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ECB Text: Draghi’s Introductory Statement To EU Parliament -2
ECB Text: Draghi’s Introductory Statement To EU Parliament -1
Update: UK Aug Trade Gaps Widen Sharply As Oil Deficit Surges
Draghi: ECB can’t print money ‘That’s not going to happen’
Draghi: Non-Euro Banks Need Same Conditions In Banking Union
UK Analysis: Manufacturing, Industrial Production Fall In Aug
UK Aug Trade Gaps Widen Sharply As Oil Deficit Surges
UK DATA: Aug Trade Gaps Widen Sharply As Oil Deficit.
ITALY DATA: Italy’s general government deficit was…
Italian Q2 GDP confirmed at -0.8% q/q, -2.6% y/y
UK August Industrial Production -0.5% m/m, -1.2 % y/y
ECB’s Draghi: Greece has made significant progress
ESRB Text: Draghi’s Introductory Statement Before EU Parl – 2
ESRB Text: Draghi’s Introductory Statement Before EU Parl – 1
EU’s Rehn: Serious Discussion Of Fin Transaction Tax Today
Cameron: EZ Integration Offers Chance For New UK EU Settlement
More Draghi…..
ECB’s Draghi: European Systemic Risk Board delivers macroprudential perspective
Dutch August Mfg output falls-0.1% m/m
EUR/USD coming under pressure ahead of super Mario’s speech

ECB Text: Draghi’s Introductory Statement To EU Parliament -2

Posted: 09 Oct 2012 02:00 AM PDT

FRANKFURT (MNI) – The following is the second part of verbatim text
of the introductory statement by European Central Bank President Mario
Draghi before the Committee on Economic and Monetary Affairs of the
European Parliament in Brussels on Tuesday:

3. Financial market union

Let me now turn to the other topic you have chosen for todays
exchange of views, namely the financial market union.

The ECB welcomes the European Commissions proposal for a Single
Supervisory Mechanism, which is very much in line with the statement of
the euro area summit of 29 June 2012. We are looking forward to working
closely with the European Parliament in this field. I am confident that
the excellent cooperation we have established so far will continue with
matters of financial supervision.

Let me here focus on three issues that are key to setting the stage
for the new supervisory framework in the euro area: first, the principle
of separation between monetary policy and financial supervision; second,
the possible participation of non-euro area Member States in the SSM;
and third, the accountability framework.

On the first issue of the separation of monetary and supervisory
functions, we are not entering uncharted territory. Many central banks
around the world including a large majority of the national central
banks in the Eurosystem combine monetary and supervisory functions.

Proper arrangements to prevent monetary policy being
inappropriately affected by the supervisory role have been devised in
several countries. I am confident that we can establish suitable
arrangements in the euro area, drawing in part on their experiences.

The Commissions proposal provides a solid basis for achieving that
goal. By having the Supervisory Board carry out all regular supervisory
activities performed directly by the ECB, we will go a long way towards
avoiding possible conflicts of interest between the two functions. In
addition, we are examining internal procedures that would separate the
relevant work-streams supporting the two functions.

The second key issue for the supervisory framework is the
possibility of non-euro area Member States participating in the SSM. Let
us first take a step back and remind ourselves that the key reason why
we are building the financial market union is because of what is
happening in the euro area. We are building it to break the vicious
circle between sovereigns and banks, the manifestations of which are
much more acute and disruptive in a monetary union. That is why we need
the SSM in the single currency area.

At the same time, it is clear that we have to create the financial
market union while sustaining and even strengthening the single
market. Both the single currency and the single market are key pillars
of growth and prosperity in Europe. Both should be maintained indeed,
both should be enhanced.

The ECB welcomes the possibility of involvement of non-euro area
Member States in the SSM. The participation of additional Member States
would provide an even stronger boost to the completion of the single
market.

That being said, for an entity such as the ECB, whose key legal
powers and key decision-making fora are limited to the euro area,
imposing obligations on and granting corresponding rights to
non-euro area Member States raises a number of legal issues. Our legal
services together with those of the Commission and the European
Council are examining closely the possible modalities of participation
of non-euro area Member States within the legal constraints of our
Statute.

