FACTBOX-EU to improve protection of financial consumers
July 12 (Reuters) – The European Union’s executive put forward proposals on Monday to bolster consumer confidence through better and faster protection of investors who face a run on their bank or have been the victim of fraud.
The European Commission’s plans are part of wider efforts to learn from the financial crisis, in which the savings of millions of people were hit by extreme market volatility and some banks had to be rescued by taxpayers.
The Commission has proposed toughening EU rules that protect bank account holders and retail investors. It has opened a public consultation on improving how insurance policy holders are safeguarded.
The 27 EU states and the European Parliament have the final say on the proposals, which seek to encourage investors to save for their retirement and avoid taxpayers having to bail out banks again in any future crisis.
BANK DEPOSITS
* Under EU rules dating to 1994, all states must set up national deposit guarantee schemes to reimburse account holders up to a certain level if their bank runs into trouble.
* During the financial crisis, the EU approved quick-fix changes to increase coverage to at least 50,000 euros ($63,000) by June 2010 and to a uniform level, expected to be 100,000 euros, by the end of 2010.
BREAKINGVIEWS – Compromise in sight on EU hedge funds directive
– The author is a Reuters Breakingviews columnist. The opinions expressed are his own –
By Pierre Briançon
PARIS, April 14 (Reuters Breakingviews) – When does regulation become protectionism? This is what European Commissioner Michel Barnier has to decide as he attempts to broker a compromise between the UK and French governments on the EU’s proposal to regulate hedge funds and other alternative investment vehicles.
A deal is in sight on the last remaining bone of contention of the controversial directive: the creation of a “passport” that foreign fund managers would need to peddle their goods within the EU.
The requirement to force non-EU managers to submit to the same rules as EU-based ones prompted strong objections from both the UK — home to most of Europe’s hedge funds — and the United States, which complained about the directive’s “protectionism”.
But advocates of a stringent passport argue that, just as Chinese toys have to submit to EU safety rules, it should be possible to subject foreign-based funds to European regulation without crying protectionism.
A first proposed compromise would have made it possible for offshore funds to market to EU investors, provided their managers could show they are subject to “equivalent” rules at home. But the French objected, saying this equivalence would be too tough and burdensome to establish. Barnier, the French commissioner who recently took over the internal markets portfolio, is now trying to convince the French to back down.
FACTBOX – How does the EU plan to shake up financial services?
BRUSSELS, April 7 (Reuters) – The European Union (EU) is embarking on an overhaul of financial services that politicians hope will send bankers back to their roots of no-frills lending to households and business.
Michel Barnier is the EU commissioner in charge of the shake up on regulations ranging from curbs on banker pay to a clampdown on speculators betting on government debt.
Here is a guide to the overhaul:
* One of Barnier’s priorities is writing a rule book for trading derivatives, a financial instrument whose value is linked to an asset such as a government bond or currency.
Pushed to the top of the agenda after politicians blamed speculators for worsening Greece’s borrowing problems, the European Commission will in June propose broad controls on market betting.
As part of a drive to force more transparency in the $600 trillion off-exchange derivatives market, Barnier will demand that traders either record their positions, or buy and sell through a central counterparty or exchange.
In October, the Commission will propose controls for short selling and credit default swaps in government debt — a form of insurance.
ANALYSIS – EU focus on credit default swaps may not yield bans
By Huw Jones
LONDON, March 5 (Reuters) – European governments are exploring ways to curb trade in credit default swaps but may have to settle for requiring greater disclosure rather than banning certain forms of speculation.
France, Germany and Luxembourg say “speculators” — typically code for hedge funds — used CDS contracts to bet on Greece defaulting and send the euro lower.
Faced with such political pressure, the European Commission has called national supervisors, credit rating agencies, hedge funds and investors to meetings in Brussels on Friday to help it decide if European Union action is needed in the CDS market.
The U.S. Justice Department is also investigating if hedge funds might have acted together in betting against the euro.
Credit default swaps are privately-negotiated “insurance” contracts between two parties. Unlike normal insurance, the buyer can go “naked”, not owning what is being insured, a situation regulators say is perverse.
Traders are waiting to see if regulators will go beyond jawboning and require buyers of sovereign CDS to own some underlying debt or deploy other means to quell volatility.
Global accounting body told to improve governance
By Huw Jones
LONDON, Feb 8 (Reuters) – The world’s most influential accounting rule setter is not answerable enough to users or the public and must improve its governance further, top financial regulators said on Monday.
International Accounting Standards Board (IASB) rules are used in over 100 countries, including the European Union, with Canada, Japan and Brazil adopting them as well. The United States, however, is still mulling its position.
The IASB will become more powerful next year when its rules form the basis for a single set of global standards as called for by the G20 group of countries, sparking calls for the London-based body to be more accountable and transparent.
David Wright, deputy head at the EU’s European Commission internal market unit, welcomed the creation of a separate board of public authorities, including the EU executive, to monitor the IASB but more improvements were needed.
“We feel there is much work to be done. The debate about …governance will continue because it’s unfinished,” Wright told a Commission hearing on accounting and auditing.
Getting the governance right was necessary to “depoliticise” accounting standard setters, Wright said.
EU sees positive outcome on Spanish bank fund
(Adds more quotes, background)
BRUSSELS, Jan 18 (Reuters) – The European Commission said on Monday it was confident of issuing a positive decision on a Spanish government scheme to help crisis-hit banks avert any solvency problems.
