* The European Banking Authority said EU banks would need €17.5 billion of additional common equity Tier 1 capital to comply with the updated Basel III rules, and said the total capital shortfall for the European banking system would be €39.7 billion.
* Europe's largest investment firms are to be declared systemic and regulated in line with banks, the European Commission has proposed. The new rules are intended to simplify the treatment of smaller firms to remove some regulatory burden, while ensuring unchecked risks are not building outside the more tightly regulated banking sector, according to the commission's vice president, Valdis Dombrovskis.
* Separately, the EU executive body proposed delaying the implementation of the Insurance Distribution Directive until Oct. 1, 2018. The new rules, which govern how insurance products are sold and the information consumers should receive before signing an insurance contract, were due to take effect from Feb. 23, 2018.
* The European Securities and Markets Authority gave EU investment firms a six-month temporary period to continue providing services to clients that lack a code that is required under the second Markets in Financial Instruments Directive, or MiFID II — which is due to take effect Jan. 3, 2018 — as long as they obtain the documentation necessary to obtain a code for the client.
* The European Systemic Risk Board adopted a recommendation addressing systemic risks related to liquidity mismatches and the use of leverage in investment funds. The recommendation will be published early next year.
* The EU said any transitional arrangements agreed with the U.K. to preserve current trading terms beyond March 2019 should not last beyond 2020, adding that there "should be no cherry picking" during the transition period, meaning the U.K. will have to follow the rules of the EU's Single Market and Customs Union in full, including any changes.
UK AND IRELAND
* The Bank of England unveiled plans to allow banks, insurers and clearing houses from the European Economic Area to apply to operate in the U.K. as branches after Brexit, as long as they are not carrying out significant retail business. The plan is based on the assumption that Brexit negotiations lead to a co-operative relationship between the U.K. and the EU; if they do not, the Bank of England may have to reconsider how it supervises firms from third countries, according to Deputy Governor Sam Woods.
* EU asset managers and mutual funds will also be allowed to continue operating in the U.K. post-Brexit for a period of time even in a "hard Brexit" scenario, according to the U.K. Financial Conduct Authority, Reuters wrote.
* Separately, the BoE's Prudential Regulation Authority proposed that, for foreign insurance companies to be allowed to set up a branch in the U.K. rather than a full subsidiary, it should also consider how much of the branch's activity is covered by the U.K. Financial Services Compensation Scheme in addition to its existing requirement for the company's home state regulation to be "broadly equivalent" to that in the U.K.
* BoE Governor Mark Carney dismissed suggestions by the EU's chief Brexit negotiator, Michel Barnier, that the U.K. and the bloc cannot have a trade deal specifically tailored for financial institutions in Britain post-Brexit, saying that financial regulation had strengthened over the past 10 years to the point that a financial services trade deal could be feasible, the Financial Times reported.
* Separately, Carney, who also chairs the Financial Stability Board, said global regulators will undertake a closer examination of digital currencies and distributed-ledger technology, which underpins cryptocurrencies, the Financial Times reported.
* U.K. digital lender Tandem Bank Ltd. received approval from the U.K. Prudential Regulation and Financial Conduct authorities for its acquisition of loss-making lender Harrods Bank Ltd. Tandem said the deal will give it access to a full banking license, about 10,000 bank clients and a significant capital injection.
* The Central Bank of Ireland said the country's main banks have agreed to compensate a further 13,600 tracker mortgage customers that have been overcharged, bringing the total number of customers affected to 33,700, Reuters reported.
* Legal & General Group Plc and Prudential Retirement, a unit of Prudential Financial Inc., have concluded their sixth longevity reinsurance agreement since 2014. The Prudential Retirement Insurance and Annuity Co. assumes longevity risk for roughly $800 million in pension liabilities, which are held by Legal & General as part of its bulk annuity business.
GERMANY, SWITZERLAND AND AUSTRIA
* Deutsche Bank AG offered up to 1,000 employees who are not needed anymore after the integration of Deutsche Postbank AG and the merger of Deutsche Bank Bauspar AG with BHW Bausparkasse AG a redundancy package in case they voluntarily leave, Handelsblatt wrote. Deutsche Postbank CFO Marc Heß will leave the bank by March-end 2018, WirtschaftsWoche noted.
* Helmut Schleweis, most recently chairman of the management board of Sparkasse Heidelberg, yesterday officially took over as president of the German Savings Banks Association, succeeding Georg Fahrenschon, who stepped down amid an investigation into alleged tax evasion. In his inaugural address, Schleweis said he will campaign for mergers of affiliated entities within the association such as Provinzial insurers, regional building societies and selected regional state banks, Handelsblatt reported.
