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Euro shorts   21.02.14 including ESMA updates AIFMD MoU table and House of Lords EU report
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Euro shorts 21.02.14 including ESMA updates AIFMD MoU table and House of Lords EU report

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  • 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 Available on CLTV from Monday: 'EMIR - THE BARE FACTS' A short video in which Dominique White discusses the bare facts about EMIR will be available on CLTV as from Monday at https://vimeo.com/86817774 ESMA updates AIFMD MoU table ESMA has updated its table showing the state of play of MoUs signed by national supervisors with non-EU regulators worldwide. The AIFMD MoUs are co-operation agreements that allow the exchange of information between EU and non-EU supervisors, enabling non-EU fund managers to market alternative funds within the EU. According to the table, the FCA has entered into MoUs with all non-EU regulators listed in the table. Carney adds view on bankers’ bonuses Mark Carney appears to have stepped into the row about bankers’ bonuses with a demand that a large chunk of the pay packages for senior staff should be deferred "for a very long time". Mr Carney said that a change in compensation structures was needed so that banks could see whether employees had taken undue risks or behaved badly. This followed news that Barclays was paying bigger bonuses despite its plans to lay off staff. Mr
  • 2. Carney said the Bank of England now had the powers to step in and limit bonus payments if a bank was deemed to have inadequate levels of capital. Meanwhile, the text of the UK’s challenge to the ECJ relating to the cap on bankers’ bonuses has been published in the OJ; the UK is seeking the annulment of a number of remuneration-related provisions in the CRD IV. House of Lords EU report The House of Lords EU sub-committee has published its 8th report regarding implications for the UK in respect of EU economic and monetary union. Points of interest include (i) the importance of the EU banking union and a warning that the UK’s influence may diminish as a result of its nonparticipation, (ii) the view that the single resolution mechanism for dealing with failing banks is not fit for purpose, (iii) that financial stability can only be achieved through a common deposit guarantee scheme, although these plans are "dead in the water" and (iv) that without a workable banking union the vicious circle linking bank and sovereign debt will not be broken. FX benchmark probe adding to woes According to reports, the widening probe of the FX markets is adding to the difficulties faced by an industry already under pressure to reduce costs, as computer platforms replace human traders. It is believed that electronic dealing will increase to 76% within five years. The investigation of alleged manipulation is also reducing the number of spot traders at several firms; at least 21 traders have been fired or suspended as a result of the probe and some are leaving of their own volition. Regulators are helping push more trading to electronic platforms by making some transactions more expensive for banks. The latest rules from BCBS will make FX derivatives less attractive by imposing charges for holding positions and products that are not cleared through exchanges. MiFID II The market is waiting for a final text for MiFID II to emerge and in the meantime, a group of brokers, fund managers and stock exchanges are uniting to harmonise input to respond to forthcoming ESMA consultations. The group, which held its first meeting in early February, comprises executives from Barings, Deutsche, BoAML, Morgan Stanley, Nasdaq OMX, Axa and Six Swiss Exchange. Despite previous disagreements on a
  • 3. number of key issues between different industry participants, signs of greater co-operation have recently appeared; during the final negotiations, a number of firms (including LSE, AFME, Blackrock and Fidelity) collaborated to send a letter to EU legislators in a last-ditch effort to influence some of the MiFID II rules. Financial transaction tax update As political support for the FTT among the 11 Eurozone countries has begun to wane, EU officials have been considering proposals to soften the tax, namely a small charge on share deals only and slow progression to full implementation. In the original blueprint, the tax on shares was proposed at 0.1%, but this has been reduced to 0.01%. This approach appears to have the support of Germany, who believe that a phased introduction would be preferable to abandoning it, suggesting that it could apply to shares first and derivatives later. The French President has since said that France and Germany share the same approach towards derivatives and a diluted FTT, although he failed to elaborate on this. The two countries are committed to agreeing a deal by late May, although the Austrian finance minister has said that he did not expect the tax before 2016. EU law on benchmarks faces long delay The European Parliament was due to vote on a draft law regulating benchmarks such as Libor next week, but according to reports it will almost certainly be postponed. This is due to a request by centre-left lawmakers that a study of the costs and benefits is carried out, as well as a legal opinion on the role of ESMA. Under the draft law, critical and major benchmarks are defined so as to encompass Libor, but ESMA would determine whether many other market benchmarks, such as those used in oil, commodity and stock markets, come under the EU rules. It is believed that the delay may be tactical in the hope of getting a stricter set of rules in the next parliament. Mansion tax edging closer? The Bank of England has said that it is ready to use mortgage rates and lending rates to keep the UK housing market in check. However, these measures are ineffective in London because foreign buyers do not rely on loans and this is one of the reasons why the Liberal Democrats and Labour support a mansion tax. The proposed tax would mean an annual charge of
  • 4. 1% on the value of a house worth over £2 million. The Conservatives are opposed to the tax, with the Mayor of London criticising the idea as ‘absurd’, saying that it would ‘trap people who are cash poor’. Cummings Tel: + 44 20 7585 1406 Mob: + 44 7734 057 327 www.cummingslaw.com 21 February 2014