Brussels, 02/11/2010 (Agence Europe) - On Tuesday 2 November 2010, EU Internal Market Commissioner Michel Barnier concluded his official visit to the United States with a meeting in Chicago with the chair of the US committee for the regulation of derivatives (CFTC), Gary Gensler. The talks focussed on work-in-progress on either side of the Atlantic and derivatives markets. In a joint press release, both men said that they needed to work closely together to achieve tight and coherent rules.
Basel rules. After a meeting in Washington on Friday 29 October 2010 between Michel Barnier and the US treasury secretary Tim Geithner, the two politicians said that the EU and the US would be applying certain bank capital requirements 'by December 2011'. Early last month, the EU formally adopted an EU directive increasing EU bank capital requirements for trading book risks (see EUROPE 10233). Europe has often criticised the US for lagging behind in applying the Basel Committee decisions, but both Barnier and Geithner welcomed the Basel Committee's latest decisions to increase the quality and quantity of bank capital by 2019, saying that both the EU and the US were planning to apply the 'Basel III' rules within the suggested timeline (see EUROPE 10123). Once endorsed by the G20 Summit in Seoul later this month, the European Commission will publish specific legislation to this effect in the spring of next year.
Hedge funds. Following agreement in principle on the draft EU Directive on hedge funds and alternative fund management ('AIFM') (see EUROPE 10244), Barnier and Geithner stressed the importance of agreeing on fair rules at international level in this domain. During the hedge fund negotiations, Geithner wrote to the Commissioner and various ministers on several occasions expressing concern at the danger of EU rules discriminating against non-EU hedge funds.
Bonuses. Speaking in New York on Thursday 28 October at the headquarters of the Securities Industry and Financial Markets Association (SIFMA) representing the shared interests of hundreds of securities firms, banks and asset managers, Barnier criticised US reluctance to regulate bank bonuses. He said he thought more could be done in this connection in the United States because the way pay is structured can create bad incentives and cause excessive risk-taking. He added that if nothing is done, then that means that the rights lessons have not been learnt from the crisis.
Rating agencies. Barnier said that he thought that the research into the role of credit rating agencies should continue because he wants to see the detail of how ratings impact on the sovereign debt market and other markets. The Financial Stability Forum at the IMF has recommended eliminating references to financial ratings from legislation, where possible. The Commission will be launching a consultation exercise in the next few days that will be looking at excessive concentration in the international ratings market and excessive trust in external ratings per se.
Accounting standards. Barnier said that when it comes to accounting standards, he was expecting the US to transpose the IFRS (International Financial Reporting Standards) into its legislation, and this was a key part of international reform of the financial industry because there are differences in accounting rules and differences in capital requirements so it does not make sense to agree on harmonised rules for capital requirements if they lead to different outcomes because of different accounting rules. (M.B. trans fl)