KAS Selections May 2012

Interview with Pension Fund Xerox

KAS BANK raises its profile in the German market

AIFMD/UCITS Congress

OTC Derivatives under EMIR

KAS BANK and Solvency II

Kickback fees set to be banned: a recipe for greater transparency or for additional hidden costs?

Collateral and liquidity management in practice

Tax on financial transactions

KAS SELECTIONSVolume 19, issue 2, May 2012

I do not know about you, but I sometimes feel as though my head is spinning from all the abbreviations - EMIR, AIFMD, UCITS, Solvency II - used in Directives for the financial sector in Europe. However, there is a common denominator between all these Directives. And that is to promote transparency in the financial sector through better monitoring. All in the interest of protecting consumers and restoring confidence in the financial sector. And for consumers we can also read private investors, savers, pension fund members, policyholders, etc.

KAS BANK is a fervent supporter of greater transparency in the financial sector, particularly with regard to providing a system of central clearing for OTC derivates. The trade in derivatives and lack of regulation are generally considered to be one of the major causes of the financial crisis. The EMIR Directive provides for central clearing of derivatives transactions. This will inevitably have ramifications for margin requirements. For this reason, we examine one or more aspects of EMIR in each issue of KAS Selections. Just as we do with Solvency II for insurers. In partnership with several large insurers, we have set up a special Solvency II Project Team to ensure that we are fully compliant.

Other important priorities in the monitoring of financial institutions are internal governance and risk control. Niels van Heesen, the director of Stichting Pensioenfonds Xerox (Xerox Pension Fund), explains how his company pension fund has provided for its risk budgeting. He believes that it is essential for institutional investors to think more in terms of risk exposure and to consider the consequences of certain decisions for the financial position of the fund.

Transparency also means cost transparency. A good example is the proposed ban on kick-back fees for financial advisers. Mark Schilstra explains the consequences of the ban for the revenue model of investment funds and advisers.

We also report on the congress recently organised by KAS BANK to discuss the European Directives AIFMD and UCITS IV/V. Interpreting these Directives is proving to be quite a challenge for lawyers and investment firms. KAS BANK can help you in this regard.

A tax on financial transactions is a controversial issue in Europe. We survey the current status of this discussion. We also provide a practical example of collateral and liquidity management in the case of pension funds.

KAS BANK Germany is attracting a lot of attention in Germany. Our proposed partnership with dwpbank was a popular subject of discussion at two important recent events for the German financial industry. Finally, Laurens Vis once again gives us his own particular views of developments in the securities and pensions industry. This time he examines the debate concerning Defined Benefit versus Defined Contribution schemes. Or is a hybrid form possible?

As always, I conclude with a call for you to share your comments, suggestions or other remarks about KAS Selections with us. This enables us to continue to tailor the contents of KAS Selections to developments in the market.

Sikko van KatwijkManaging Board of KAS BANK

Contents:Interview with Pension Fund Xerox 3KAS BANK raises its profile in the German market 6Laurens Vision 8AIFMD/UCITS Congress 10OTC Derivatives under EMIR 14KAS BANK and Solvency II 15Kickback fees set to be banned: a recipe for greater transparency or for additional hidden costs? 16Global Custody Network News 18Collateral and liquidity management in practice 20New clients 21Personnel notes 21Tax on financial transactions 22

Comments on this issue, suggestions for future articles and mailing list requests should be addressed to:

NetherlandsClearing & Banking ServicesAssociate director:[email protected]

Fund & Insurers ServicesAssociate director:[email protected]

Institutional ServicesAssociate director:[email protected]

Sales & Business Development (S & BD)Head of S & BD:[email protected]

German BranchManaging Director:[email protected]

KAS Investment Servicing GmbHCEO & Managing Director:[email protected]

UK BranchManaging Director:[email protected]

Translation:Wilkens c.s.

Text editor:Robbert Veltman

Editor:Carla BoogersKAS BANK N.V.Marketing & Commercial DevelopmentP.O. Box 24001, 1000 DB AmsterdamThe Netherlands +31 20 557 [email protected]

Graphic Design:Ebbenhorst Design, De Meern

Print:KAS BANK,Document & Systems Services

KAS Selections is a quarterly newsletter from KAS BANK N.V.Although the information in this issue is drawn up with the utmost precision, no rights can be derived from it.

Volume 19, Issue 2, May 2012

KAS Selections Editorial

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3KAS Selections • May 2012

Switch to thinking in terms of risks

Interview with Pension Fund Xerox

Pensioenfonds Xerox (Xerox Pension Fund) was created

through the merger of the Xerox Venray pension fund and

Stichting Pensioenbelangen Amstelveen (Amstelveen

Pension Interests Association). Stichting Pensioenfonds

Xerox was established on 28 July 1999. As a company

pension fund, the Fund administers the pension schemes

for employees of Xerox (Nederland) B.V. in Breukelen,

Xerox Manufacturing (Nederland) in Venray and Veenman

B.V. in Capelle aan de Ijssel. The fund has 1,181 active

members, 1,922 pension beneficiaries and 2,033 former

employees from these three companies, with assets under

management totalling 700 million euros.

We spoke to Niels van Heesen, the director of Stichting

Pensioenfonds Xerox, about developments within the fund

and the partnership with KAS BANK in terms of

structuring risk management.

What have been the most important

developments within the pension fund since

the merger?

‘Before the merger, Xerox Manufacturing and Xerox

Nederland each had their own pension scheme and their

own board. Xerox Manufacturing did not have its own

pension fund, but was directly insured. Xerox Nederland, by

contrast, did have its own pension fund but was fully

reinsured at that time. Nevertheless, both companies had

the same pension contract. Since 1 January 2000, we have

administered these combined pension schemes ourselves.