Spain set up the 9-billion-euro ($13 billion) bank restructuring fund (FROB) in June last year, allowing lenders to borrow up to 90 billion euros, in a move that may spur consolidation among the country’s savings banks.
Three savings banks from northern Spain agreed last week to postpone plans to merge until the European Union’s executive Commission had ratified the FROB restructuring plan.
The Commission, tasked with ensuring that state aid does not skew competition in the 27-country EU, is in constructive discussions with the Spanish authorities over the plan, spokesman Jonathan Todd told a daily briefing.
“The Spanish authorities have to clarify what their intentions are,” he said, adding that while there was no fundamental problem, the Commission had to ensure that the scheme complied with EU state aid rules.
“The Commission is confident that we will be able to come to a positive outcome on the regime.”
EU economy, tax nominees may face second grilling
By John O’Donnell
BRUSSELS, Jan 14 (Reuters) – One of the European Union’s top lawmakers has said she may demand a second hearing to quiz the bloc’s designated tax and economics chiefs before the committee she leads decides whether to approve their appointments.
The remarks by Sharon Bowles, who leads the influential economic and monetary affairs committee, cast uncertainty over the line-up of the next European Commission, in particular the would-be tax chief, who has already faced criticism.
“I would have liked more questioning time with him,” Bowles said of Algirdas Semeta, the Lithuanian candidate to take charge of EU taxation whose answers at a European Parliament hearing were described by socialists as unconvincing.
Commenting on Finland’s Olli Rehn, the candidate to become the 27-country bloc’s economic and monetary affairs chief, Bowles said: “On many things he was strong and interesting. On other things we would have liked more information.”
Bowles said she may seek a second hearing with both. She signalled this was more likely for Semeta than Rehn, who is already an EU commissioner and has faced little criticism following his appearance before lawmakers to win their approval.
“I’m not going to say no to that. We might,” she said when asked if she would request a second hearing. “If you want us to do a good and worthy appraisal you have to give us the time.”
EU executive to target derivatives speculation
(Adds more detail on derivatives legislation)
BRUSSELS, Jan 13 (Reuters) – Speculation in commodity derivatives has been “scandalous” and needs to be regulated carefully, the European Union’s nominee for chief financial watchdog said on Wednesday.
“Why do we have this speculation we have had over the last two to three years in raw materials,” Michel Barnier, EU internal market commissioner-designate, said.
“I am talking about speculation which to me is scandalous on agricultural raw materials … We have to do something about that,” Barnier told a confirmation hearing in the European Parliament.
The European Commission has the sole right to initiate pan-EU financial services legislation and is expected to put forward a draft law by mid-year to regulate the vast off-exchange traded derivatives market.
The Commission would be implementing a pledge it made along with other members of the G20 rich and developing countries in September to increase transparency in the derivatives sector, such as central clearing of privately negotiated contracts.
The United States is also adopting new rules for derivatives, and banks worry about possible divergences with the EU.
EU’s Barnier says will mull short-selling curbs
By John O’Donnell
BRUSSELS, Jan 13 (Reuters) – The European Union’s designated financial services chief has pledged to examine curbs on short-selling and extend a planned regulatory shake-up to every corner of the industry, blamed by many for the economic crisis.
Outlining his plans to push through a welter of rules that will tighten the policing of banks as well as curbing runaway borrowing, Michel Barnier said: “We need to turn the page on an era of irresponsibility.”
“We are going to reform. No market, no financial player … should be able to escape. I will not shy away from the difficult subjects of sanctions and short-selling.”
Barnier made the remarks on Wednesday to European Union parliamentarians, who were quizzing him to test his suitability for the post of financial services chief. The job would put him in charge of a European Union banking overhaul.
Barnier, 59, laid down his agenda for a five-year term that could see investment banking shrivel in the 27-country bloc, returning bankers to their roots of no-frills lending to households and businesses.
He flagged his interest in bolstering the amount of capital banks are required to keep, a move many expect would restrict their ability to lend by making it more expensive for banks to refinance such loans, as well as regulating hedge funds.
EU exec likely to sue Greece over statistics mess
By Jan Strupczewski
BRUSSELS, Jan 12 (Reuters) – The European Commission is likely to launch infringement proceedings against Greece for failing to provide reliable statistics on its budget deficit and debt, an EU source with knowledge of the proceedings said on Tuesday.
The Commission, the European Union’s executive arm, is responsible for upholding EU law. It had already once launched proceedings against Greece for unreliable deficit statistics in 2004, but closed them in 2007.
“There will probably be another infringement procedure… because providing timely and reliable statistics is an obligation under EU law and they have failed in their obligation,” the EU source said.
Greece revised its 2008 budget deficit to 7.7 percent of gross domestic product from 5.0 percent reported in April and also revised its 2009 budget deficit forecast to more than 12 percent of GDP from 3.7 percent forecast in April.
A Commission report released by the EU’s statistics office Eurostat on Tuesday underlined reservations about past Greek data, saying Eurostat had questioned figures five times between 2005 and 2009.
“Over the last eight years, whenever the Greek (debt and deficit) data have been published without reservations, this was very often the result of Eurostat interventions before or during the notification period in order to correct mistakes or inappropriate recording,” the report said.
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