* Swiss Re AG estimated total insured losses from natural and man-made catastrophes in 2017 at $136 billion, up from $65 billion last year. It also expects total economic losses from catastrophes in 2017, to hit $306 billion, up from $188 billion the previous year. Handelsblatt noted that Swiss Re will likely report losses for 2017 due to high claim payouts, while Munich Re will have to deploy almost all of its annual profit and Zurich Insurance Group AG at least $700 million.
* EU member states yesterday agreed to grant Swiss stock exchanges — SIX Swiss Exchange and BX Swiss AG — a one-year access to its internal market, two EU officials told Reuters. The move should allow for an overall accord by the end of next year on Switzerland's access to the bloc's market. The commission is set to formally endorse the decision today.
* SIX Group's regulation enforcement unit reprimanded Bellevue Group AG for breaching IFRS requirements in its 2016 annual financial statements.
* GAM Holding AG unveiled a new compensation framework that will see a "downward adjustment" in the salary of CEO Alexander Friedman, whose pay has triggered a large-scale shareholder revolt in April, the Financial Times reported.
* UBS Group AG is faced with a criminal charge filed at the public prosecution of Canton Zug alleging qualified money laundering and violation of mandatory reporting obligations in cases of suspected money laundering, Handelszeitung reported. The charge was brought in by a foundation representing 300 shareholders of bankrupt biopharma company Amvac AG, whose president stands accused of fraudulent trades with the company's shares.
* Basler Kantonalbank created a new digital services business unit and is now looking for a chief digital officer to head the department. Subsidiary Bank Cler AG is bundling its digital business in the new strategic and digital transformation unit.
* Christoph Meister, vice president of the board of directors of Valartis Group AG, is stepping down from his post, the bank said. A successor is being sought.
* Bank Frick & Co. AG named Melanie Gstöhl CFO and a management board member covering the finance, risk and controlling department, effective Jan. 1, 2018.
FRANCE AND BENELUX
* Bank of France Governor François Villeroy de Galhau said the country's banks will be able to meet higher capital requirements under the updated Basel III regulations with their retained earnings and that there is no need for any of them to carry out a capital increase specifically because of the new rules, Reuters wrote.
* La Poste and Caisse des Dépots et Consignations will have to find €5 billion to buy the shares held by Groupe BPCE and others if La Poste were to take control of CNP Assurances SA and merge it with La Banque Postale SA, Les Echos reported.
* ABN AMRO Group NV said its common equity Tier 1 requirement for 2018 was set at 10.4% under the Supervisory Review and Evaluation Process. Its fully loaded CET1 requirement for 2019 is expected at 11.78%.
* KBC Bank NV is setting aside €61.5 million to compensate overcharged mortgage customers in Ireland, De Tijd reported.
SPAIN AND PORTUGAL
* Voters in Catalonia will head to polling stations today to elect a new parliament, after Spanish Prime Minister Mariano Rajoy sacked the Catalan government following the October independence referendum. The result of the snap election, which pits separatist parties with those calling for the region to remain in Spain, is expected to be very close, BBC News reported.
* The president of Spanish bank restructuring fund FROB, Jaime Ponce, denied that his institution would be carrying out a "forced sale" of its stake in Bankia SA, and explained that the disinvestment would take place once there were "windows of opportunity." Speaking at a Parliamentary commission investigating the country's financial crisis, Ponce clarified that the FROB's objective was to sell the 60.63% participation before December 2019, Europa Press reported.
* Unicaja Banco SA purchased a 12.5% participation in EspañaDuero for €36.7 million from FROB. The transaction, which involved 127.48 million shares and represented the entire stake held by the public body, was carried out at a price that took into account the entity's restructuring plan established for April 2018, Expansión wrote.
* A Portuguese court has ruled that Portugal's central bank must release the sale contract of Novo Banco SA to 19 international funds that invested in bonds from the failed Banco Espírito Santo SA and requested access to the document, Economia Online reported. The central bank has 10 days to send the investors a copy of the document.
* Millennium BCP said it has fulfilled the minimum capital requirements set by the ECB, Jornal de Negócios noted. The bank's core Tier 1 capital ratio stood at 13.2%, more than four basis points higher than what is required by the regulator.
ITALY AND GREECE
* UniCredit SpA and CNP Assurances are renewing their Italian life insurance partnership for seven years until the end of 2024, Reuters wrote.
* Intesa Sanpaolo SpA said it expects to book overall savings in personnel expenses of approximately €675 million annually under its voluntary exit program targeted at around 9,000 employees. Roughly 7,500 staff have already subscribed to the voluntary exits, and the bank said it plans to hire 1,000 new staff with indefinite-term contracts and another 500 with a mixed contract, in addition to the 150 hires already agreed with trade unions in February.
* The bancassurance joint venture between Società Cattolica di Assicurazione -Società Cooperativa and Banco BPM SpA is slated to get underway in March or April, Il Sole 24 Ore said.
