMA empowered to make dawn raids, impose fines, and ensure agencies evaluate the accuracy of their past ratings
All credit rating agencies to be checked by July 2014
The amendments were approved with 611 votes in favour, 15 against and 26 abstentions.
Fining power
The Commission's initial proposal argued that the Commission itself was best placed to impose fines, upon a recommendation from ESMA. However, the final text agreed in negotiations and approved by Parliament gives this role to ESMA. A range of fines, reflecting the type of infringement, the size of the CRA, and possible aggravating or attenuating conditions, is laid down in the rules. ESMA will be able to impose fines of up to 20% of a CRA's turnover for the previous year.
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Source: European Parliament
EEX To Focus On Organic Growth
Strategy adopted until 2015 – Organic growth key focus on way to becoming leading European energy exchange – Doubling of sales revenue by 2015 planned – Considerable increase in sales and results for 2010
December 15, 2010--Over the next five years, the European Energy Exchange AG (EEX) will focus its efforts in order to become the clear leader among European exchanges on the basis of its own strength.
The strategy will see EEX concentrating on organic growth, without using additional funds from its shareholders and without cut-backs in the annual results. The partnership model will be maintained and expanded only if it is commercially sensible and viable.
This five-year aim is to be achieved through a reinforced expansion of EEX’s position in the four main strategic directions – power, natural gas, emissions and clearing
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Source: European Energy Exchange (EEX)
FESE European Equity Market Report – November 2010
December 15, 2010--FESE has published the FESE European Equity Market Report –November 2010 report.
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Source: FESE
Spain put on debt watch by Moody’s
December 15, 2010--Ratings agency Moody’s warned Spain on Wednesday that its debt rating could be downgraded, pushing Spain back into the euro zone debt spotlight ahead of an EU leaders’ summit starting on Thursday.
Moody’s said it was concerned about Spain’s high debt funding needs, its heavily indebted banks and its regional finances, but said it did not expect Madrid to have to resort to an EU bailout like Greece and Ireland. Spain, which with Portugal has come under intense market pressure in recent weeks, raising concerns it could be driven into a bailout, needs to refinance around 60 billion euros of debt early next year, according to JP Morgan research.
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Source: Todays Zaman
Basic Rules of ISE Stock Indices has been changed
December 15, 2010--At the meeting of the Executive Council of our Exchange, the following resolutions have been made with regards to the Basic Rules of ISE Stock Indices:
- Circular Letter number 292 on “Basic Rules of ISE Corporate Governance Index”, Circular Letter number 299 on “Basic Rules of ISE City Indices”, Circular Letter number 315 on "Basic Rules of ISE 10 Bank Index” and Circular Letter number 316 on “Basic Rules of ISE Stock Indices” have been combined and the Circular Letters in question have been abolished.
The new text with Circular Letter number 353 regarding the “Basic Rules of ISE Stock Indices” which has been reconstituted via the combination of Circular Letters number 292, 299, 315 and 316, has been adopted.
The number of companies which are required in order to Start/End Calculating Indices has been established as 5 and 1, respectively, and accordingly, the calculation of ISE Defense Index will be discontinued effective from January 03, 2011 as ISE Defense Index only includes the ASELSAN stock.
ISE All Index will be continued to be calculated as an index that covers all the stocks traded on the ISE (except List C and Watchlist market), and accordingly, stocks which are not currently included in its scope will be included in the index effective from January 03, 2011.
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Source: Istanbul Stock Exchange (ISE)
Baymarkets’ EDGE Energy
December 14, 2010--Baymarkets has designed a new OTC price discovery and execution platform for making trading energy futures, swaps and options easy.
Crude Oil, Natural Gas, Electricity, Ethanol, Coal and Environmental Commodities are all covered in the range of energy products handled by the platform.
EDGE Energy is an ideal system for brokerage firms, banks’ sell-side and anyone planning to create an electronic marketplace in the energy space. Brokers can increase their deal flow by attracting traders to the broker-centric screen where they can view their own activity. Brokers can offer screen trading by granting full access rights.
The system can be used as an internal whiteboard and order management system that easily connects offices worldwide, helping brokerage firms expanding their business to multiple sites.
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Source: Baymarkets
Dutch pension funds now hold more than €675bn in assets
December 14, 2010--The combined assets of Dutch pension funds have grown from €649bn at year-end 2009 to €675bn during the third quarter, with €300bn allocated to fixed income and €216bn invested in equity, according to financial supervisor De Nederlandsche Bank (DNB).
More than 50% of fixed income has been invested in government bonds in the euro area, while the owned non-euro bonds were mainly issued by financial institutions (€48bn) and companies (€30bn).
According to the regulator, 80% of pension funds' equity investments are outside the euro-zone, with €118bn invested in companies and €52bn in financial institutions. Equity investments in the euro-zone came to more than €45bn.
The DNB noted that Dutch pension funds have re-structured their investment policies over the last 18 months by placing a large part of their assets in funds for joint account (FJAs) against participations certificates.
