The vote on the Omnibus II Directive at the Economic and Monetary Affairs Committee (ECON) of the European Parliament is postponed to the committee’s meeting on 23 – 24 January 2012. The vote, which was due to take place on 20 December this year, will finalise the Parliament’s proposals on the changes to the Solvency II Directive. These will represent the Parliament’s views in the trilogue negotiations. The plenary vote in Parliament has been rescheduled, tentatively, for April 2012.
The trialogue negotiations between the Parliament, the Commission and the Council of Ministers will take place over the months leading to the April vote. Although it is not set in EU law, the purpose of the trilogue is to reach an agreement of all three bodies, before it is brought to a vote in the Parliament. If the vote is approved, the changes become law.
A spokesperson for the European Parliament confirmed both dates, but said the date for the plenary vote was dependant on the outcome of the trialogue and was therefore tentative.
A number of key Level 2 and 3 documents can only be finalised once the Omnibus II Directive is agreed in Parliament.
The ECON committee discussion can be followed via a live webstream on the ECON website and accompanying documents can be found here.
A step-by-step guide to the procedure of the ordinary legislative process can be found here.
Stress test 2012
EIOPA will conduct a stress test in 2012. The announcement, by Carols Montalvo, Executive Director, EIOPA at the ABI Solvency II conference last week, is in line with EIOPA’s ongoing market testing activities (Solvency II Wire 5 July 2011). However, QIS5 will not be used as the basis for the stress test. “QIS5 is no longer a valid reference to undertake a stress test exercise,” Mr Montalvo said.
Although further details are pending, Mr Montalvo confirmed that EIOPA will continue using the MCR instead of SCR for the stress tests. The decision to use the lower capital requirement threshold, has been criticised by many in the industry as taking a soft approach. However, Mr Montalvo defended EIOPA’s decision to continue using the MCR in the test. “We look at the MCR because we have a structured system with two layers of intervention.” Firms and regulators have a range of measures they can take once the SCR is breached, which would be used as an early warning system to markets and the Board.
It is becoming apparent that the regulator is looking at the SCR not just as an early intervention tool but also as a counter-cyclical measure, which can smooth some of the volatility created when using mark-to-market valuation of assets and liabilities.
Yet Mr Montalvo surprised many when he played down the significance of breaching the SCR, saying, “It is not the end of the world if you breach it.”
Treatment of a breach of the SCR was discussed by others in the conference and there was an awareness of the need to educate markets on how to interpret it.
EIOPA said it aims to release details of the stress test in January.
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