Governments and lawmakers grope for ‘flexibility’ compromise over CRD IV. Much is staked on extraordinary finance ministers' meeting

By Melvyn Westlake

The increasingly tense standoff in the EU over demands for “flexible” bank capital requirements, which has produced two strongly opposed camps, is also stirring rivalries between the European bloc’s institutions. A third set of compromise proposals circulated at the beginning of April is still being closely scrutinised in member countries’ finance ministries. And finance ministers are now set to hold an extraordinary meeting in Brussels on May 2, to try and break the deadlock and hammer out a deal.   More>>>

As the G20 turns the spotlight on auditors, there’s little appetite for mandatory rotation as a solution to the profession’s failings

By David Keefe

Splits over how best to regulate the business of the auditing of company financial statements threaten another post-crisis divide between Europe and America, particularly over the controversial question of forcing firms to change auditor at regular intervals.   More>>>

Oversight council approves criteria for designating non-bank financial firms as ‘systemic’. Firms anxious to avoid the label

Despite resistance from insurers, hedge funds and other financial sector firms, America’s powerful new financial risk council, comprising all the country’s key regulatory agencies, approved final plans in early April for identifying the non-bank entities that could pose a threat to financial stability. Non-bank financial firms are desperate not to be tagged as systemically risky because this will entail closer supervision and tougher prudential standards.   More>>>

Drive for a common rulebook provokes a backlash in Europe’s biggest economy. Threat seen to banking’s diverse character

By Klaus C Engelen

German bankers are angry. And the focus of this wrath is the European Banking Authority (EBA), one of the three pan-EU supervisory watchdogs set up 16 months ago to oversee the banking, insurance and securities markets respectively. The London-based EBA is accused of exceeding its legal authority, of bungling the recent stress testing of European banks, and exacerbating the eurozone sovereign debt crisis.   More>>>

Still many doubts over plans to write-down creditors of ailing banks. Race to finalise ‘resolution’ rules by June G20 summit

A selection of news items generated by the American regulatory reform agenda

Washington’s regulatory conveyor belt is spewing out new rules required under the Dodd-Frank Wall Street Reform and Consumer Protection Act signed by President Obama in July 2010. Banks and other market participants struggle to keep up with the detail. Latest estimates suggest only 100 or roughly 25% of the 400 required rulemaking had been completed by the beginning of April 2012. Around 134 proposed deadlines for rulemakings have been missed, according to law firm Davis Polk. It calculates that some 155 (38.8%) of required rulemakings have been proposed, while a further 138 (34.5%) have not yet been proposed    More>>>

MADRID/BASEL – International regulators have issued new standards aimed at strengthening the resilience and reducing the operational risks of financial market infrastructures (FMIs). Often referred to as the plumbing in the global financial markets, the failure of an FMI can have disastrous consequences and cost users huge sums. These infrastructures, which include systemically important payment systems, central securities depositories, securities settlement systems, central counterparties and trade repositories, in fact performed well during the financial crisis. But their importance is growing as, for example, all standardised over-the-counter derivative contracts are cleared through central counterparties.

A report setting out the new standards was issued in mid-April by the Basel-based Committee on Payment and Settlement Systems (CPSS) and the International Organisation of Securities Commissions (IOSCO), the Madrid body representing more than 100 securities commissions.    More>>>

BASEL – The world’s largest banks would have needed an aggregate €485.6 billion ($638 billion) more equity in mid-2011 if the 7% Basel III core equity capital requirement had been in force at the time. That is revealed by a monitoring exercise undertaken by regulators at the Basel Committee, which drafted the Basel III package of capital and liquidity reforms issued at the end of 2010, and due to be phased-in over a six-year period starting in 2013.

BRUSSELS – The proposed EU law to regulate the vast over-the-counter (OTC) derivatives market received overwhelming backing from the European Parliament at the end of March, 18 months after the EU executive first submitted proposals for a European Markets Infrastructure Regulation (EMIR). Lawmakers voted by 602 to 23 in favour of the regulation, with 27 abstentions. This followed a deal two months earlier in the co-legislative body, the European Council, representing the bloc’s member countries (see February issue of GRR).

During these two months, members of the two legislative bodies and the European Commission had hammered out a final agreement in a so-called trialogue.    More>>>

WASHINGTON – Daily tension exists between US accounting standard-setters and their international counterparts over the issue of rules-based versus principles-based rules, according to America’s chief accounting rule-maker.

WASHINGTON – Sustained effort and effective cooperation among the Group of Twenty (G20) leading economies is needed to achieve “the promised deliverables” on financial reform for the G20 leaders’ summit in Mexico in June, according to Financial Stability Board (FSB) chairman Mark Carney.

LONDON – Implementation of Basel III should be accelerated, a top macro-prudential regulator at the Bank of England suggested in late March. The comment came during a speech to an Ediburgh audience by Michael Cohrs, a member of the Bank’s Financial Policy Committee (FPC), a key part of the new regulatory structure being created in Britain in the wake of the financial crisis.

His remarks were in sharp contrast to the reassurances that some other regulators have been giving bankers who are worried that the proposed long timetable for implementing the new internationally-agreed capital and liquidity standards will get foreshortened. Bankers argue that such an outcome will lead to lower lending to the economy.   More>>>

BASEL - Improving the information that external audits provide to financial sector regulators, including information on systemically important financial institutions (SIFIs), is a key aim of the Group of Twenty (G20) biggest economies as they reform the post-crisis global financial system.

In a March statement on auditing and financial stability*, the Financial Stability Board (FSB) said it’s providing input to the Basel Committee of global banking supervisors as the Committee revises its external audit policy papers and develops the new guidance on auditing that’s expected by the end of 2012. The FSB is doing the same with the International Association of Insurance Supervisors (IAIS), which develops international standards for the insurance industry, as the IAIS updates and enhances its policies on the auditing of insurers.    More>>>

BASEL – Global banking regulators believe there’s clearly room for further improvement in the supervision of stress testing by banks

BASEL – The US is among the nations lagging behind in their implementation of the tougher Basel III bank capital and liquidity rules devised by global banking supervisors in the wake of the financial crisis.

SYDNEY, Australia - Australia’s regulators are to allow some limited flexibility to banks in meeting the new Basel III bank capital and liquidity rules after banks argued the rules were tougher than elsewhere.

LONDON/BRUSSELS – The long-running and sometimes bitter clash over the European Commission’s efforts to regulate hedge funds, private equity funds and other alternative investment vehicles suddenly erupted again in early April. This fresh flare-up began when the London-based Alternative Investment Management Association (AIMA), a global hedge fund trade association, accused European Commissioner Michel Barnier of proposing to implement regulation that diverged from the advice given by the EU’s own technical advisory body.

Supervisors must understand how financial firms are managed and controlled – or not – by their directors and shareholders

Signs of the turning of the bank shareholder worm came in April as Europe’s lawmakers sought to tighten further the pay and reward provisions of the Basel III bank rules as they apply in the European Union.

Final arguments are put as fears persist that US is out of step with the G20 in approach to identifying systemically risky firms