In 2006, we also took over the accounting of these schemes

and in 2009 we incorporated the pension scheme of

Veerman B.V.

Administering a single pension scheme and carrying out the

accounting duties ourselves have had most impact. Hiring

people, purchasing systems in order to be able to administer

the scheme, defining and structuring processes - it was

quite a job sorting everything out. Everything had to be up

and running within just a few months.’

Has the introduction of the Financial

Assessment Framework (FAF) also had an

impact on staffing levels within pension fund

administration?

‘We were responsible for the pension administration of

several funds: two pension funds providing for the over 65s,

an early retirement pension fund, an executive pension fund

and a flexible pension fund. Each fund had to be audited

and subjected to actuarial certification separately. And each

fund had to produce an annual report. That took up a lot of

our time. Switching to a single scheme simplified all that and

had the added bonus of saving work. As a result we didn’t

need to take on any new employees after the introduction of

the FAF in 2007. We also launched a website, complete with

pension planner, in 2005. That’s meant that we now receive

considerably fewer questions. Our members can use the

pension planner to calculate their pension benefit if they

Niels van Heesen, director of Stichting Pensioenfonds Xerox

In 2005 we launched a website complete with pension planner. That’s meant that we now receive considerably fewer questions

4 KAS Selections • May 2012

choose to retire at the age of 62, for example, or to see what

the consequences are of a high/low structure. Members who

contact us with a question are now better informed in

advance. Thanks to these measures, we have sufficient

manpower to ensure we can meet the stricter requirements

of De Nederlandsche Bank (DNB).’

Which market developments have been

important for the pension fund?

‘The introduction of the FAF and the switch from the fixed

notional interest rate to a variable interest rate have had a

significant impact. The interest rate issue is particularly difficult

to communicate well to members. Try explaining that in spite

of a good return on investments, you might nevertheless be

compelled to cut pensions. It is a shame that DNB’s policy is

one of retrospection. You would expect a regulatory authority

to think ahead about crises. Now we have to submit a crisis

plan by 1 May 2012, for example, whereas that should really

have been done years ago.

In my opinion, one drawback of the various directives and

guidelines is that regulations are transforming pension funds

from long-term investors into short-term investors. In the final

analysis, we are long-term investors.

It’s time we simplified pension arrangements in the

Netherlands. The pension agreement reached between the

government, employers’ organisations and trade unions on

the future of the pension system in the Netherlands doesn’t

help much in this regard. On the contrary, it looks as if

everything will become even more complex and difficult to

administer.’

How is the investment process structured in

the case of Pensioenfonds Xerox?

‘Once every three years, we commission an ALM study by an

independent actuary firm. This gives a pointer to the possible

asset mix. The previous ALM study, for example, indicated

that commodities might have significant added value for us.

These results then form the basis for further decision-making

by the investment committee, which I chair. The investment

committee consists of two other board members and an

independent adviser. Besides being a member of the

investment committee, the external adviser tracks all available

investment products and asset managers in the market on

our behalf. His role in relation to the selection of a new asset

manager includes drawing up a longlist of asset managers

based on several selection criteria. The investment committee

decides which names appear on the shortlist. Assisted by the

external adviser, I then hold meetings with the selected asset

managers. The investment committee eventually sends a

well-substantiated recommendation to the trustees.’

How is the board composed in terms of

knowledge and expertise?

‘We examine the collective expertise and whether it is

covered within the expertise matrix. This ensures that the

board has sufficient expertise to judge whether the

investment committee’s proposals have merit. The ALM

study is discussed by the entire board. However, the ALM

study only examines the likelihood of underfunding, an

acceptable premium and the strategic mix. We didn’t think

this went far enough. In the interest of good decision-making,

we would like the board to base its deliberations on our risk

exposure. Risk management as a whole consists of taking

into account risks and risk budgeting. This formed the basis

for our discussions with KAS BANK and led us to develop our

risk budgeting commitment together with you. Looking at risk

monitoring, it seems that a sizeable part of the risk budget is

engulved by ranges. In itself that’s nothing to be concerned

about, but it’s still important to be aware of the risks you are

exposed to and which mandates you give to an asset

manager. If we decide to change track, by placing greater

focus on emerging markets, for example, then risk budgeting

allows you to examine the consequences of that change in

strategy.’

CV Niels van Heesen

Niels van Heesen joined

Pensioenfonds Xerox (Xerox

Pension Fund) on 1 January

2000. He has always worked in

the pension industry. He started

at Consultas, then a pension

consultancy owned by ABN Amro, before moving to the

Wolters Samson Group pension fund, then the TDV

pension fund, and then Watson Wyatt where he set up a

consultancy practice to support small pension funds.


Do you also have a training/development plan

for the board?

‘Yes, we have a training and development plan for each new

member of the board. New candidates can’t ‘simply’ join the

board, but are required first to complete a general training

programme. A prospective member’s candidacy is not

proposed to DNB until he/she is considered to have

sufficient expertise. Following the implementation of risk

budgeting, the board attended a special study day on this

topic. The board now has to embrace a different way of

thinking. The risk budget allows you to determine

immediately what the impact of a particular addition will be

on the budget. Will it be increased or decreased? Is my risk

exposure heightened? Is that what I want? Maybe not,

meaning that something else has to be deducted or taken

from elsewhere so that it falls within the constraints of the

risk budget again.’

How is your risk policy defined?

