Eu regulations

The Impact of New Financial Regulation on Investment Banks

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The results of a study into the impact of EU regulation in the wake of the financial crisis have been published. New rules introduced since the 2007/09 financial crisis required banks to hold more capital for trading activities, making these areas less profitable and prompting cuts to trading desks. This has led investment banks’ balance sheets supporting trading markets to decrease by 20% since 2010, and by 40% in risk-weighted asset teams. It is estimated that European investment banks will shrink by another 14% on aggregate in the next two years.

The report also said that “for banks, the diminishing returns on capital from market-making call for more and fast structural change,” and estimated that for banks to improve their return on equity to above 10%, they would need to deliver 2 to 3 percentage points of return on equity improvement from restructuring.

European Commission Guidance on Implementing Russian Sanctions

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On December 18, the government published a European Commission notice (dated December 16) containing guidance on implementing certain provisions of EU Regulation 833/2014.

The notice explains that the Regulation relates to restrictive measures targeting sectorial co-operation and exchanges with the Russian Federation including, among other things, measures aimed at limiting access to EU capital markets for Russian State-owned financial institutions. The guidance is designed to help national authorities and other relevant parties (including EU financial institutions) to implement the Regulation in a uniform manner.

The guidance takes the form of answers to certain questions that have been brought to the Commission’s attention. In relation to the financial services measures, the Q&As cover trade finance, emergency funding, loans (other than for trade finance or emergency funding), and capital markets.

EU Regulation on Improving Securities Settlement and Regulating Central Securities Depositories Published in the EU Official Journal

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On August 28, the text of the Regulation on improving securities settlement and regulating central securities depositories (Regulation 909/2014) was published in the Official Journal of the EU.  EU Regulation 909/2014.