16 May 2012
EU consensus on tougher and tighter regulation of banks in the EU
At the EU Economic and Financial Affairs Council meeting on 15 May EU's finance and economy ministers reached agreement on the compromise
proposal on new EU rules on capital requirements for banks. Now the Council can begin negotiations with the European Parliament for a
final agreement.
The rules imply extensive regulation of the financial sector, including more and better capital and liquidity in banks, the possibility to impose different, temporary additional requirements for banks to ensure financial stability and elements of good corporate governance, and a tightening of the requirements for the Member States' sanctions towards non-complying institutions.
For further information:
EU Council Press Release
16 May 2012
EU Ministers endorse 2012 Ageing report and confirm pension reform
At the EU's Economic and Financial Affairs Council meeting on 15 May, EU ministers adopted and endorsed the 2012 Ageing Report:
economic and budgetary projections for the 27 EU Member States (2010-2060) which shows a significant increase in the EU countries'
age-related spending on pension, health and elder care due to an ageing population in Europe.
The report covers in-depth age related public expenditures in pensions, health care, long-term care, education and unemployment benefits. Among other things, it addresses public pensions spending which it project to rise by 1.5% of GDP until 2060 in the EU. The Ministers confirmed their commitment to implement further reforms in notably pensions and raising retirement age.
Links:
Web summary
Full report
27 April 2012
Michel Barnier speech: Towards better regulation of the shadow banking system
As part of the on-gong consultation (19 March - 1 June) on the recently published Green Paper on shadow banking issues (definition,
risks and benefits, stricter monitoring and regulation), EU Internal Market Commissioner Michel Barnier said in a speech today (27 April)
that there are five types of bodies that appear to be concerned by the shadow banking system: financial bodies that are active in
intermediation or other credit granting but do not accept deposits and are not regulated in the same way as banks. One of these five
types includes insurers providing credit guarantees.
Barnier explained that the reason for regulating was the Commission's wish to ensure that regulators and supervisory authorities could have a complete overview. "They need to have the means and powers to familiarise themselves with and master the leverage exerted by all the financial intermediaries in the shadow banking system".
Barnier pointed to practices such as securities lending, rehypothecation and repurchasing, "which can lead to excessive risk-taking, sheep-like behaviour ("runs") and excessive volatility in liquidity provision. These practices, left unchecked, played a decisive role in the difficulties faced by AIG, Bear Stearns and Lehman Brothers".
The Commission will initiate targeted sectorial consultation exercises, which will most probably be followed by proposals for regulations.
Full text of Barnier speech26 April 2012
Commission publishes financial report assessing impact of financial crisis on insurance sector
The Report addresses the fact that, "Post-crisis policy measures in the financial sector give way to longer-term growth goals", adding
that, "resilience in the financial sector has improved in the aftermath of the financial crisis, and action is now focusing on longer-term
growth goals".
EU Internal Market and Services Commissioner Michel Barnier, said that, "the report's careful analysis of past and current challenges is a solid basis for continuing our reform programme and shaping future policies. The reforms we are introducing are essential to restore financial stability and to pave the way for a more resilient and integrated European market in financial services. In turn, this is the essential basis to allow for long-term growth to return in Europe".
Link to the report:
Report
12 April 2012
IMF sounds the alarm on growing public and private costs of increased longevity risk
The IMF yesterday (11 April) published a Global Financial Stability Report which, inter alia, investigates the growing public and private
costs of increased longevity risk from ageing populations. The IMF said that even a slightly faster than expected increase in
life expectancy could impose a huge new financial burden on Western economies. Governments and the financial sector have consistently
underestimated how quickly average lifespans will rise, IMF researchers found which could render public finances unsustainable, they warned.
The IMF suggests a range of "risk-sharing" measures to spread potential costs between the Government, individuals and companies. The Government could allow pension funds to "share shortfalls with plan participants", potentially reducing pension payments in lean years. New financial products whose returns are linked to longevity could also be developed. Individuals could then "share the burden" by "self-insuring against longevity risk".
The IMF report says that longevity risks may also cripple life insurance companies and could push some into bankruptcy. Because private sector pensions are effectively backed by the state through the Pension Protection Fund, the final burden of private sector failures would fall on taxpayers.
Links to the report:
Summary
Full text
27 March 2012
Making financial regulation serve society through civil society and consumer participation
EU Financial Services Commissioner Michel Barnier wants to improve consumer protection for PRIPs
Text of Barnier speech to Finance Watch
16 February 2012
Commission publishes White Paper on Pensions
Recognising that pensions are putting increased financial pressure on national budgets, especially with the
added strain of the financial and economic crisis, the European Commission publishes a White Paper on adequate,
safe and sustainable pensions. It looks at how the EU and the Member States can work to tackle the major
challenges that confront pension systems. The White Paper points in particular to the following issues:
- Develop complementary private retirement schemes by encouraging social partners to develop such schemes and encouraging Member States to optimise tax and other incentives;
- Enhance the safety of supplementary pension schemes, including through a revision of the directive on Institutions for Occupational Retirement Provision (IORP) and better information for consumers;
- Make supplementary pensions compatible with mobility, through legislation protecting the pension rights of mobile workers and by promoting the establishment of pension tracking services across the EU. This can provide citizens with information about pension entitlements and projections of their income after retirement.
Commission's Q&A on the White Paper
15 February 2012
EIOPA publishes final advice to the European Commission on the review of the IORP Directive 2003/41/EC
In its response EIOPA highlights, as a key proposal, the "holistic balance sheet",
as a way to achieve the Commission's aim for harmonisation. This approach is to
acknowledge the existing diversity of occupational pension systems in the EU
Member States, while capturing all these systems into a single balance sheet.
EIOPA furthermore underlines the importance of a quantitative impact study (QIS),
which it is currently preparing, with a view to publish its results in the second half of 2012.
Additionally EIOPA calls for proposals to enhance qualitative requirements in
such areas as governance and risk-management. These have been modelled on
Solvency II with the necessary adjustments for IORPs. Finally, information
provision and member protection, particularly in defined contribution (DC)
schemes are pointed out, saying that information needs to be relevant, correct,
understandable and not misleading. Likewise, EIOPA calls for the introduction
of a Key Information Document for all DC schemes allowing members to have
confidence in the scheme irrespective of where it is located in the EU.
Gabriel Bernardino, Chairman of EIOPA, said: "This is not the end of the process of developing a European
framework for occupational pensions, but merely the beginning ... In particular, we have to ascertain ourselves via the QIS that
the proposed approach stimulates affordable yet secure occupational pension provision in Europe".
EIOPA advice to European Commission
EIOPA reasoned feedback to comments submitted
22 December 2011
European Commission issues press release on anti-discrimination guidelines following the gender ruling by the ECJ
At the occasion EU Commissioner for the Internal Market and Services, Michel Barnier said: "There have been some concerns among insurers as to the impact and consequences of this important judgment, in particular at this time when insurers as all other financial market participants face important challenges. I believe that these guidelines will be helpful for the industry and assist them in adapting their contracts and premiums to be able to ensure timely and full compliance with the judgment. This will be beneficial for both the industry and policyholders."