‘Two years ago, all the risks were surveyed by two different

working groups; the financial risks by the investment

committee and the non-financial risks by the second working

group. Once all the risks had been identified and listed, we

examined the impact of those risks on the fund. We repeat

this process on a regular basis. Of course, there is a danger

that you only examine risks you are already aware of. That is

also the problem with the present crisis. We were not in a

position to see it coming. In the past, for example, less

attention was paid to the counterparty risk. It was also a

commonly held belief in the market that cash was

tremendously safe. But not everyone knew that those cash

funds were being reinvested in mortgages, thus constituting

a risk again. That explains why DNB has made the

mandatory focus on risk recognition a primary issue. Many

different parties are now engaged in this, but each time it

comes down to looking back at past events. So even now

we can’t guarantee that new risks won’t occur in the future.’

Why did you decide to develop risk budgeting

together with KAS BANK?

‘As our custodian, KAS BANK has all the necessary

information available. That is an extremely valuable

database, because you can do so many things with that

data. Risk management is just one of them. We could go to

another party, but then we would have to supply them with

lots and lots of information. We prefer not to do that. That is

why it was our first choice to assign the risk budgeting to

you.’

Do you see other possibilities for further

improving the risk process?

‘The evaluation of the crisis has shown us that we have

mainly been affected by the fall in interest rates; that has

been our biggest problem. No one would have expected

interest rates and share prices to fall at the same time.

Nevertheless, we haven’t been able to identify anything that

might be construed as an error on our part. We didn’t invest

in complex products. Maybe it would have been better if

we’d absorbed the longevity risk in one go, or said: we still

need to cut your pension because you’re all living much

longer and will therefore draw your pension for many more

years. Then we wouldn’t have as many problems as we do

now.

Investment cost transparency is also important, of course.

We used to do business with a party that was very active in

fixed-income securities and who churned the portfolio three

times. You might then wonder whether the associated

transaction costs are all necessary, and whether the costs

outweigh the benefits. Obviously, you have to be careful not

to compare them like for like. After all, it’s difficult to

compare the costs of different pension funds. Those costs

depend on whether you pursue an active or passive

investment strategy, whether you work for one or more

employers, or what your service level is, for example. So you

can’t just say these are the costs per member, and then

compare them with another pension fund. Any subsequent

cost lists that you draw up aimed at comparing pension

funds can be very misleading. I am in favour of transparency,

also towards members. Ever since the crisis first broke out,

I have consistently reported that there’s a theoretical chance

that we may have to cut pensions. Fortunately, we don’t

have to do that.’

In my opinion, one drawback of the various directives and guidelines is that regulations are transforming pension funds from long-term investors into short-term investors


Words from Wiesbaden

KAS BANK raises its profile in the German market

During March, KAS BANK Wiesbaden used two important

events within the financial industry to establish new

business relationships and to maintain current contacts.

On 14 and 15 March 2012, stakeholders in the market met

for the fifth Finanzplatztag in Frankfurt. Furthermore, on

the evening of 5 March 2012 the US rating agency

Morningstar and the German newspaper, the Handels

blatt, nominated the best fund managers and their

products at the Morningstar Fund Awards 2012.

KAS BANK Wiesbaden was present at both events with its

own stand.

Finanzplatztag

High calibre decision-makers from the management of credit

institutes and financial servicers met at the fifth Finanzplatz-

tag in the Frankfurt IHK (the Frankfurt chamber of industry

and commerce). This event takes place every year and is an

industry gathering for the financial sector and a central forum

focused on the German financial sector in Frankfurt. The

sponsors of the event, the WM group, publishers of the

Börsen-Zeitung, were thrilled with the record number of

visitors. Besides overriding focal points such as the future of

the financial market in Frankfurt, new regulations in the

industry or new trends in the markets, comprehensive

current analyses and developments as well as the

consequences of new legal frameworks on the financial

sector were addressed and discussed. Such a trade event

allows visitors to gain insight into new products and services

in the industry and offers an excellent opportunity to

exchange ideas.

There were also lectures held by notable speakers. A high -

light of the conference was the lecture given by the state

consumer protection minister, Ilse Aigner (CSU), who talked

about her favourite topic, investor protection. Ernst Padberg,

Publisher and Editor of the Börsen-Zeitung, warned in

contrast against exaggerating regulations. Indeed

continuous stringent regulation and assertive financial

supervision is to all intents and purposes a competitive

advantage to a financial market. In crisis times, however, it

should be executed with a sense of proportion.

Reto Francioni, Chairman of the German stock exchange,

announced that the German stock exchange would not

grow through mergers and take-overs, but more through

joint ventures and cooperation with other stock exchange

operators. In February, the EU Commission banned the

merger of the German stock exchange with NYSE Euronext

because it believed it would cause a monopoly within

derivatives trading. Moreover, Francioni announced that the

new trading system of the stock market, which is currently

being developed and which will offer considerable

turnaround times, will be introduced in 2013 under the name

of Xetra.


Exhibition

The lectures and workshops were flanked by the exhibition

where the team from Wiesbaden presented KAS BANK at a

stand which was also close to our intended partner dwpbank.

Visitors to both the stands felt that the cooperation between

the two houses added spice to the securities business. This

spice came in the form of a promotional gift: at the

KAS BANK stand visitors received a pepper mill and could

then receive the matching salt shaker at the dwpbank stand.

The KAS BANK team was very satisfied with how the event

went. The exhibition fulfilled its purpose: many interesting,

serious and follow-up contacts were made and by the end of

the event the KAS BANK name was known to most visitors.

Morningstar Fund Awards

On 5 March, the German elite

of the fund industry met in

Frankfurt for the 18th

Morningstar Fund Awards in

order to nominate the best

fund providers. During the

evening, 14 asset managers

and individual funds were

noted for their excellence with

the “Oscar of the asset

management world”.