The third key issue for the supervisory framework is one that I
suspect is particularly close to your hearts: how the ECB will be
accountable for its supervisory actions to the citizens of Europe and
their elected representatives. While the independence of the supervisory
function is important, so is its accountability. They are, after all,
two sides of the same coin.

Given the nature of the tasks of supervision and the need for
operational cooperation with other authorities notably where fiscal
costs are concerned separate and robust mechanisms of accountability
have to be in place to legitimise the high degree of independence. The
Commission proposal foresees, in particular, that the SSM will be
accountable to the European Parliament and the European Council.

Questions have been raised about the timeline for when we should
begin our supervisory tasks. Irrespective of the precise schedule for
the performance of supervisory tasks, I believe that it is very
important that the Council Regulation enters into force as envisaged on
1 January 2013. This would allow us to start the preparatory work as
swiftly as possible.

I have discussed the main aspects of the SSM. But the financial
market union would be incomplete without commensurate progress towards a
common resolution regime. The lack of such a regime has increased the
cost of bank failures for taxpayers. It has also complicated the
handling of bank failures, especially in cross-border cases. A common
resolution regime with an independent European resolution authority at
its centre is crucial for managing crises in a way that is as orderly,
effective and efficient as possible.

4. Concluding remarks

Let me conclude my remarks. The euro area is making good progress
towards achieving stable and sound foundations. I trust that in October
and subsequently in December, the Heads of State or Government will
reaffirm their commitment to the irreversibility of the euro by agreeing
on a long-term vision for our economic and monetary union.

That process has not yet had a fully visible impact on the everyday
life of citizens in the countries suffering most from the crisis. I am
well aware of the hardship that the current situation entails for many
people, especially those whose job is lost or at risk.

The adjustment process towards sustainable public finances and a
competitive economy can be painful in the short term, both politically
and economically. Yet, the reforms are necessary corrections which will
bring countries back on the path of sustainable growth. And they also
contribute to improve social justice, by fostering tax compliance and
limiting rent-seeking by vested interests.

I am confident that the euro area and its currently weaker members
will emerge from the crisis with stronger and better functioning
economies and that this will be to the benefit of all Europes
citizens.

Thank you very much.

[TOPICS: M$$EC$,M$X$$$,M$$CR$,MT$$$$]

ECB Text: Draghi’s Introductory Statement To EU Parliament -1

Posted: 09 Oct 2012 02:00 AM PDT

FRANKFURT (MNI) – The following is the first part of verbatim text
of the introductory statement by European Central Bank President Mario
Draghi before the Committee on Economic and Monetary Affairs of the
European Parliament in Brussels on Tuesday:

Introductory statement by Mario Draghi, President of the ECB,
Brussels, 9 October 2012

Madam Chair,

Honourable members of the Committee on Economic and Monetary Affairs,

It is a pleasure to be back here in Parliament and in front of your
Committee for our regular exchange of views.

As you know, the European Central Bank (ECB) has recently taken
important decisions to address severe distortions in government bond
markets. The ECB stands ready to undertake, under appropriate
conditions, what we have called outright monetary transactions (OMTs).
These provide a fully effective backstop to avoid destructive scenarios
that might threaten price stability in the euro area.

Our OMT announcements have helped to support financial market
confidence. The ECBs actions can help to build a bridge. But the bridge
must have a clear destination.

Reaching that destination involves three processes: first, full
implementation of fiscal consolidation and structural reforms to enhance
competitiveness; second, full implementation of financial sector reform;
and third, completion of a genuine economic and monetary union. The
establishment of a Single Supervisory Mechanism (SSM) is a key step in
these processes.

Today, I will review economic and monetary developments since July.
I will then explain in some detail the rationale and modalities of the
OMTs. I will end by sharing my views on one of the four building blocks
of a genuine economic and monetary union, namely the financial market
union.

I. Economic and monetary developments

Let me start with the economy. Since our last meeting, the ECB has
left its key interest rates unchanged: the main refinancing rate stands
at 0.75%; and the deposit rate at 0%; the marginal lending facility at
1.50%;.

