Welcome to Euro Shorts, a short briefing on some of the week’s developments in
the financial services industry in Europe.
...
Crowdfunding
The FCA has this week published a policy statement on its regulatory
approach to crowdfunding over the intern...
rules on bonuses.

Derivatives should be included in FTT
According to the German finance minister, derivatives should be i...
Cummings
Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327
www.cummingslaw.com
7 March 2014
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Euro shorts 07.03.14 including uk key dates coming up and ECB signals no need for new economic stimulus

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Euro shorts 07.03.14 including uk key dates coming up and ECB signals no need for new economic stimulus

  1. 1. Welcome to Euro Shorts, a short briefing on some of the week’s developments in the financial services industry in Europe. If you would like to discuss any of the points we raise below, please contact me or one of our other lawyers. Claire Cummings 020 7585 1406 claire.cummings@cummingslaw.com www.cummingslaw.com UK key dates coming up The 2014 Budget will be delivered on 19 March 2014. Following this, as announced by the Treasury last week, the Finance Bill 2014 and accompanying explanatory notes will be published on 27 March 2014. Draft legislation for this Bill was published in December last year. Key financial measures included in the Bill are provisions relating to offshore non-UCITS funds, which will provide greater certainty on the tax residence of AIFs, a code of practice on taxation for banks, a bank levy review and real estate investment trusts (REITs). ECB signals no need for new economic stimulus The ECB’s president, Mario Draghi, has said that the latest economic information suggests Europe’s recovery was on track and needed no stimulus at present. This follows the news that the ECB has left interest rates on hold, despite forecasting low inflation for years to come. Inflation has been in what Mr Draghi terms the ‘danger zone’ i.e. below 1%, for five months, but he says that the ECB will either do nothing or take bold policy action should the outlook deteriorate. The IMF, however, believes more should be done and, according to reports, considers that the ECB should cut interest rates and release money into the financial system, possibly via quantative easing.
  2. 2. Crowdfunding The FCA has this week published a policy statement on its regulatory approach to crowdfunding over the internet, following responses to its consultation in October 2013. The FCA has moved to protect investors, by introducing rules preventing ordinary savers from spending more than 10% of their savings on shares in peer-to-peer funded companies. From 1 April, investment in crowdfunded companies will be restricted to investors advised by professionals or certified as HNW or sophisticated investors. France, to the contrary, has recently relaxed its rules on crowdfunding, permitting ventures to raise up to €1 million per campaign per year without having to notify the regulatory authority, a marked increase from the previous €100,000 ceiling. BoE seeking derivatives global pact The Bank of England is seeking a global pact among banks to suspend default clauses in some derivatives contracts during any future crisis. The BoE wants ISDA and international lenders to agree to temporarily halt claims on banks that become insolvent and need intervention. They see this as a way of avoiding a repeat of the Lehmans debacle, which saw ‘huge amounts of uncertainty and an uncontrolled cascade of closeouts and cross defaults in the market.’ ISDA has declined to comment on the proposed pact, but says that it is committed to working with supervisors and regulators to achieve ‘an appropriate solution’ which ‘will contribute to safe, efficient markets’. Perceived bonus cap evasion by UK criticised Belgium’s MEP, Philippe Lamberts, regarded as the architect of the bankers bonus cap, is considering taking the UK to court for permitting its banks to circumvent the bonus cap. Britain’s banks are awarding ‘allowances’ to senior staff, such as providing them with shares, in order to evade the cap which limits bonuses to 100% of salary, or 200% with shareholder approval. In contrast to Mr Lamberts, the UK’s MEP, Sharon Bowles, has said that she is relaxed about the effectiveness of the system, which came into force on 1 January this year. She is happy for large sums to be shown in fixed pay and fixed overheads as she sees this as a more transparent and honest structure and considers that fundamental reforms such as separating investment banking from high street operations matter more than tightening
  3. 3. rules on bonuses. Derivatives should be included in FTT According to the German finance minister, derivatives should be included in any proposed financial transaction tax, as well as stocks and bonds. Mr Schaeuble stated that Germany was determined to push ahead with the levy and that it made sense to include derivatives in view of developments in the financial markets. Implementation of the FTT is being held up by disagreement between the 11 Member States as to the scope of the tax, but EU finance ministers are due to discuss the FTT at a meeting in Brussels next week. BoE involvement in FX market manipulation The Bank of England has issued a press release concerning its internal investigation into alleged FX market manipulation. The review investigated allegations that BoE officials condoned or were informed of manipulation in the FX market or the sharing of confidential client information. According to the press release, the BoE has found no evidence of any collusion by BoE officials and no decision has been taken on disciplinary action against any BoE staff, although one member of staff was suspended on Wednesday. In the meantime, Mark Carney and other officials will face questions next week from the Treasury Committee, which considers that it should have been involved earlier in the investigations in its role as the Bank’s oversight body. Are gold rates subject to manipulation? Following investigation into the manipulation of FX and interest rate benchmarks, a study of the London gold fix shows that it may have been manipulated for the last ten years. According to researchers, the structure of the benchmark is conducive to collusion and manipulation and the resulting data is consistent with price artificiality. The report concludes that cooperation between participants may be occurring and this will add pressure to overhaul the way the rate is calculated. The five banks responsible for the gold fix are Barclays, HSBC, Deutsche, Societe Generale and Bank of Nova Scotia.
  4. 4. Cummings Tel: + 44 20 7585 1406 Mob: + 44 7734 057 327 www.cummingslaw.com 7 March 2014

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