The approximately 200 guests agreed on one point, that

times remain hard for asset management. The debt crisis in

Europe is not yet over. Furthermore, private investors who

suffered painful losses must continue to take care and remain

cautious in their investment decisions.

This aside, the best from the industry came together in order

to celebrate their success from a difficult 2011. The jury

sums up this year as a year whereby the winners are those

providers who have concentrated on their core

competencies. By contrast, those who were less successful

were providers of passive, index-tracking funds, so-called

ETFs. Werner Hedrich, CEO of Morningstar, appealed to the

guests to take a new approach with respect to managed

funds or dividend strategies to counteract the negative

image of funds. The association of “funds are basically

stocks, with which I will lose my money” needs to be

drummed out of the minds of investors.

An entertaining interlude to the programme was the

contribution by Chin Meyer (cabaret artist for the finance

industry), who appeared as a Frankfurt tax inspector and

attacked the guests. Not even our managing director,

Jörg Sittmann, was safe in hands with him. Meyer called out

a number plate of a car to be confiscated; the car belonged

to Jörg Sittmann.

In pleasant surroundings, participants from the fund

management industry brought the evening to an end with

animated conversations.

Left Frank Vogel and right Jörg Sittmann, Managing

Directors KAS BANK Germany Branche


Laurens Vision

Laurens Vis,

Managing Director,

KAS BANK UK

People are living longer. A man

aged 65 today expects to live until

he is 86 and a woman until she is

89. And, as a result of this and low

fertility rates, in 2010 there were

3 supporting workers for every

pensioner and in 2050 there will

only be 2 workers for every

pensioner.

The outlook is a happy one for the

individual, but collectively not so

positive. Of the Defined Benefit Plans, 80 percent are now

revealing longevity-related funding voids. And in the UK, the

end is predicted for Final Salary schemes.

Time to change track. The happy individual is kindly asked to

leave the DB waiting room. 58 percent of UK’s DB Schemes

are now entirely closed to new members. 34 percent are

closed to further accruals and 18 percent are winding up

completely. The move to DC is picking up speed from

8 percent in 2001 to 39 percent in 2011. Goodbye

Collectivism, Solidarity and Participation. Welcome

Individualisation. And individualisation comes at a price.

Because ‘if a 1.5 percent fee is charged every year, both

during the period of saving and during the period of pension

payment, around 40 percent of the potential savings pot will

end up in fees’.

It seems that the Individual or Defined Contribution

arrangement has landed (from the United States) in the UK

first, before making its way across the English Channel.

Where, for example, only a mere 7 percent of Dutch Pension

savings have turned the DB corner.

In the United States, a 401 (k) retirement savings account

takes its name from subsection 410 (k) of the Internal

Revenue Code. 50 million American employees make their

regular contributions (which can be matched dollar for dollar

by their employers) into these accounts. Withdrawal of funds

is only permitted without penalties after the age of 59.5

years.

Having been introduced in the 1980s, 401k plans are now

starting to be drawn upon with 60 percent of American

households (in 2011). The outlook for them is dire. The plans

appear to fall short in general and account for less than

one-quarter of what is needed in that account to maintain

the standard of living in retirement. The reason for this?

A DB plan does not require the employee to do anything (but

given the opportunity to attend the General Membership

Meeting and keep an eye on Membership Notifications in the

ad-interim). The employee is taken care of by the nature of

the collective arrangement and solidarity between the

generations.

But with a DC arrangement, the ball is firmly in the

employee’s court and he/she has to decide what portion of

the income goes towards retirement. With a reduction of

taxable income as an incentive, no tax levies over earned

interest, a choice of mutual funds to invest in, an option to

buy company’ stock and the freedom to alternate

investment allocations at any time are visible and tempting

incentives.

But there appears to be a snag in the system, as employers

can only help their employees to save for their old age. Or

adapt the allocation of their savings relative to their changing

lifestyle as they grow older. Or to changing economic

circumstances for that matter. But they cannot force them to

make good use of the savings system.

A DB plan does not require the employee to do anything


Recent retirement research has revealed that the adjustment

of asset allocation stalled completely over the crisis period.

The default for many investors was already to withdraw from

the market entirely in adverse circumstances, but most

‘401k’ers’ have done nothing at all. With over 40 percent

already allocated to equity specific funds, the result has

been a further ‘near’ paralysed drift into US Stocks.

However a silver lining is appearing, as the US Labor

department is stepping up its efforts to force administrators

and investment companies to disclose the cost of the 401k

plans. A wave of fee reductions and new investment choices

is expected. Under existing rules, fees are typically not

disclosed in the annual investor statements. And, as has

been stated above, a small fee change can make a big

investment return in the long run.

Employers are already changing their investment funds

line-up to lower fee funds. The majority of which have

resulted in a further increase in the proportion of passive

equity funds on the 401k account holder’s menu. Because

for some time to come, it seems they can ‘check out any

time they like, but they can never leave’.

This is quite unlike the prospects given to current DB

pension savers, when they are kindly asked to seek the risks

and returns of investments themselves. As happened 30

years ago in the land of the brave and the free.

Hence the quest for a ‘hybrid’ form, where there is a balance

between individual shoulders bearing the investment risk of

otherwise collectively-driven investments. Guided by

professionals on a transparent and competitive fee basis.

A fusion of the best parts of DB liability-driven structures and

DC life style arrangements? Because the good of the

individual is best achieved in what is good for the collective

as a whole?

The pension debate continues. Terms and conditions apply.

Please post your comments on: www.mallowstreet.com.