Economic activity contracted in the second quarter of 2012. Looking
ahead, we expect weak economic activity in the near term and only a very
gradual recovery after that. The risks to this outlook are on the
downside, mainly related to the tensions in several euro area financial
markets.

Average inflation in the euro area stood at 2.7% in September,
reflecting indirect taxes and high energy prices. It should decline to
below 2% in the course of 2013. Underlying price pressures should remain
moderate given modest economic growth and well-anchored long-term
inflation expectations. Risks to the outlook for price developments are
broadly balanced.

Our monetary analysis paints a picture consistent with price
stability. In particular, the underlying pace of monetary expansion
remains subdued. Loan dynamics are also subdued as a result of weak
demand for credit but also restrictions on the supply of credit in some
euro area countries.

2. Outright monetary transactions (OMTs)

Let me now explain the decision announced by the ECBs Governing
Council in September on outright monetary transactions.

The impact on financial and monetary conditions of past reductions
in key ECB interest rates differed considerably within the euro area.
For example, in some countries, following cuts in key ECB interest
rates, the rates charged by the banking system for credit to the real
economy have declined only a little, if at all. In other countries, ECB
rate cuts have been fully passed through.

One reason for this difference is that the cost of bank credit to
firms is inevitably linked to the cost of market funding for the banks
themselves. If there are fears about potential destructive scenarios,
the cost of funding for banks can be affected asymmetrically across the
euro area. This means that two firms that are otherwise identical and
have the same creditworthiness have benefited to a different extent from
past cuts in key ECB interest rates, merely because they are located in
different countries.

It is that distortion in financing costs that hinders the smooth
functioning of credit markets and the transmission of monetary policy.
It is that distortion which keeps some countries in what I have
previously described as a bad equilibrium. And it is that distortion
which falls clearly within our mandate to address.

To counter the impairment of monetary policy transmission and to
preserve the singleness of the ECBs monetary policy, the Governing
Council decided to undertake outright monetary transactions.

OMT interventions in government bond markets provide a fully
effective backstop to avoid destructive scenarios that might threaten
price stability in the euro area. The aim is to ensure that the ECBs
monetary policy stance is transmitted more evenly to the real economy
across euro area.

The ECB will conduct OMTs if and as long as countries comply with
strict and effective conditions attached to an appropriate programme via
the European Financial Stability Facility and the European Stability
Mechanism.

Conditionality preserves the primacy of our price stability mandate
and ensures that OMTs will not compensate for a lack of fiscal
consolidation. Conditionality in particular preserves the incentives for
governments to continue with economic and fiscal adjustments. And only
if conditionality is fulfilled will the OMTs be successful in moving an
economy towards what we might call a good equilibrium.

OMTs are ex-ante unlimited but, as I have just explained, they are
not unconditional. Exit from OMTs would take place once their objectives
have been achieved or when there is a failure to comply with a
programme. OMTs would not take place while a given programme is under
review and they would resume after the review period once programme
compliance has been assured.

Consistent with the Treaty prohibition of monetary financing, the
ECB will only conduct transactions on secondary markets, buying from
investors and not from governments. Purchases will focus in particular
on government bonds with remaining maturities of between one and three
years. This is in line with the traditional focus of central bank
monetary operations.

The ECB will accept the same treatment as private or other
creditors with respect to bonds purchased in the context of OMTs. And
the ECB will be fully transparent on its OMTs. We will report weekly on
total portfolio holdings, and monthly on the average duration of our
holdings and the breakdown by country.

[TOPICS: M$$EC$,M$X$$$,M$$CR$,MT$$$$]

Update: UK Aug Trade Gaps Widen Sharply As Oil Deficit Surges

Posted: 09 Oct 2012 02:00 AM PDT

-Adds Detail To Version Transmitted 0830 GMT; Corrects July Oil Number
-UK Aug global goods trade deficit stg9.844b vs stg7.34b Jul
-UK Aug total trade deficit stg4.169b vs stg1.705b Jul

LONDON (MNI) – A marked increase in the oil deficit fueled a sharp
widening in the UK’s trade deficits in August.

The August total trade deficit surged to stg4.169 billion from
stg1.705 billion in July while the goods trade deficit widened to
stg9.844 billion from stg7.337 billion in July, with both measures much
wider than analysts’ median forecast.

