European Commission Proposes Measures to Avoid Future Bank Bailouts
On 6 June, the European Commission published a legislative proposal for a Directive designed to avoid future taxpayer bailouts of troubled banks. The proposals aim to ensure authorities will have the means to intervene decisively before problems occur, or if they do occur, to intervene as early as possible. Banks that have deteriorated beyond repair would be partly rescued by unsecured creditors rather than taxpayers. Legislative Proposal.
The proposals include:
Preparatory and preventative measures – including recovery plans, resolution plans, powers to address or remove resolvability impediments and intra-group support agreements;
Early supervisory intervention;
Resolution tools – including selling all or part of a failing firm to another firm, separating "good" assets into a new firm, putting "bad assets" into an asset management vehicle and a "bail-in" tool which involves a firm being recapitalised with creditors having their claims reduced or converted to shares; and
Enhanced co-operation between national authorities.
The European Commission intends Member States to finalise their implementing measures for the proposed Directive by 31 December 2014 and apply the measures from 1 January 2015. The bail-in tool should be applied from 1 January 2018. A Law-360 article, with comments from Orrick's Partner Sam Millar, a regulatory partner in the London office, can be found here.
Treasury Committee Publishes Report on the Financial Services Bill
On 8 June, the Treasury Select Committee published a report setting out its main concerns on the Financial Services Bill. Report.
In particular, it called for amendments to the Bill which would:
Oblige the Court of the Bank of England to undertake retrospective reviews of the Bank of England's performance;
Give a general power to the Chancellor of the Exchequer to direct the bank of England when public funds are at risk;
Make competition an objective of the Prudential Regulation Authority;
Ensure Parliament, through the Treasury Committee, may request retrospective reviews of the work of the Financial Conduct Authority's ("FCA").
It also considered whether the Treasury Committee should have a role in the appointment and dismissal of the Governor of the Bank of England and whether there is a way of requiring the FCA to publish board minutes. It welcomed the House of Lords to re-examine these issues. The second reading of the Bill in the House of Lords will take place on 11 June 2012.
ESMA Publishes Responses to Call for Evidence on Transaction Reporting
The European Securities and Markets Authority (ESMA) has published the responses it has received to its May 2012 call for evidence on transaction reporting. On 7 May 2012, ESMA published a call for evidence on transaction reporting. The purpose of the call for evidence was to gather initial views on ESMA's work to develop guidelines on harmonised transaction reporting under the Markets in Financial Instruments Directive (2004/39/EC) (MiFID). This followed the commitment made by ESMA's predecessor, the Committee of European Securities Regulators (CESR), to review its May 2007 Level 3 guidelines on MiFID transaction reporting.
On the basis of responses received, ESMA intends to launch a full public consultation on guidelines on harmonised transaction reporting. Call for Evidence. Responses.
European Parliament to Consider Solvency II Amending Directive at Plenary Session
On 7 June 2012, the European Parliament updated its procedure file on the proposed Directive amending the transposition and application dates for the Solvency II Directive (2009/138/EC). The procedure file indicates that the Parliament will consider the proposed Directive during its plenary session on 3 July 2012. Procedure File.
The European Commission published its legislative proposal for this Directive in May 2012. Legislative Proposal.
FSA Issues Final Notices to an Investment Banker and His Wife for Insider Dealing
On 31 May 2012, the FSA issued Christian Littlewood and his wife, Angie, with final notices prohibiting them from performing any function in relation to any regulated activity. Between 1998 and 2008, Mr. Littlewood was employed by the investment bank Dresdner Kleinwort Wasserstein Ltd. As a result of his employment he had access to inside information relating to securities. Mr. and Mrs. Littlewood used the inside information obtained through his employment to facilitate the placing of trades in eight separate stocks just prior to announcements to the market. As a result of these trades, Mr. and Mrs. Littlewood, together with a third party friend of Mrs. Littlewood (Mr. Sa’aid), made profits of around £590,000.
The FSA's action follows the conviction of Mr. and Mrs. Littlewood for criminal offences of insider dealing in February 2011. Final Notice for Christian Littlewood. Final Notice for Angie Littlewood.