With a DC arrangement, the ball is firmly in the employee’s court

http://www.mallowstreet.com


AIFMD/UCITS Congress

With roughly 250 investment funds as its clients,

KAS BANK is committed to being fully prepared in good

time for the implementation of the Alternative Investment

Fund Managers Directive (AIFM) and Undertaking for

Collective Investment in Transferable Securities (UCITS V).

In addition to introducing new supervisory and capital

requirements for investment funds and institutions, the

new regulations are bringing about a change in the role of

the custodian. However, much is still unclear regarding

the impact of the AIFMD and UCITS and the precise effect

of the European Directives at a national level. In order to

shed some light on this matter, KAS BANK organised a

wellattended AIFMD/UCITS congress specifically for

managers of investment funds on 16 February 2012. In

addition to the legal impact, the congress also examined

the practical structuring of an Investment Fund and the

changing role of the custodian.

The AIFMD strengthens the regulatory and supervisory

regime for investment funds. Many investment managers will

have to prepare to apply for a licence to perform their

management activities. It was originally proposed that only

managers of hedge funds and private equity funds would be

subject to stricter supervision. It is now clear that the scope

of the AIFMD is broader. It also applies to managers who

manage all types of investment funds that do not qualify as

an UCITS.*

Objectives

The objective of UCITS is to ensure that investors are better

protected against financial risks. By enforcing more rigorous

supervision, the European Commission aims to create a

framework within which it can exercise greater control over

the spread or enhancing of risks due to alternative

investment strategies. The objective of the AIFMD is to

* For more background information on the AIFMD and UCITS, please contact Floris Jan Zwijnen email: [email protected]

mailto:floris.jan.zwijnen%40kasbank.com?subject=


create a comprehensive and secure framework for the

supervision and prudential oversight of AIFM in the EU.

Irma Dollen, senior policy advisor Financial Markets of the

Dutch Ministry of Finance, discussed the present position

regarding the implementation of the AIFMD. While the

European consultation round had yielded plenty of useful

input, the impact per country was still unclear. The

Netherlands, for example, prescribes rules with regard to

non-UCITS, but at the same time makes exceptions for

exempted institutions that have voluntarily placed

themselves under supervision. Pension funds may also be

exempted from the registration requirements for investment

fund managers. ‘Family offices’ in the Netherlands do not

qualify as an investment fund or institution. Institutions falling

under the so-called ‘light-touch regime’ (no licensing

requirement, although they do have to be registered with the

regulatory authority) may be subject to fewer charges, but

neither do they enjoy the benefits in the form of a European

passport.

Dollen concluded with a discussion of current developments.

The new European regulatory authority ESMA (European

Securities and Markets Authority) is still discussing the scope

of supervision of AIFs and UCITS. It is possible that

managers of investment funds for private investors may fall

under the light-touch regime, for example. The Ministry

remains in contact with the Dutch Authority for the Financial

Markets (AFM), concerning the precise interpretation of the

Directives.

Supervisory regimes

The second speaker introduced by chairman of day Jan

Willem van der Velden, lawyer at Keijser Van der Velden N.V.

was Kees Groffen, lawyer at De Brauw Blackstone

Westbroek. He began by outlining the main changes that will

take effect from July 2013. Groffen expects that the Directive

would have greater impact in the Netherlands than in other

countries. In future, managers of funds would also be

subject to the supervisory regime, for example. The

distinction between retail and institutional was set to change

and there would also be a mandatory custodian for public

limited companies (NVs) and private limited companies

(BVs). It would no longer be obligatory for the custodian to

be the legal owner of the investments, but he would be liable

for any losses incurred on financial instruments. An

investment firm, a credit institution as well as an UCITS

custodian can all act as a custodian. Private placement

would also be barred in future. Every foreign investment

institution with a European passport will be able to offer

funds in the Netherlands in the future.

An important difference between the UCITS and AIFMD

Directive is that the AIFMD does not impose any

requirements on the investments and does not stipulate a

prospectus or essential investors information. A UCITS, by

contrast, is bound by strict requirements with regard to the

type of investments, the spread between the investments

and a restriction on loan capital. The AIFMD also calls for a

custodian for all investment funds. The custodian does not

Irma Dollen, senior

policy advisor Financial

Markets, Ministry of

Finance

Jan-Willem van der

Velden, Lawyer Keijser

Van der Velden N.V.

Kees Groffen, Notary/

Lawyer, De Brauw

Blackstone Westbroek

N.V.

Karel Vogel, Director

Keijser Capital Asset

Management

Jaap Goossens,

Head of Legal Affairs

KAS BANK


acquire the legal ownership of the securities, but has a

purely supervisory role.

Manager

Groffen then discussed the activities of the manager in

detail. Just like the manager of a UCITS, the manager is

subject to regulations based on MiFID. These include a

far-reaching duty of disclosure towards the participants and

compliance with the best execution requirement. Conflicts of

interest must also be combated or controlled. Strict

requirements are also applied with regard to risk

management.

Tasks may only be outsourced in so far as they are tasks

that are inherent in the manager’s role and are essential for

the management. The manager himself remains responsible

at all times, and supervision must be safeguarded. ‘Brass-

plate companies’ are absolutely prohibited. Portfolio

management or risk management may only be outsourced

to institutions that are licensed or registered for asset

management subject to prudential supervision. The manager

may give instructions at any time. Where activities are

outsourced beyond the borders of the European Union,

there must be a collaborative relationship between the

relevant supervisory and regulatory authorities.

