FACTBOX-How the EU plans to shake up financial services
Sept 27 (Reuters) – European Union central bankers, lawmakers and ministers meet in Brussels this week for the annual Eurofi symposium to discuss the bloc’s financial reform plans.
Representatives of European Union states and the European Parliament also meet separately on Monday in a further bid to agree new rules to regulate managers of hedge funds and private equity groups.
This is one of several changes the EU is making to its rulebook in order to apply lessons from the financial crisis.
Many of the changes implement pledges the EU made at the global Group of 20 leading countries level to introduce sweeping reforms by the end of 2012.
The United States this summer approved a reform of Wall Street that turned the G20 pledges into law in one fell swoop.
Here is a guide to the overhaul being authored by the bloc’s executive European Commission and approved by EU states and the European Parliament:
The Commission has proposed a draft law to regulate managers of hedge funds, private equity groups and other alternative investments to curb risks and excessive pay. Talks between EU states and the European Parliament have been bogged down for months over a passport scheme or licence for foreign hedge funds to do business throughout Europe. Lawmakers want tight curbs while Britain wants to maintain freedom to give foreign funds a licence in the UK. There is also disagreement over the extent to which private equity groups should disclose their strategy. [ID:nLDE68F14E]
This month the European Commission proposed a draft law to force more transparency in the $615 trillion off-exchange derivatives market.
Traders will have to standardise and centrally clear as many of their contracts as possible and record all trades.
This month the European Parliament gave final approval to a new supervisory framework for banks, markets and insurers in the EU from January 2011. Three new EU authorities with binding powers will supervise banks, insurers and markets. A fourth to monitor system-wide risks will be based at the European Central Bank in Frankfurt.
The European Parliament has approved new rules that will give supervisors tough new powers to curb excessive pay at banks and other financial institutions to limit risk-taking. The rules will also increase how much capital banks must set aside to cover resecuritised products they hold on their books. [ID:nLDE6661IR]
The Commission will propose another round of amendments to bank capital rules in December or early 2011 as it implements “Basel III” bank capital and liquidity reforms agreed this month at the global level.
The European Commission has proposed controls for short selling of shares and naked selling of credit default swaps in government debt — a form of insurance. The draft law also includes powers to ban short selling for temporary periods.
Policymakers say they want to rein in financial speculators whom they blame for worsening the debt situation of countries like Greece.
CREDIT RATING AGENCIES
The Commission has proposed changes to new EU rules to regulate credit rating agencies that are now coming into effect.
Under the planned changes, rating agencies like S&P, Moody’s and Fitch would be supervised centrally in the EU and be subject to possible investigations and on-site inspections from 2011.
EU finance ministers have agreed in principle on a bank tax but there is no consensus yet on how it should be structured.
The Commission is set to propose changes to the bloc’s securities trading rules in early 2011. Reform of the markets in financial instruments directive (MiFID) will reflect a push for greater transparency in areas such as dark pool or anonymous trading venues for shares.
The Commission is due to present a policy paper on crisis prevention and management in October and will propose a draft law next year. (Reporting by Huw Jones, editing by Stephen Nisbet)
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