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. 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. 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. Cummings
Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327
www.cummingslaw.com
7 March 2014