Managers in practice

Groffen’s legal assessment was given a practical elaboration

in the presentation by Karel Vogel, the manager on behalf of

Keijser Capital Asset Management of the Add Value Fund

N.V. The Add Value Fund was established as a mutual fund

under the exemption regulation. In 2010, the fund was

converted into an investment company listed on NYSE

Euronext. This then applied for and obtained UCITS status

from the AFM. With the introduction of the AIFMD, it was

uncertain whether the fund would need a new AIFMD licence

or whether the UCITS licence could be maintained*. Under

the AIFMD, a custodian must be appointed and specific

capital requirements are applicable, amongst other things.

These require the articles of association and the prospectus

to be amended. Another important change is the periodic

financial reporting requirement to the Dutch Central Bank,

DNB. The risk management policy has been tightened on a

number of important points. The investors must also be

provided with information on the risk profile, the risk

management systems and the leveraged financing

undertaken by the fund.

Tasks may only be outsourced in so far as they are tasks that are inherent in the manager’s role and are essential for the management

* Meanwhile Keijser Capital Asset Management, as a Fund manager, obtained a UCITS-licence


Sikko van Katwijk, Managing Board KAS BANK

In all three presentations the speakers repeatedly

emphasised the changing role of the custodian under the

AIFMD. Managers of Investment Funds must now seek to

appoint a custodian for the safekeeping of the financial

instruments of the investment funds, something which they

are not always required to do at present. Furthermore, the

custodian will perform a greater supervisory and auditing

role in addition to his securities servicing duties.

The changing role of the custodian

Sikko van Katwijk (Managing Board KAS BANK), the final

speaker, showed two possible new structures for investment

funds with the corresponding role and duties of the ‘new

style’ of custodian. In the structure in which the investment

fund opts for a ‘depositary’ as the legal owner of the fund’s

assets, the depositary also carries out the supervisory tasks.

The custodian then restricts himself to ensuring the

safekeeping of the assets and the related activities. Van

Katwijk said that this structure was adequate for most of the

current market. In a structure with a ‘custodian role’, most of

the supervisory tasks will be performed by the custodian in

the role of depositary. In effect, the custodian is then

responsible for performing three tasks: the supervisory

function, the securities servicing function and the audit

function. Where the securities safekeeping duties are

outsourced the custodian is additionally assigned due

diligence responsibilities.

Panel discussion

During the panel discussion following the presentations it

became evident that investment funds are anxious for

greater clarity regarding the requirements with which they

would have to comply July 2013. The questions focused

largely on practical matters, such as liability and

transparency towards members. Many of the fund managers

present also felt that the AFM’s role was still insufficiently

clear. The general view was that the congress had

nonetheless shed light on a number of matters.

In view of the high attendance and the at times highly

specific questions, it is justifiable to conclude that the

congress in any event met its objective: to clarify the

developments surrounding the AIFMD and UCITS directives.


OTC Derivatives under EMIR

EMIR is the European Regulation published by the

European Commission aimed at introducing greater

transparency and better risk management to the ‘over the

counter’ (OTC) derivatives market. On 29 March 2012, the

European Parliament adopted EMIR, requiring the

European Securities and Markets Authority to publish the

technical standards and implementation date by 30

September 2012.

European Securities and Markets Authority

The European Securities and Markets Authority (ESMA) has

been given a key role in implementing and enforcing EMIR.

ESMA will be responsible for establishing what contracts will

be subject to the clearing obligation. It will also be

responsible for supervising trade repositories and will

co-supervise CCPs operating in the various member states.

Finally, it will be required to draft a large number of specific

and binding technical standards for the application of the

Regulation, for example with respect to the clearing

thresholds.

How will EMIR affect your business?

If you use derivatives contracts in any way, you will face the

post-trade requirements that EMIR brings. Very concretely,

you will need to install a version of MarkitServ (to confirm the

bilaterally executed transaction and automatically report it to a

relevant Trade Repository), appoint a Clearing Member (who

will help you bring the transaction into the Clearing House)

and decide how you are going to deal with the (intra!) daily

margin calls that the Clearing House will initiate.

Collateral Management

It is especially the latter issue that we would like to draw your

attention to. Contrary to the often weekly or monthly collateral

updates customary in the bilateral world, Clearing Houses

require intra-day and up-front margining; margin that needs to

be eligible and liquid and needs to arrive on time without the

flexibility you may be used to from your current counterparties.

We feel that this is the biggest challenge facing the industry

and this is where KAS BANK is placing its main focus: helping

our clients by completely taking over their collateral

management.

2012

2012 will be the year when all parties prepare for EMIR.

KAS BANK is ready for EMIR and ready to talk to you about

our solutions.

Rutger Abbink, Sales & Business Development KAS BANK

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End-user Small �nancial institution Large �nancial institution

Bilateral clearing Central clearing


KAS BANK and Solvency II

Within KAS BANK, a crossbank Solvency II project team

is working intensively to prepare for the implementation of

the Solvency II European Directive for insurers. Besides

continually analysing the impact of Solvency II, the team is

closely tracking all the developments surrounding the

implementation of the Directive with effect from 1 January

2014. By engaging with our clients at an early stage, we

can ensure that they are prepared in good time for the

introduction and the reporting requirements associated

with Solvency II. At the moment, we are actively engaged

in making preparations for the socalled parallel run by

DNB in August 2012.

Reporting requirements

KAS BANK uses SimCorp’s industry-leading Dimension

investment management software package for its reporting.

External analysis has shown that KAS BANK is able to meet

all current reporting requirements. However, Solvency II will

introduce substantially more comprehensive and specific

reporting requirements on the asset side in particular than is

presently the case. As a result, the present dataset

combining data elements will have to be further expanded in

certain areas. For example, a number of valuations will be

added in order to comply fully with the Solvency II reporting

requirements. Having joined forces with a client and an

external party to address this issue at an early stage, this

process is now approaching its conclusion.