The August total trade deficit was the second highest on record,
surpassed only by the stg4.248 billion deficit in April.

The oil deficit accounted for almost stg1 billion of the widening,
increasing to stg1.659 billion in August from stg0.695 billion in July.

Excluding oil, the trade in goods deficit still widened in August,
to stg8.185 billion from stg6.642 billion in July. This, however, was
pretty much in line with recent outturns. The trade in goods excluding
oil deficit was stg8.809 billion in April and stg8.514 billion in June.

National Statistics said the wider oil deficit may just represent
the pattern of deliveries, which depends simply on when tankers unload
rather than anything more fundamental.

The trade in services deficit only edged wider, to stg5.675 billion
from stg5.632 billion in July and narrower than the stg6.171 billion
seen in June.

The data suggest there has been little deterioration in the
underlying trend, with the total trade deficit in the three months
through August standing at stg9.8 billion compared with stg9.2 billion
in the previous three months.

The EU deficit widened to stg4.872 billion from stg4.408 billion in
July with a sharper widening in the non-EU deficit, which spiked to
stg4.972 billion from stg2.929 billion.

–London newsroom: 44 20 7862 7491; email: drobinson@marketnews.com

[TOPICS: M$BDS$,M$B$$$,MABDS$]

Draghi: ECB can’t print money ‘That’s not going to happen’

Posted: 09 Oct 2012 01:58 AM PDT

ECB can’t replace government actions
ECB stands ready to undertake OMT’s where warranted
OMT announcement helped market confidence
Shared deposit insurance is the final step in bank union
Single bank supervision is the key step
Downside risks to economic outlook remain

Ok that’s quite enough now Mario….

Draghi: Non-Euro Banks Need Same Conditions In Banking Union

Posted: 09 Oct 2012 01:50 AM PDT

–No Doubt Fiscal Consolidation Weakens Growth In Short Term

FRANKFURT (MNI) – Non-Eurozone banks should have the same
conditions for taking part in an EU-wide banking supervisor, European
Central Bank President Mario Draghi said Tuesday.

Testifying before the European Parliament, Draghi also acknowledged
that fiscal consolidation by EMU members is harming growth in the short
run but argued it was necessary to restore growth prospects over the
longer term.

“It is without doubt that the process of fiscal consolidation in
the short term will depress and has depressed outputs in different parts
of the euro area,” he said. “But what’s the alternative?” Fiscal
consolidation must hold out “a prospect at the national level of
restoring growth,” he explained.

Draghi argued that a harmonized resolution mechanism for banks was
a “very important” element of having a single banking supervisor, though
he did not explicitly say such a resolution mechanism had to come into
effect at the same time as the single supervisor.

Draghi reiterated that a there should be a “strict separation”
between the ECB’s new role as a bank supervisor and its traditional
monetary policy role. He insisted that a single supervisory mechanism
(SSM) – without all EU members – would not split the internal market
within the European Union but instead would enhance it.

“The ECB and the whole way in which we look at the SSM is very open
to non-euro members which want to opt in,” Draghi said. “The ECB is
very, very open to have them on the same, equal footing.”

On risks to the internal market, Draghi said: “I don’t think,
frankly, this is going to cause any problem from the internal market
viewpoint.” Instead, having a common rule book for many members means
“the internal market will actually benefit from this development of the
single supervisory mechanism.”

– Frankfurt bureau: +49 69 720 142; email: frankfurt@mni-news.com –

[TOPICS: M$X$$$,M$$EC$,MGX$$$,MT$$$$,M$$CR$]

UK Analysis: Manufacturing, Industrial Production Fall In Aug

Posted: 09 Oct 2012 01:40 AM PDT

- August manufacturing output -1.1% m/m; -1.2% y/y
- August industrial output -0.5% m/m; -1.2% y/y
- UK Manufacturing Falls Sharply, Comes In Below Forecast

LONDON (MNI) – Manufacturing fell back sharply in August after July
saw output recover strongly from the Jubilee led downturn in June,
suggesting that GDP in the third quarter may not bounce back quite as
strongly as previously hoped.

