Le iniziative europee sui mercati finanziari a seguito della crisi C ARLO C OMPORTI S IENA – 4 G IUGNO 2010.

Le iniziative europee sui mercati finanziari a seguito della crisi

CARLO COMPORTISIENA – 4 GIUGNO 2010

FINANCIAL MARKETS CONCERNSFINANCIAL MARKETS CONCERNS

• Most serious financial crisis since the 1930s• Threat to Financial Stability (Lehman, etc.)• Risk concentration in some market segments– Derivatives, Cds, hedge funds, etc.

• “Opaque markets”– The supervisors did not have adequate information

on large parts of the market– Important markets segments not subject to

regulation– Unprecedent level of complexity

• Contagion: real economy and public budgets

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THE REACTION BY THE AUTHORITIESTHE REACTION BY THE AUTHORITIES

• First wave: emergency measures to save the system

• Second wave: identify the problems, ie what were the causes of the crisis and what has to be done

• Third wave: regulatory phase– New rules– Look at impact– Global dimension and consistent approach

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THE AGENDA OF REGULATORY REFORM: THE THE AGENDA OF REGULATORY REFORM: THE POLITICAL RESPONSEPOLITICAL RESPONSE

• Emergence of international political guidelines: G 20– Changed world regulatory structure– Better coordination, right of initiative, supervision

• Agenda mainly driven by prudential/ financial stability concerns, but also in securities: – CRAs– Hedge Funds– OTC and Derivatives markets

• CDS: fear for speculation and abuses against the Euro• The reduction of systemic risk

– Remuneration• The link with the technical level (International standards setters): role

of the FSB

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THE REGULATORY REFORMS IN EU SECURITIES THE REGULATORY REFORMS IN EU SECURITIES MARKETS (1)MARKETS (1)

• Markets: – Trading • Equities: dark pools, transparency, waivers, consolidation,

etc.• Non equities: bonds, derivatives (CDSs), OTC markets

– Intermediaries– Post – Trading: C&S , CCPs, T2S– Market Integrity– Short selling– Review of existing directives: MAD, MiFID, PD, TD and

new legislative proposals

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THE REGULATORY REFORMS IN EU SECURITIES THE REGULATORY REFORMS IN EU SECURITIES MARKETS (2)MARKETS (2)

• Credit rating agencies: implementation of EU Regulation

• Accounting Standards, esp. IAS 39• Alternative investment vehicles: AIFMD• Remuneration issues in all sectors• Institutional Reforms– Systemic risk– Coordination in financial supervision

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MARKETS (1): EQUITIESMARKETS (1): EQUITIES

• The MiFID Review– Scope of regulation

– Transparency: pre- and post-trade

– Consolidation of information

– Internal crossing networks

– Options and discretion

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MARKETS (2): NON EQUITIESMARKETS (2): NON EQUITIES

• CESR July 2009 advice• Pre- and Post- Trade Transparency: calibration• Transaction reporting to Competent

Authorities• G/20: Centralised trading of OTC derivatives

(« where appropriate »)

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MARKETS (3): POST-TRADINGMARKETS (3): POST-TRADING

• Proposal for EU legislation before the Summer 2010

• G/20: Central clearing of eligible OTC derivatives• Process for eligibility• CCPs• Trade repositaries• Supervision • Exemptions

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INTERMEDIARIES AND INVESTOR INTERMEDIARIES AND INVESTOR PROTECTIONPROTECTION

• Revision of MiFID: Commission request– Conduct of business rules• Inducements• Suitability• Conflicts of interest rules• Client classification • Best execution

– Options and Discretions

• Future legislative proposal on PRIPS

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SHORT SELLINGSHORT SELLING

• September 2008: emergency measures– Effectiveness ?– Most of measures where repealed, some re-introduced

recently• CESR work: proposal for an EU disclosure regime– Disclosure of net positions at level 0,2 to supervisors +

each add O,1%– Disclosure to markets at 0,5% individual positions– Call to Comm. for legal basis– Further studies on “naked shorting”, via ex ante

settlement cover – Study of settlement fails

• May 2010: new emergency euro-denominated T-bonds

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CRAS: IMPLEMENTATION OF THE EU CRAS: IMPLEMENTATION OF THE EU REGULATIONREGULATION