DNB parallel run

We are also currently making preparations for the so-called

parallel run by DNB in August 2012. The Dutch Central Bank

and banking regulatory authority, De Nederlandsche Bank

(DNB), is conducting this parallel run in order to be certain

that insurers can become ‘Solvency-proof’ well in advance

of the 1 January 2014 deadline. We can act as your partner

towards DNB prior to and during the parallel run.

Besides Solvency II, the AIFMD European Directive can also

have significance for insurers. Our staff will be pleased to

arrange a meeting to inform and advise you about the

consequences of both Directives for your organisation.

Sandra Könisser, Relationship Manager Fund and Insurers

Services


Kickback fees set to be banned: a recipe for greater transparency or for additional hidden costs?

In March 2011, Dutch Finance Minister Jan Kees de Jager

launched his ‘Financial Sector Action Plan’ in response to

the findings of the De Wit committee. In his letter to the

Lower House of the Dutch Parliament, Mr De Jager

presented a number of policy and legislative plans for

increasing transparency in the financial sector. One of the

measures proposed was a ban on ‘kickback fees’

amongst investment firms. According to Mr De Jager,

kickback fees are not compatible with the principle that

investment firms must use their best endeavours to look

after their clients’ interests, based on a commitment to

loyalty, fairness and professionalism. In line with the new

measures contained in MiFID II, a ban on these kickback

fees is intended to enforce greater transparency. It is

debatable whether this is actually the case, however. Will

abolition not in fact just lead to new hidden costs?

Investing in funds

Investing in unit trusts has become tremendously popular

amongst consultancy as well as investment management

clients during the past ten years. By investing more in unit

trusts and less in individual equities, it is possible to achieve

a greater spread of risks and avoid the high costs

associated with discretionary investment management. It

also facilitates the avoidance of even the appearance of

inside information and helps to limit the risk of ‘commision

chasing’ as far as possible.

The Netherlands Authority for the Financial Markets (AFM)

stipulates that various standards be observed when selling

and providing advice on investment funds. The purpose of

demanding this compliance is to ensure that advisers can

gain and retain the confidence of investors. An adviser must

make clear, for example, why a particular fund has been

chosen and how the costs of the selected or advised fund

compare with other funds or a far cheaper tracker. The

question may otherwise arise whether banks and investment

managers always recommend the best funds or simply the

funds on which they earn the biggest kickback.

Kickback fees

A kickback fee is the payment or compensation received by

a party or person for successfully introducing a (commercial)

lead to another party/person. In the specific case of

investment funds, it is the commission that a fund operator

pays to a bank or investment manager for referring clients to

its funds. In this situation, the client does not usually pay a

fee to the bank or investment manager, but rather a

management fee to the investment fund. This management

fee (together with a number of other expenses) is

incorporated in the daily ‘Net Asset Value’, or the quoted

price of the fund. Out of this management fee, commission

Mark Schilstra, Director Client Management KAS BANK

The purpose of abolishing kickback fees is to make investment firms act more in the interest of their clients


is then paid (back) to the bank or investment manager in the

form of a kickback fee. This construction makes it difficult for

the client to see precisely what part of the ‘Net Asset Value’

consists of commission for the bank and what part

comprises commission for the fund operator.

Investment advice is normally provided free of charge, with

the associated costs being recovered indirectly through the

kickback fees. Since kickback fees can be as much as half

of the management fees, clients are still therefore paying

indirectly for the bank’s advice. These expenses are borne

collectively by all the investors in the fund. However, the

bank also receives a kickback fee if the client purchases

units in the fund on the stock exchange without being

provided with advice. So execution only investors also pay

towards advice that they themselves have never received.

A reduction of management fees combined with the

introduction of consultancy fees amongst banks would

therefore see execution only clients benefit most from the

removal of kickback fees.

A transparent model

Finance Minister Jan Kees de Jager sees his Action Plan as

a way of enforcing greater transparency in the costs of

investment funds. In a transparent model, clients pay their

bank or investment manager directly for giving good advice,

while they pay a management fee to the fund operator for

the fund’s performance. Since the fund operator no longer

pays any (hidden) kickback fees to the bank or investment

manager, the management fee can be significantly lower.

This represents a major change in the revenue model of

advisers (banks and investment managers) and fund

operators alike. Instead of receiving ‘guaranteed income’

from the kickback fee, they will now have to charge

transparent consultancy fees, while the investment funds will

have to lower their management fee, half of which is made

up of kickback fees in some cases, by the amount of this

kickback fee.

Hidden costs

That sounds like good news for investors. It is uncertain,

however, whether the fund operators will actually lower their

fees by the full amount of the kickback fees. Some funds

have already announced plans to increase their marketing

outlay since they fear that without the kickback fees, banks

may make less effort to sell their funds.

Transaction charges may also be raised. Given the intense

competition, this is unlikely to be reflected directly in the

fees. However, by completing more transactions in the

portfolios managed on behalf of the clients, they can also

boost their earnings on the transaction charges.

Finally, there appears to be a trend for banks to set up and

offer more self-managed funds due to other business

models and the increasing costs of discretionary investment

management. The bank then keeps the management fee for

itself.

Conclusion

The purpose of abolishing kickback fees is to make

investment firms act more in the interest of their clients.

Abolishing these fees will provide private investors with

greater transparency. Without kickback fees, investors have

greater safeguards for receiving independent advice. The

abolition of the kickback fees will nevertheless bring about a

significant change in the revenue model of banks,

investment managers and fund operators alike. Investors

must therefore be alert in the coming period to the different

fees and additional costs, whose only purpose is to mask

the modified revenue model. Transparency and openness

are key concepts in this respect. KAS BANK looks forward

to contributing to this development.