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Source: IP&E
Stricter financial regulation can help contain future asset bubbles and reduce macroeconomic imbalances
December 14, 2010--As part of the effort to broaden macroeconomic surveillance, this Quarterly Report on the Euro Area investigates the extent to which financial supervisory and regulatory reform can help avoid future harmful credit and asset price booms, for instance in housing markets. Stricter financial supervision can help directly reduce risks to financial stability by keeping banks' leverage in check and by establishing more stringent lending standards. Further topics in this issue highlight the effect the crisis has had on cross-border banking integration in the euro area. Furthermore, the sovereign debt crisis of 2010 is shown to complicate the ongoing process of balance sheet repair. Finally, the freezing of interbank markets in 2008 has caused non-financial corporations to switch to greater bond issuance, thereby diversifying away from their traditional bank-based funding.
In keeping with the prominent role occupied by financial marked issues in recent months, this edition of the Quarterly Report on the Euro Area features analysis of a number of closely related topics in this area. The Focus Section starts with the observation that excessive credit and asset price booms in some parts of the euro area created an important source of vulnerability in the run-up to the crisis. A single monetary policy for the euro area is by itself unable to effectively address the adverse effects of excessive credit growth, which in the past has shown strong regional divergences. The financial crisis has further exposed the limits of the current regulatory and supervisory structure in dealing with the build-up of balance sheet vulnerabilities in the banking sector. In this respect, the newly created European Systemic Risk Board (ESRB) will play a pivotal role for the identification of risks and will thereby support a stronger focus on macroprudential surveillance. Furthermore, changes to banks’ loss provisioning standards, combined loan-to-value and loan–to-income rules, as well as more demanding capital adequacy rules stand out as promising regulatory instruments to prevent excessive credit build-up in the future. Within the euro area, the supervisory toolbox should be considered as part of a wider macro-financial surveillance framework.
Turning to the set of special topics in this edition, the report examines the impact of the financial crisis on the euro-area banking sector, in particular on cross-border integration of financial institutions through bank mergers and acquisitions (M&A). The results show that the process of market integration is still ongoing, although at a slower pace as a consequence of the crisis and the ensuing restructuring of the banking sector. The process of market integration is however not uniform across countries, as smaller economies are integrating internationally more quickly than larger ones, for whom M&A activity is predominantly domestic. But irrespective of country size, the crisis has led to a clear slowdown of M&A activity and a refocusing on domestic activities for almost all euro-area countries.
view the Quarterly report on the euro area
Source: European Commission
Parliament stakes out its position on MiFID reform
December 14, 2010--Ahead of the Commission's review next year of the MiFID directive, the most wide-ranging EU law regulating trading venues and practices in the financial services sector, MEPs on Tuesday approved a resolution setting out Parliament's priorities on the matter.
The Markets in Financial Instruments Directive (MiFID), comes up for review in spring 2011. The main point of Parliament's resolution today is that both standard and non-standard trading venues should be supervised in a transparent way, with all venue users having access to similar information on the price formation process.
MiFID's success in reducing transaction costs has also resulted in trades slipping out of sight due to a fragmentation of trading among the proliferation of trading venues and the use made of the directive's exemptions, says the resolution authored by Kay Swinburne (ECR, UK).
More broadly, the resolution urges the Commission to give priority to limiting the build-up of risk.
More transparency and rules
When performing activities similar to those of other standard trading venues, broker crossing networks (BCNs), or bilateral trading systems, must be obliged to conform to the same rules as those for the standard venues, says the resolution, in a bid to close up certain loopholes to the MiFID directive. It also calls for all BCNs to be obliged to submit information about their activities to supervisory authorities to enable them to enforce the MiFID rules when this is deemed necessary.
The resolution asks ESMA to study the costs and benefits of high volume, high speed trading (algorithmic trading and high frequency trading (HFT)) on markets, look into the potential abusive manipulation of markets leading to an uneven playing field, and analyse the impact of these trading methods on overall market stability.
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Source: European Parliament
Kingdom of the Netherlands-The Netherlands: Financial Sector Assessment, Preliminary Conclusions by the Staff of the International Monetary Fund
December 14, 2010--Introduction
1. At the request of the Netherlands authorities a Financial Sector Assessment Program (FSAP) team led by the Monetary and Capital Markets Department of the IMF has visited the Netherlands between November 29 and December 14, 2010 in order to conduct an update of the Fund’s 2004 assessment of the soundness and stability of the Netherlands financial sector.
It has been the practice that such assessments are undertaken roughly every seven years.1 The following provides some initial findings from the mission. These findings are subject to further review, and will also serve as background to the Article IV discussions to be held with the IMF’s European Department in spring 2011.
2. The Netherlands has over the past decade introduced a financial sector supervisory model that is being studied closely in many countries. Prudential oversight of all financial institutions—banks, insurance and pension funds, and securities firms—is exercised by a single authority. This reflects the increasing interconnectedness of the various elements of the financial system, with large complex financial institutions (LCFIs) spanning the sector. In the Netherlands, the decision was made to place prudential supervision in the Netherlands Central Bank (DNB), leveraging on the synergies between the macro monitoring and micro supervisory aspects, as well as on its long-standing credibility. With regard to conduct-of-business supervision, the Financial Markets Authority (AFM) has a strong focus on market behavior and consumer/investor protection.
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Source: IMF
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