As discussed in greater detail below, the recent Consultation on the 'coherence of EU financial services regulation' – launched by the European Parliament – demonstrates the volume and complexity of current and proposed rules. The timing is interesting (and once again, perhaps linked to the forthcoming elections) as so much is still in the process of being finalised. Many countries are at varying stages of progress as highlighted by the FSB peer review of resolution regimes, which serves as a reminder of just how much is still to be done in a number of countries.
Achieving international consistency is still the order of the day – reinforced by an interesting letter issued by Commissioner Barnier to the Chairman of the US Federal Reserve. The letter requests that US authorities reconsider rules requiring foreign banks operating in the US to hold extra capital.
I urge you to fully engage in the regulatory debate, making use of your links in Brussels and the various resources available to inform the debate and provide policymakers with a deeper understanding of the real implications for business. Regulation is driving the strategic agenda – and will continue to do so. Financial services firms can only influence the strategic and operational impacts of the changing policy before the rules are finalised. It is not an option to just wait and see what will happen; we just end up with sub-optimal and conflicting rules.
If you have any queries from any issues addressed in this communication, please do not hesitate to contact me or your usual KPMG contact.
Head of Financial Services Markets
Other insights available from KPMG
More coherent financial services regulation – the European Parliament consults
In what may be described as an exercise in good democracy and accountability, the European Parliament has recently launched a new Consultation on the 'coherence of EU financial services regulation'. This initiative comes in the midst of a prolonged period of extensive financial services reform and rule-making that has filled gaps in financial services regulation in the wake of the crisis – as well as strengthened the supervision of the financial sector as a whole.
FTT – Significant impact on the EU, despite 60 percent of EU Member States saying no to the tax
During 2012, a proposal for an EU-wide Financial Transaction Tax (FTT) was rejected by the European Council. Following this, 11 Member States (MS) have agreed to proceed with an FTT under 'Enhanced Cooperation'. Stakeholders are now analysing the potential impacts of an FTT, which all indicate significant negative impacts, such as increasing the cost of capital, decreasing trading volumes and liquidity, and decreasing total returns for investors - both for the 11 MS and globally. The UK has initiated the first legal challenge; with Luxembourg's Finance Minister Luc Frieden saying he "cannot exclude" a challenge based on its impact on his nation and other non-participants.
Banking union – milestones and delays
Despite the initial momentum, the path to the implementation of banking union is somewhat problematic. For affected banks, this means a confusing mixture of communications from the EU, conveying both progress and hold-ups.
EIOPA's proposals for 2014
On 27 March 2013, the European Insurance and Occupational Pensions Authority (EIOPA) released four Consultation papers providing the detail of its proposed interim measures guidelines, which it proposes should be adopted by national supervisors from 1 January 2014. The Consultation papers cover governance, a forward-looking assessment by insurers of their own risks (based on the ORSA principles), internal model pre-application process and submission of information to national competent authorities.
Controlling banks' large exposures
The Basel Committee on Banking Supervision has published a Consultation Paper on measuring and controlling banks' large exposures. The main objectives of the proposed requirements – which update the Basel Committee's 1991 guidelines on large exposures – are to: tighten the reporting and "hard" limits on large exposures; define more precisely how exposures should be measured, so the requirements can be applied more consistently across countries; and introduce tougher limits on the large exposures of systemically important banks.
Euro Crisis Update
Lessons from the Cyprus bailout
As the dust settles following the Cyprus bailout agreement, policymakers have begun to take stock of the key lessons for the rest of the eurozone and their implications for the future.
IOSCO Consults on Regulation of Retail Structured Products
On 18 April 2013, the board of the International Organization of Securities Commissions (IOSCO) launched a Consultation on Regulation of Retail Structured Products. The retail structured products work responds to concern among IOSCO members about the regulatory challenges these products pose, particularly in the area of investor protection.
This Consultation feels more substantive and needs to be monitored carefully. IOSCO has flagged their new approach to policy making – and we anticipate that they will become more influential as a body.
Restructuring the EU banking system
On 9 April 2013, KPMG sponsored a QED seminar on bank restructuring, which attracted high quality speakers and prompted interesting discussion and debate. Iain Cummings, KPMG in the UK, spoke alongside Arlene McCarthy MEP and Mario Nava about Liikanen and other bank restructuring proposals across Europe. Access the seminar report and video.
On the radar…
- European Commission shadow banking proposals expected – 8 May
- European Commission conference on financial supervision – 24 May