FS regulatory, accounting and audit bulletin - 12th edition 2013

Being better informed

For Solvency II the wheels are now in motion for the new insurance regime to launch 1 January 2016, with the publication of the Quick Fix 2 Directive, EIOPA’s Preparatory Guidelines, and the trilogue agreement on Long Term Guarantees.

EMIR also hit an important milestone. ESMA registered the first trade repositories (TRs) on 7 November 2013, an event which triggers 12 February 2014 as the start date for reporting derivative transactions. Both counterparties to a derivative transaction will have to file a transaction report with an EMIR authorised TR. There are no phase-in periods, exemptions or exclusions for the reporting obligation. So firms should be preparing now for February implementation.

In the banking sector, the CRD IV package continues to trundle its way through level 2 provisions. The fourth consultation on own funds from the EBA and HMT provided much need clarity on what information banks will have to disclose on country-by-country reporting from 1 July 2014. The PRA confirmed that the full CRD IV capital deductions will apply from 1 January 2014. But the PRA did drop its earlier proposal to cover all Pillar 2 requirements with CET1 capital, deciding instead that 56% was enough.

December was a busy month for European legislators. They are tantalisingly close to finalising the single supervisory mechanism—the grand experiment of creating a single supervisor for the Eurozone. The trilogue discussions have also moved forward on the BRD, MiFID II/MiFIR and the MMF Regulation. We hope to see at least the first two of these finalised before the EU Parliament breaks up next spring.

Investors want reassurance that EU banks’ balance sheets don’t hold any more nasty surprises - implementing the SSM is key to putting their minds at rest. The ECB announced plans to undertake an asset quality review (AQR) across the Eurozone banking sector starting in November and running for 12 months. Through this exercise, the ECB is aiming to enhance the quality of information available on banks’ conditions which will give it a better picture of banks’ health. The AQR will identify and implement necessary corrective actions, and if successful, could help re-build market confidence that banks are fundamentally sound and trustworthy.

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