* The Swedish central bank said it would "begin slowly raising" its key repo rate in the middle of 2018 as it kept its key rate at negative 0.5%, and said monetary policy needed to remain expansionary.
* The Swedish National Debt Office set the minimum requirements for own funds and eligible liabilities, or MREL, for Nordea Bank AB (publ) at 7.1%; Svenska Handelsbanken AB (publ) at 6.6%; Skandinaviska Enskilda Banken AB at 7.7% and Swedbank AB (publ) at 7.3%.
* Martin Noreus, deputy director general of Sweden's Financial Supervisory Authority, warned against granting national supervisors additional powers to oversee bank branches, and urged regulators to "find a way to cooperate effectively" if it wants to have large European cross-border banks, Bloomberg News reported.
* Topdanmark A/S appointed Lars Thykier acting CEO, following the announcement of Christian Sagild's resignation as CEO on Jan. 1, 2018. Thykier will serve as acting CEO, in addition to his CFO role, until a new CEO takes on the post.
* Nordic airline Norwegian Air Shuttle ASA further reduced its ownership in Bank Norwegian AS, selling an additional 2 million shares in Norwegian Finans Holding ASA, the bank's parent company, Dagens Næringsliv reported.
* The Russian Deposit Insurance Agency asked Otkritie Holding JSC to return 28 billion Russian rubles received in December 2015 to finance the bailout of National Bank Trust PJSC, Vedomosti reported. The latest development could suggest there is a conflict between the former owners of Otkritie Financial Corp. Bank and the central bank, which took over the lender following its August bailout, RBK Daily said.
* The Russian central bank is concerned about plans for a twofold increase in mortgage lending in Russia by 2020, which are enshrined in the development strategy of the JSC The Agency for Housing Mortgage Lending, and is considering measures to toughen conditions for the issuance of mortgage loans to avoid a housing bubble, Kommersant reported.
* Russia's State Duma passed a bill widening the scope of activities of Vnesheconombank as a development institution, news agency Prime said.
* The Polish Financial Supervision Authority removed Raiffeisen Bank Polska SA from the list of Poland's systemically important banks, and added Deutsche Bank Polska SA, Rzeczpospolita reported. The regulator also revised capital buffers for several systemically important lenders.
* Jouko Pölönen is stepping down as CEO of OP Financial Group unit OP Yrityspankki Oyj, or OP Corporate Bank Plc, and as CEO of Helsinki Area Cooperative Bank by the end of June 2018 to join Ilmarinen as CEO.
* Bank BGZ BNP Paribas SA received 2.3 billion Polish zlotys from the sale of a portfolio of cash and car loans as part of a securitization deal that will allow the bank to improve capital adequacy ratios, Rzeczpospolita said.
* Ján Lucan, serving as head of corporate banking at Czech lender Ceskoslovenská obchodní banka as, will move to Slovakia-based sister unit Ceskoslovenská obchodná banka a.s. to serve as the new CFO of the bank, E15 reported.
* Ceskoslovenská obchodní banka as's chief risk officer, Tomáš Korínek, will move to the lender's Ceskomoravská stavební sporitelna as unit as new head of the company, E15 said.
* The Ukrainian central bank intends to appeal a local court decision banning Ukrainian and foreign advisers and consultants from investigating events that resulted in the insolvency of Ukraine's largest lender, PAO KB Privatbank, Reuters said.
* Albania's central bank maintained its monetary policy rate at 1.25%, citing a stable economic outlook.
IN OTHER PARTS OF THE WORLD
Asia-Pacific: New Zealand rejects HNA's UDC Finance bid; Thailand maintains policy rate
Middle East & Africa: ANC calls for SARB nationalization; Reserve Bank of Malawi cuts policy rate
Latin America: BCI to buy Wal-Mart's Chilean financial biz; Bradesco compensates pension funds
North America: Regulators approve big banks' living wills; 2 Texas banks to merge
North America Insurance: ACA mandate repeal could hurt health market; $136B in global insured cat losses
NOW FEATURED ON S&P GLOBAL MARKET INTELLIGENCE
Regulators leave eurozone banks' bond addiction untouched: Rather than trying to encourage banks to buy less of their governments' debt, European authorities are trying to bolster their defenses in case of a bond market sell-off.
EU's capital markets union gathers steam, but direction may be wrong: The EU's plan to integrate Europe's markets further does not go far enough in opening up the equity markets to entice European retail investors to participate in the capital markets, according to observers.
Sheryl Obejera, Arno Maierbrugger, Meike Wijers, Gerard O'Dwyer, Beata Fojcik, Heather O'Brian, Brian McCulloch, Praxilla Trabattoni and Mariana Aldano contributed to this report.
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