A senior European central banker has slammed bankers who seem intent on adapting to proposed new regulations by reducing credit to the economy rather than raising new capital or limiting rewards to shareholders. Lorenzo Bini Smaghi, a European Central bank (ECB) executive board member, described bankers’ claims about the adverse affects of the regulatory proposals as “unjustified.”

As new capital framework nears finalisation, insurers are in a last-ditch fight to win changes in monster legislation

The business models of several insurers will be seriously damaged if the results of its study hold, the report by insurance research firm EMB says. For complex insurers and reinsurers, the standard formula approach is unlikely to be representative of the true underlying risk profile. EMB says companies should ensure they undertake specific parameter reviews and build internal models which are tailored to each company. These are subject to regulatory approval and adequate planning is therefore needed. “The clock is already ticking and the results of our study should add further impetus to firms’ Solvency II implementation plans. The cost of failure just became much higher,” EMB says.

The Lloyd’s of London insurance market plans to make its voice heard clearly on Solvency II as requirements under the regime could adversely affect the capital efficiency of the market, according to a three-year strategy paper drawn up by Lloyd’s*.

LONDON – Banking supervisors in Europe are planning to undertake a quantitative impact study (QIS), in parallel with the Basel Committee, to gauge how proposed new capital and liquidity regulations will affect banks across the EU. The Basel Committee, which effectively sets prudential standards for large banks around the world, issued an extensive package of new regulations in late December. A comprehensive QIS for many of the bigger banks is already being undertaken by the Basel Committee.

BRUSSELS – Regulation of the vast over-the-counter derivatives market has taken another step forward in the EU, with the establishment of a working group comprising representatives of the bloc’s member governments and aimed at hammering out a detailed approach for incorporation into legislation later this year. The working group’s starting point at its first meeting, in late January was a paper drawn up by the European Commission, setting out its own well-established position for greater standardisation of derivative contracts and centralised clearing of them.

BRUSSELS – A bizarre indicator of the tangled and contentious wrangling over the EU’s Alternative Investment Fund Management (AIFM) Directive is the unprecedented 2,000 amendments tabled by lawmakers to a draft report that will provide the basis of the European Parliament’s own version of the legislation. The flood of amendments has swamped Jean-Paul Gauzés, the French Christian Democrat member of the European Parliament (MEP), who drafted the report now scheduled to be initially debated during the last week of February by the powerful Economic and Monetary Affairs Committee (ECON), with a vote expected on April 12.

STOCKHOLM – Sweden’s central bank is considering using more formal measures to warn of risks to financial stability as a result of the financial crisis that engulfed the Baltic states in 2008 and 2009, the bank’s governor said in early February.

LONDON – Continuing uncertainty over future regulation is a potential constraint on the revival of the European securitisation market in 2010, according to an assessment of the outlook for structured finance undertaken by credit rating agency standard and Poor’s (S&P).

WASHINGTON – The Securities and Exchange Commission (SEC), America’s leading markets regulator is undertaking a broad review of the equity market structure, issuing a concept release in mid-January that seeks public comment on issues such as high frequency trading, co-locating trading terminals, and markets that do not publicly display price quotations.