Welcome to Euro Shorts, a short briefing on some of the week’s developments in the

financial services industry in Europe.

If you would like to discuss any of the points we raise below, please contact me or one of

our other lawyers.

Claire Cummings

020 7585 1406

claire.cummings@cummingslaw.com

www.cummingslaw.com

EU and Germany warn Greece over renegotiation of bailout debt

The new Greek Prime Minister, Alexis Tsipras, is today meeting Jeroen

Dijsselbloem, the current head of the eurozone group of finance ministers,

marking the start of Greece's negotiations on revising the conditions of its bailout

deal. The EU and Germany have already warned the new government that there

is little support for a reduction in Greece’s bailout debts. According to reports,

the Greek government is planning to negotiate to halve the debt, although it has

assured the EU that it would not seek a "unilateral solution" to the renegotiation.

European Commissioner, Jean-Claude Juncker, has said, however, that a

reduction of the €315 billion debt "is not on the radar".

BoE speech on eurozone

The Bank of England governor Mark Carney has warned that the current

structure of the eurozone puts it in an "odd position". He said that sharing a

currency without also sharing decisions on taxes and spending did not work.

Currently, EU members share the euro currency, but decisions on spending are

made at a national level. Dr Carney said "it is no coincidence" that effective

currency unions tended to have centralised fiscal authorities, adding that

"European monetary union will not be complete until it builds mechanisms to

share fiscal sovereignty". The timing of Dr Carney’s warning is seen as key,

following as it does the launch of the ECB’s quantitative easing programme and

Syriza’s election victory this week in Greece.

China warns EU on QE programme

Following the launch of the ECB’s quantitative easing programme, China has

warned that it could trigger "competitive depreciation" of currencies around the

world. The programme was unveiled at the end of last week, according to which

the ECB plans to buy €60 billion of private and public bonds each month starting

in March with the aim of warding off deflation in the eurozone. The figure was

apparently more than the €50 billion expected by analysts and will total more

than €1 trillion altogether. The Chinese commerce ministry said that the

“European QE may worsen the competitive depreciation of currencies of various

countries, further increasing the uncertainties in international cross-border capital

flows", adding that it would closely monitor the situation. The EU is China’s

largest trading partner.

European Commission first step towards establishing CMU

The European Commission has launched its project to establish a capital markets

union (CMU) by holding a first orientation debate at the college of

commissioners. The debate focused on the key challenges and priorities for the

integration of capital markets. A green paper will be adopted next month, which

will consult on how the short term priorities set out in the Commission's

investment plan for Europe should be implemented and seek views on how to

address, in the medium term, the barriers (going beyond financial market issues)

to integrated capital markets. The Commission will then publish an action plan

on the CMU in Q3 of 2015 based on feedback received. According to reports, the

Commission intends to establish the CMU by 2019.

Lord Hill to publish green paper for CMU

Further to the above, according to reports, Lord Hill, European Commissioner

for Financial Stability, Financial Services and Capital Markets Union, plans to

publish a green paper and consultation on draft proposals for a capital markets

union (CMU) in February 2015. The date being touted for publication of the

papers is 18 February 2015, although a spokesman for Lord Hill's office would

only confirm that it is scheduled for the second half of February 2015. According

to the article, the proposals are likely to include plans to harmonise certain laws

across the EU, so that money can easily flow across borders, and include

standards for securitisation.

ISDA proposes recovery and continuity framework for CCPs

ISDA has set out proposals for a recovery and continuity framework for central

counterparties, believing that the recovery of a CCP is preferable to its closure.

ISDA published a set of key principles for CCP recovery in November 2014 and

the framework it has now proposed relates to the restoration of a CCP clearing

service whose sustainability has been put at risk due to losses caused by the

default of a clearing member. ISDA has also proposed the tools that can be used

to re-establish a matched book following the default of one or more clearing

members. The proposed framework (which is set out in section II of the paper)

comprises the following elements: recovery measures, transparency and timing,

appropriateness of utilising recovery measures beyond pre-funded resources,

segregated clearing services, failure to re-establish a matched book,

compensation for loss allocation and condition for entry into resolution.

EU and US close to deal on derivatives trading

According to reports, the EU and the US are close to completing an agreement

on each other's rules on financial derivatives trading following talks which have

continued for more than 18 months. The majority of swaps are traded in London

and New York and the prospect of rule clashes had threatened to fragment the

markets. Some of the US rules would require European banks to comply with

both US and EU rules, which could prove costly, and according to reports, the

US has proposed streamlining registration requirements for non-US derivatives

traders and Olivier Guersent, an official in the Commission’s financial services

unit, considers the new proposals from the CFTC to be "quite encouraging".

EU extends existing sanctions against Russia

The EU agreed to extend existing sanctions against Russia yesterday in response

to the rebel advance in the Ukraine last week, but held off on tighter economic

measures. The EU’s foreign policy minister said a decision on further restrictive

measures, which had appeared in a pre-meeting draft, would be decided at the

EU leaders meeting next month. The measures were supported by Greece, whose

position had been in doubt following the election; the new government’s call for

the decision on tighter sanctions to be delayed did find favour, however, with

other member states, including Italy and Austria.

BaFIN finds no evidence to support allegations of gold fix manipulation

BaFIN, Germany’s financial regulator, has announced that it has found no

evidence to support allegations of manipulation in the gold market or that

currency exchange rates were systematically rigged. BaFIN’s head of banking

supervision, Raimund Roeseler, also said that it is close to concluding a probe

into alleged attempts to rig LIBOR, without providing any further information on

the results of that investigation. He further confirmed that the probe into

currency markets is still under way.

Cummings

Tel: + 44 20 7585 1406

Mob: + 44 7734 057 327

www.cummingslaw.com

30 January 2015