The data, which were somewhat weaker than forecast, are
disappointing after July’s data put trend growth in manufacturing back
in positive territory.

Manufacturing output fell 1.1% on the month in August and was down
1.2% on the year. This was well below the median forecast for a fall of
0.6% on the month and a decline of 0.7% on the year.

In the three months to July, manufacturing output dropped 0.7%
compared with the previous three months.

The wider measure of industrial production fell 0.5% on the month
and was down 1.2% on the year, compared with the median forecast for a
fall of 0.5% on the month and a fall of 1.1% on the year.

Following the sharp rises in July, the August data will weaken
hopes that the sector, which is forecast to bounceback from a decline of
0.5% on the quarter in Q2, can make a significant upward contribution to
GDP in Q3.

–London bureau: 0044 20 7862 7491; email: wwilkes@marketnews.com

[TOPICS: M$B$$$,MABDS$]

UK Aug Trade Gaps Widen Sharply As Oil Deficit Surges

Posted: 09 Oct 2012 01:40 AM PDT

-UK Aug global goods trade deficit stg9.844b vs stg7.34b Jul
-UK Aug total trade deficit stg4.169b vs stg1.705b Jul

LONDON (MNI) – A marked increase in the oil deficit fueled a sharp
widening in the UK’s trade deficits in August.

The oil deficit accounted for almost stg1 billion of the widening,
increasing to stg1.659 billion from stg695 billion in July.

–London newsroom: 44 20 7862 7491; email: drobinson@marketnews.com

[TOPICS: M$BDS$,M$B$$$,MABDS$]

UK DATA: Aug Trade Gaps Widen Sharply As Oil Deficit.

Posted: 09 Oct 2012 01:40 AM PDT

UK DATA: Aug Trade Gaps Widen Sharply As Oil Deficit Surges
-UK Aug global goods trade deficit stg9.844b vs stg7.34b Jul
-UK Aug total trade deficit stg4.169b vs stg1.705b Jul
————————————————————————
A marked increase in the oil deficit fueled a sharp
widening in the UK’s trade deficits in August. The August total trade
deficit surged to stg4.169 billion from stg1.705 billion in July
while the goods trade deficit widened to stg9.844 billion from
stg7.337 billion in July, with both measures much wider than analysts’
median forecast. The oil deficit accounted for almost stg1 billion of
the widening, increasing to stg1.659 billion from stg695 billion in
July.

ITALY DATA: Italy’s general government deficit was…

Posted: 09 Oct 2012 01:40 AM PDT

ITALY DATA: Italy’s general government deficit was 5.0% of GDP at
the end of the 2Q of 2012, the same deficit registered in the 1H of
2011, national statistics institute ISTAT said. –2Q general government
deficit-GDP 2.8% VS 3.2% deficit in 2Q 2011 –2Q primary balance-GDP
+3.3% VS +2.1% in 2Q 2011 –2Q GDP data provides a platform of -2.0%
acquired growth –See headlines on main wire

Italian Q2 GDP confirmed at -0.8% q/q, -2.6% y/y

Posted: 09 Oct 2012 01:36 AM PDT

H1 2012 budget deficit/GDP unchanged at 5% from H1 2011, Q2 2012 deficit/GDP 2.8% from 3.2% in Q2 2011

UK August Industrial Production -0.5% m/m, -1.2 % y/y

Posted: 09 Oct 2012 01:30 AM PDT

Sharply lower from July +2.9%m/m and -0.8% y/y, but m/m in line with expectations

MFG output -1.1% m/m, -1.2% y/y (expected -0.6% m/m)

August global trade deficit -£9.844 bln (exp -£8,5 bln) from -£7.337 bln in July

Cable’s kicking lower towards 1.6000 on the weaker data showing sharp drops in production/manufacturing and the widening trade deficit

ECB’s Draghi: Greece has made significant progress

Posted: 09 Oct 2012 01:25 AM PDT

But still has more to do
Have to wait for Troika report now

EUR’s attempting to balance in the low 1.2930′s

ESRB Text: Draghi’s Introductory Statement Before EU Parl – 2

Posted: 09 Oct 2012 01:10 AM PDT

FRANKFURT (MNI) – The following is the second part of verbatim text
of European Systemic Risk Board Chair Mario Draghi’s introductory
statement given before the Committee on Economic and Monetary Affairs of
the European Parliament:

