Because of an error in the original source article, an item in Tuesday's SIFMA Global SmartBrief incorrectly identified Mark Austen as CEO of AFME. Austen is the chief operating officer of AFME. SmartBrief regrets the error.
Michel Barnier, the EU's internal-market commissioner, explained an overhaul of the Markets in Financial Instruments Directive, saying one key goal is to enhance rules for over-the-counter derivatives and trading. Under Barnier's plans, OTC derivatives would be moved onto exchanges, which are seen as less risky. Barnier's plans raise several questions for market participants. "It is unclear how much of the market the [European] Commission is seeking to move onto organised venues and whether this will be beneficial," said Mark Hart, managing director for AFME. "One of the few certainties is that it will take choice away from investors."
The Irish government unveiled an austerity budget as the European Council gave the green light to a €22.5 billion loan to the troubled country through the European Financial Stability Mechanism. The loan is part of a broader €85 billion package previously agreed upon to aid Ireland. The loan comes with strings attached, including a revamp of Ireland's banking sector. "The state will own the bulk of the banking system," said Brian Lenihan, finance minister for Ireland.
A draft EU law would give regulators authority to temporarily ban naked short-selling of derivatives and sovereign debt and abusive short-selling of shares. Michel Barnier, internal-market commissioner for the EU, is poised to publish the measure on 15 September. Some member nations have called for such a move to rein in speculators. Read a briefing note on short-selling from AFME and ISLA.
The Basel Committee on Banking Supervision's proposals for "countercyclical capital buffers" gave early indications of how bank rules related to capital and liquidity could work. Under the proposals, banks would be required to bolster capital when credit builds up in the marketplace, effectively reining in lending and establishing a larger capital cushion. Industry insiders and groups, including AFME, scrutinised the proposals. "We would prefer to see the regulators building on existing tools and practices rather than introduce new ones," said Mark Austen, acting CEO at AFME.
As finance ministers and central bankers from the Group of 20 prepare to meet in Washington, DC, this week, the International Monetary Fund is poised to issue a report on the idea of a global levy on banks. The bank tax has gained some momentum in recent months, but opponents said it raises concerns about moral hazard. "A bank tax as a vaguely defined insurance against future bank failures takes us back to the scenario of governments being expected to intervene using public funds," said Mark Austen, acting CEO of AFME. "Faced with insolvency, a bank should look first to shareholders and creditors for support, not the taxpayer."