Le iniziative europee sui mercati finanziari a seguito della crisi

1. Le iniziativeeuropee sui mercatifinanziari a seguitodellacrisi Carlo Comporti Siena – 4 Giugno 2010

2. Financial 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

3. The 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

4. The agenda of regulatory reform: the political 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 • HedgeFunds • OTC and Derivatives markets • CDS: fear for speculation and abuses against the Euro • The reduction of systemicrisk • Remuneration • The linkwith the technicallevel (International standards setters): role of the FSB

5. The Regulatory Reforms in EU Securities 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

6. The Regulatory Reforms in EU Securities 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

7. Markets (1): equities • The MiFID Review • Scope of regulation • Transparency: pre- and post-trade • Consolidation of information • Internal crossing networks • Options and discretion

8. Markets (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 »)

9. Markets (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

10. Intermediaries and investor protection • Revision of MiFID: Commission request • Conduct of business rules • Inducements • Suitability • Conflicts of interest rules • Client classification • Best execution • Options and Discretions • Future legislativeproposal on PRIPS

11. Short 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

12. CRAs: implementation of the EU regulation • 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

13. 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)

14. 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

15. 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

16. New Supervisory Architecture (4): New Powers (1) 1° Rulemaking after the Lisbon Treaty Delegated acts (modifying or implementing level 1 or level 2) Commission adopts rules, often on advice from ESMA Council and Parliament have right - To revoke the powers - To oppose debated whether this would only apply in case of difference of opinion Implementing Acts Rule developed by ESMA, approved by Commission. Which control by MS? (comitology only in case of different view?)

17. New Supervisory Architecture (5): 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

18. New Supervisory Architecture (6): 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

19. New Supervisory Architecture (7): 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?

20. New Supervisory Architecture (8): European 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.

21. Conclusions • Important regulatory phase: opportunities but also risks – transparency of process • Political input and technical implementation • International consistency (US and others): avoidregulatory arbitrage • Adequate control and enforcement is essential • What role for self-regulation?