Macro-prudential policies in the EU
Banking union and the role of the ESRB

The ESRB has also reviewed the current plans on the banking union
and welcomes the European Commissions proposal. Board members consider
that the macro-prudential benefits of the Single Supervisory Mechanism
(SSM) would be enhanced if an adequate resolution regime for banks were
implemented without substantial delay. The Commissions initiatives for
establishing a single resolution mechanism to resolve banks and to
coordinate the application of resolution tools to banks under the
banking union are to be encouraged.

The ESRB is reflecting on the implications of the proposed SSM for
its own work. The Commissions proposal directly affects
macro-prudential policy and its implementation suggesting for the ECB
exclusive competence within the euro area to set counter-cyclical
buffer rates and any other measures aimed at addressing systemic or
macro-prudential risks in the cases specifically set out in Union acts.

The ESRB has repeatedly stressed that macro-prudential policies
should be sufficiently flexible to prevent the build-up of systemic
risks. Policy-makers should be encouraged to mitigate emerging risks as
soon as they are identified, rather than fostering a bias towards
inaction. Flexibility can be balanced by members coordination to
safeguard against potential negative externalities or unintended
consequences.

The ESRB is working on a general framework for the coordination of
macro-prudential policies in the EU. First results can be expected in
the coming year.

Meanwhile, a review of the mission and organisation of the ESRB
itself will take place in 2013. Three members of the ESRB Steering
Committee Stefan Ingves, Chair of the Advisory Technical Committee,
Andr Sapir, Chair of the Advisory Scientific Committee, and Vtor
Constncio, Vice-President of the ECB will examine the functioning of
the ESRB, including in light of the forthcoming banking union. Follow-up
on ESRB recommendations

The ESRB is also working on first implementation of the act or
explain mechanism set out in the ESRB Regulation to ensure that
addressees respond properly to ESRB recommendations. The first set of
deadlines for replies to the ESRB recommendations issued in 2011 expired
in June 2012.

The current review suggests that the act or explain mechanism has
functioned smoothly. At the same time, more work lies ahead to enhance
our assessment framework. The ESRB Secretariat has contacted relevant
European and international institutions such as the Commission, the
IMF, the OECD, the FSB and the Bank for International Settlements to
learn from their experience. Conclusions

In concluding, I would like to emphasise that there is substantial
progress in the understanding of systemic risks and the design of
macro-prudential policies in the EU. This would not have been possible
without the active involvement and dedication of all ESRB member
institutions and committees.

On the occasion of the rotation of the Chair of the Advisory
Scientific Committee, I would like to thank in particular its first
Chair, Martin Hellwig, and to wish all the best to the new Chair, Andr
Sapir. I understand that you will have the opportunity to exchange views
with the Chair and Vice-Chairs of the Committee very soon.

Thank you very much for your attention. I am now at your disposal
for questions.

[TOPICS: MT$$$$,M$$CR$,M$X$$$,M$$EC$]

ESRB Text: Draghi’s Introductory Statement Before EU Parl – 1

Posted: 09 Oct 2012 01:10 AM PDT

FRANKFURT (MNI) – The following is the first part of verbatim text
of European Systemic Risk Board Chair Mario Draghi’s introductory
statement given before the Committee on Economic and Monetary Affairs of
the European Parliament:

Introductory statement by Mario Draghi, Chair of the ESRB Brussels,
9 October 2012

Dear Madam Chair,

Dear Honourable Members,

I am very pleased to appear before this Committee today to inform
you about the activities of the European Systemic Risk Board (ESRB).

As you know, the ESRB complements the know-how of central banks,
national supervisors and the three European Supervisory Authorities by
delivering what has come to be called a macro-prudential perspective.
What this means is the capacity to analyse risks across market segments,
to address vulnerabilities which currently lie mainly in the banking
sector and to examine medium-term risks in the financial system as a
whole.