– Regulation adopted: in force since 7.12.09 (applications from 7 June 2010)

– Supervisory role of CESR/ESMA expected– Coordination with the non EU countries:

“equivalence” “ as stringent as” criterion• Use of non-EU ratings by local subsidiary provided the

firm endorses the rating, and the original ratings comes from a state with an equivalent regime

• Equivalence assessment to be prepared by CESR, decided by Commission

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NEW SUPERVISORY ARCHITECTURE (1)NEW SUPERVISORY ARCHITECTURE (1)

• Post-Lamfalussy: the « de Larosière report »

• Political support after the crisis

• The new Authorities (ESAs): EBA, EIOPA, ESMA

• The European Systemic Risk Board (ESRB)

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NEW SUPERVISORY ARCHITECTURE (2)NEW SUPERVISORY ARCHITECTURE (2)

• State of Play: – Council text approved by Ecofin December 2, 2009– Parliament vote (Econ 10 May/Plenary June?):

Amendments for stronger Authorities– Adoption 1Half 2010 after “Trilogue” Commission,

EP, Council– Effective 1.1 2011: transition very important

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NEW SUPERVISORY ARCHITECTURE (3)NEW SUPERVISORY ARCHITECTURE (3)

• Key principles: – More centralised regulation, but supervision remains national– No effective supervision at the European level

Fear of fiscal consequences Exception: CRAs, post-trade?

– Build on existing structures: The Three Committees: CESR, CEBS, and CEIOPS Cooperative and associative structure involving the 27 states Stronger core needed

– European status: e.g. staff, funding, organisation

– Role of Commission kept limited to observer status and voice on budget matters

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NEW SUPERVISORY ARCHITECTURE (4): NEW NEW SUPERVISORY ARCHITECTURE (4): NEW POWERS (1)POWERS (1)

1° Rulemaking after the Lisbon TreatyDelegated acts (modifying or implementing level 1 or level 2)

Commission adopts rules, often on advice from ESMACouncil and Parliament have right- To revoke the powers- To oppose debated whether this would only apply in case of difference of opinion

Implementing ActsRule developed by ESMA, approved by Commission. Which control by MS? (comitology only in case of different view?)

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NEW SUPERVISORY ARCHITECTURE (5): NEW SUPERVISORY ARCHITECTURE (5): POWERS (2)POWERS (2)

2° Consistent Application of Community Rules Non implementing national supervisors will be traced

by the Authority Recommendation to comply In case of refusal: Commission decision to comply:

compare art 226• Addressed to national supervisor or firm? Controversy

If no compliance : Authority can act directly against individual firms, including cessation of practice that runs against EU rules

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NEW SUPERVISORY ARCHITECTURE (6): NEW SUPERVISORY ARCHITECTURE (6): POWERS (3)POWERS (3)

3° Emergency matters Who decides on an emergency: Council, on request

of ESRB, Commission, authority – Sometimes ESMA Allows authority to take individual decisions in

accordance to the general legislation applied by the authority

Against national supervisors not against individual firms

These decisions will prevail over national decisions

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NEW SUPERVISORY ARCHITECTURE (7): NEW SUPERVISORY ARCHITECTURE (7): POWERS (4)POWERS (4)

4° Conflict resolution mechanism “mediation”• Within the scope of the listed directives• Disagreements between supervisors• On a cross border basis• Conciliation phase• If not: authority will decide on specific action

addressed to national supervisor• If no result: not addressed to individual firms?

But can ESMA sue in national court for having national law provisions applied?

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NEW SUPERVISORY ARCHITECTURE (8): NEW SUPERVISORY ARCHITECTURE (8): EUROPEAN SYSTEMIC RISK BOARDEUROPEAN SYSTEMIC RISK BOARD

• High level board in charge of identifying systemically dangerous developments

• In liaison with other institutions: IMF, US, FSB, Basel Committee, a.o.

• Early detection and warning to national governments, supervisors

• On the basis of information from member states, or authorities, not of individual banks, unless exceptionally from supervisors and with filters, in crisis e.g.

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CONCLUSIONSCONCLUSIONS

• Important regulatory phase: opportunities but also risks – transparency of process

• Political input and technical implementation

• International consistency (US and others): avoid regulatory arbitrage

• Adequate control and enforcement is essential

• What role for self-regulation?

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