Making privately traded derivatives markets safer is proving controversial. Republicans join business in fighting proposals By Nick Paraskeva

BRUSSELS – A further extensive round of regulations in the EU’s financial markets is being proposed by the European Commission, including powers enabling it to ban particular investment services, products or activities, in some circumstances. The new regulations were proposed for public consultation in early December by the Commission, the EU’s executive, in a far-reaching review of the Markets in Financial Instruments Directive (MiFID), the cornerstone of financial regulation in the European bloc.

BRUSSELS – Plans to reinforce sanctioning regimes in the EU’s financial sector are being considered by the European Commission, which issued a “communication” in early December setting out possible ways to achieve its goal. Today, rules vary greatly between EU member countries, and often do not serve as an effective deterrent, argues the Commission. It wants greater convergence and efficiency of these regimes. The objective is not, the Commission insists, to increase its own powers to impose penalties.

BASEL – A typical bank could offset a one percentage point hike in its regulatory capital ratio, under the proposed Basel III reforms, by raising its lending spreads by 15 basis points, according to a new study.* This calculation assumes that both the bank’s expected return on equity (ROE) and cost of debt are unchanged, and there is no change in other sources of income, or any reduction in operating expenses.

LONDON – The European Commission’s September proposal to create a harmonised regulatory framework for ‘short selling’ securities within the EU “is not proportionate to the actual risks” posed by this activity. And, the “costs of complying with the regulations and the negative effects to financial markets will be great,” according to three leading trade associations.

MANAMA, Bahrain – Reinvention of business models is just as necessary for Islamic financial institutions as it is for conventional banks as a result of the global financial crisis, according to a top Arab central banker.

MUMBAI – Indian banks are generally well positioned to adjust to the Basel III bank capital and liquidity norms well within the phase-in period that could extend to 2019, according to India’s central bank chief.

BASEL – Operational risk strategy should reflect the nature and source of a bank’s exposure for all op risk measurement system elements, according to guidelines proposed by regulators.

BASEL – Static historical backtesting on counterparty portfolios must be part of the validation of banks’ internal risk models for calculating regulatory capital, global banking regulators said in December.

SYDNEY – As Australia’s banks move out of the defensive mode adopted as they successfully came through the global financial crisis, so too are the country’s financial supervisors, the nation’s top financial sector watchdog said in December.