Based on such analysis, combined with proposals for remedial action
by way of warnings or recommendations, the ESRB will help to protect
Europes economy from fragility in the financial system.

An important step in the ESRBs work was the publication of the
first risk dashboard on 20 September 2012. The dashboard was requested
by this Parliament in the legislative process establishing the ESRB. It
consists of a set of quantitative and qualitative indicators aimed at
identifying and measuring systemic risk.

The risk dashboard has been produced in cooperation with the
European Central Bank (ECB) and the three European Supervisory
Authorities (ESAs). It is one of the inputs considered by the ESRBs
General Board in its discussions of risks and vulnerabilities in the
financial system.

The dashboard, which will be updated quarterly, looks at six
different categories of risks, sectorally and across the financial
landscape. It should be considered an information tool that orients
further analysis on systemic risk, rather than a fully-fledged early
warning system.

The General Board has decided to publish the dashboard and its
underlying data on the ESRBs website. Risks in the banking sector

Let me turn to the current situation. The European economy and
financial system continue to face challenging times and it is vital
always to be mindful of systemic risks. But there are also reasons to be
confident, provided that policy-makers continue to implement agreed
measures with determination.

These measures include macroeconomic and structural reforms to
ensure competitiveness and sustainable public finances. They include
continued financial reform to ensure a resilient and well-functioning
financial system. And they include further development of Europes
institutional framework.

From a macro-prudential perspective, there are three main possible
risks. First, the risk of setbacks in the implementation of agreed
measures. Second, the risk of downside macroeconomic news with
implications for banks asset quality, profitability and funding. And
third, the risk that feedback loops between these two factors may affect
the supply of credit, which in turn will affect the real economy.

Revitalising the supply of credit is crucial for the recovery.
Notwithstanding some reductions in market tensions, financial activity
remains impaired in various parts of the system. At this time, the role
of macro-prudential policy is primarily to restore trust in the
financial sector.

To rebuild investors confidence in banks, it is necessary to
reassure them about asset quality. There are a number of options that
authorities can consider. One is enhanced disclosure, for example, on
the level of provisioning. A second option is supervisory assessments of
asset quality, possibly including peer reviews by supervisors and third
party assessments and a third option, where necessary, is the setting up
of separate entities to deal with low quality assets.

Important work is already being done by the European Banking
Authority (EBA), assessing forbearance in the banking sector, promoting
coordinated reviews of asset quality and harmonising definitions of key
variables such as non-performing loans.

The ESRB plans to make further proposals for macro-prudential
policy, particularly on vulnerabilities linked to bank funding. In light
of the impairment of some credit and interbank markets, the ESRB,
together with the EBA, is reviewing asset encumbrance and complex
funding instruments such as synthetic exchange-traded funds and
liquidity swaps. The aim is to identify sources of systemic risk and
policy actions to mitigate them. I intend to present the results of this
process at the next hearing in the first half of 2013. Risks in
financial markets

The ESRBs examination of the financial system extends well beyond
the banking sector. Today, I would like to focus in particular on
developments in the field of central counterparties (CCPs) and
over-the-counter (OTC) markets. I will outline the analytical work done
by the ESRB and the policy advice it has given.

The implementation of the G20 commitment to central clearing for
all standardised OTC derivatives has important consequences for the EU
financial system. The ESRB started to assess the systemic implications
of the more prominent role for CCPs that they will become a crucial node
within the financial system.

Macro-prudential examination of CCPs relates, in particular, to the
pro-cyclicality of margining and haircutting practices. Such practices
have an important bearing on financial conditions in the economy. While
the more prominent role for CCPs reduces counterparty risk, it
inevitably implies an increase in concentration risk. Therefore, the
ESRB issued advice to the European Securities and Markets Authority
(ESMA) on two aspects regarding the systemic resilience of CCPs.

On collateral, the ESRB advised the ESMA to increase the systemic
resilience of CCPs by better defining the type of eligible collateral
and the conditions under which commercial bank guarantees may be
accepted as collateral by CCPs. The ESRB also advised that risks related
to cross-collateralisation should be adequately taken into account.

On clearing among non-financial corporations operating in
derivative markets, the ESRB advised the ESMA to restrict the
possibilities for such corporations to settle outside CCPs, so as to
reduce counterparty risk. Regrettably from a macro-prudential viewpoint,
there is a risk that the systemic vulnerabilities identified by the ESRB
will remain at least partly unaddressed. This is due to an
interpretation of the EMIR legislation that has made it difficult to
translate fully the ESRBs advice into technical standards.

On OTC markets more broadly, the ESRB is examining potential risks
stemming from market practices that have become very common in the
so-called shadow banking sector. For example, collateral pledged by a
client may be re-used by a lender for own borrowing needs.

This pattern, which is called re-hypothecation, may be repeated
several times for the same collateral. It can therefore create a
contagion chain in case any party fails to deliver. In other cases, when
collateral for securities lending transactions is represented by cash,
that cash may re-invested by the lender. In case such re-investment
takes place in a risky asset or for a longer maturity, there are risks
of so-called reuse of cash collateral in securities financing
transactions.

[TOPICS: MT$$$$,M$$CR$,M$X$$$,M$$EC$]

EU’s Rehn: Serious Discussion Of Fin Transaction Tax Today

Posted: 09 Oct 2012 12:50 AM PDT

LUXEMBOURG (MNI) – There will be “serious discussions” on the
financial transaction tax at today’s Ecofin meeting, Olli Rehn, European
Commissioner for Economic and Monetary Affairs, said on Tuesday.

Speaking to reporters on his way to the EU finance ministers’
meeting here, Rehn said that the Commission’s proposal from one year ago
will “form the basis of the discussions.”

“I regret that [the report] did not receive a more positive
response” when it was presented, he added.

The financial transaction tax remains controversial. “The
Netherlands is not in favour,” Dutch Finance Minister Jan Kees de Jager
told reporters. “We are even a little bit reluctant towards the
introduction of it in other countries.”

Regarding the implementation of a single bank supervisor in the
Eurozone by the start of next year, Rehn called the date “ambitious” but
“doable”.

“Especially if all the member states and the Parliament work as
intensively as the European Commission worked during the summer recess,”
Rehn said.

De Jager said meeting the start-2013 deadline for launching the
bank supervisor would be “very difficult”, though he hoped for progress
at the Eurogroup meeting. He said talks on banking supervision should be
“not fixed on the calendar but fixed on the substance.”

– Frankfurt bureau: +49 69 720 142; email: frankfurt@mni-news.com –

[TOPICS: M$X$$$,MT$$$$,MGX$$$]

Cameron: EZ Integration Offers Chance For New UK EU Settlement

Posted: 09 Oct 2012 12:50 AM PDT

LONDON (MNI) -Further integration of the eurozone over coming
years offers the opportunity of a fresh settlement for the UK with the
EU, Prime Minister David Cameron said Tuesday,

Speaking to BBC radio, Cameron said any new settlement could lead
to a referendum for the UK voters after the next election.

“I’m committed to getting a fresh settlement with Europe and then
getting fresh consent for that settlement, whether by referendum or by
General Election.

However, Cameron said the use of a referendum could be the cleanest
way to garner consent, but any move would not be until after the next
election.

–London bureau: +4420 862 7499; email: ukeditorial@mni-news.com

[TOPICS: M$B$$$,M$BDS$,MT$$$$,M$$FX$,M$$EC$,M$X$$$,M$$CR$]

More Draghi…..

Posted: 09 Oct 2012 12:49 AM PDT

ESRB is publish a ‘dashboard warning system’
ESRB welcomes commission banking union proposal
Single supervisory mechanism (SSM … bloody hate acronyms) is a vital part of banking union and is welcome non-euro members that wish to opt in
Austerity is depressing growth in some regions ( no shit sherlock)
Need to act on gender imbalance at ECB,ESRB ( More women employees?)
ECB needs a complete executive board now, Mersch nomination for ECB board should go through.

EUR/USD, off the lows of 1.2907 around 1.2927 now, and i’m being told that Middle Eastern names were among the buyers just under 1.2910. Seems also there was some confusion over where exactly the Spanish 10 yr bond yields were earlier, with reports they were over 6% ,but this appears to have been incorrect .