Global Custody Network News

Europe

Germany – Eurex announces launch of new derivative

contracts

Eurex added ten new Euro-denominated dividend

derivatives to its platform as from 2 March 2012. These

instruments cover dividends from selected sector indices out

of the EURO STOXX and STOXX Europe 600 indices,

including the banking, insurance, oil & gas,

telecommunications and utilities sectors. Eurex also offers a

designated Market-Making Scheme for these products. The

contracts are settled in cash and denominated in Euro, and

can be traded from 08:30–17:30 CET.

In cooperation with the Vienna Stock Exchange, Eurex

Exchange also offers derivative contracts on the Russian

RDX USD Index, as from 19 March 2012.

Greece – Further postponement Capital Gains Tax

The Greek Parliament approved the postponement of the

Capital Gains Tax (CGT). The tax on sales will continue to be

levied on all on

and off exchange

sales until the

implementation of

the Capital Gains

Tax on 1 January

2013.

netherlands – Introduction of AMX index futures and

options

As of 26 March

2012, it is possible

to trade AMX

index futures on

NYSE Liffe

Amsterdam.

Trading in AMX

index options

contracts was introduced on 10 April 2012.

austria – CCP.A plans to offer clearing services to entire

CEESEG region

CCP.A is committed to a strategy for offering clearing

services to the

exchanges in the

entire CEESEG

region: Vienna,

Prague, Ljubljana

and Budapest.

CCP.A also

announced that it

will be open for interoperability solutions with other CCPs.

Outside Europe

malaysia/honG KonG – Pilot platform for cross-border

investment and settlement of debt securities

Bank Negara Malaysia (BNM), the Hong Kong Monetary

Authority (HKMA) and Euroclear Bank jointly announced the

launch of a pilot platform for cross-border investment and

settlement of debt securities. Investors in Hong Kong and

Malaysia can buy and hold foreign debt securities and settle

cross-border transactions on a Delivery versus Payment

(DvP) basis, while local and international bond issuers can


currencies. Listed companies can choose to have their

securities traded in any two different currencies.

south Korea – New tax for foreign investors holding

non-KRW bonds

Foreign investors holding non-KRW denominated bonds

issued by local residents in South Korea are now subject to

taxation. The new legislation applies to bonds issued after

1 January 2012. The tax exemption remains unchanged for

foreign currency denominated bonds that are issued outside

South Korea.

thailand – Proposal to remove dividend tax

The Thai Securities and Exchange Commission (SEC) has

proposed a plan to remove the dividend tax on equity. The

proposal would

abolish double

taxation; issuing

companies pay

corporate taxes and

investors are

currently subject to

a 10 percent withholding tax on dividend income.

The proposal is a step towards the integration of Asean

(Association of Southeast Asian Nations) capital markets,

which include Thailand, Philippines, Singapore, Malaysia,

Vietnam and Indonesia.

issue a wide range of debt securities. The platform is

operational from 30 March 2012 and enhances cross-border

debt securities settlement efficiency and strengthens the

capacity for debt securities issuance activities in the Asian

region.

sinGapore - SGX enhances global connectivity

Singapore Exchange (SGX) and Eurex are launching a

partnership to provide market participants with easy

connectivity to each other’s markets. The link is expected to

be effective in mid-2012 and should make it more easy and

cost effective to access both markets.

SGX also announced that NYSE Technologies is extending

its Secure Financial Transaction Infrastructure (SFTI) to the

SGX data centre. As a result, clients worldwide can

conveniently access SGX’s derivatives and securities

markets. Qualified investors in Singapore can also access

NYSE Liffe, the derivative exchange of NYSE Euronext.

Both alliances are part of the strategy of SGX to reach out to

global liquidity pools in major financial cities and establish

Singapore as the Asian gateway.

Furthermore, SGX introduced dual currency trading, which

enables listed securities to be traded in two different


Collateral and liquidity management in practice

Collateral management and liquidity management are an

important part of internal governance amongst Dutch

pension funds. New legislation and regulations, amongst

other things, are prompting more and more pension funds

to examine the possibility of outsourcing the collateral

management process. They are also in search of the

qualitative provision of liquidity. KAS Selections describes

a practical example.

Pension fund X has decided to outsource its asset

management activities. Within the pension fund’s mandate

the manager invests in a portfolio of US securities. He

acknowledges the existence of a US dollar exchange rate

risk due to the positions that have been taken. The

investment policy of pension fund X prescribes that the

exchange rate risk should be hedged.

The fund decides to negotiate an exchange rate hedge (OTC

derivative) in order to mitigate the risk. An inherent

requirement for contracting the derivative is the signing of an

ISDA agreement. A counterparty risk exists during the term

of the derivative. In order to mitigate this risk, the fund

decides also to arrange a CSA (Credit Support Annex) with

the counterparty, in addition to the ISDA.

The combined ISDA/CSA reduces the pension fund’s

counterparty risk. Only for it to be replaced with an

operational risk, however. The legal documents are only of

value to the fund if they are correctly executed. This

inevitably highlights the importance of having a well-

functioning collateral management function based on

durable systems and expert personnel. The employees

concerned must have a thorough knowledge and

understanding of the OTC derivatives that have been traded

and the underlying ISDA/CSA.

The day-to-day working practice within Collateral

Management (laid down in the CSA) consists of:

• Valuingpositions

• Margincalls

• Reconciliation

• Collateralsettlements

Traditionally, collateral management often has an operational

nature. Over the years the duties of a collateral manager

have become increasingly automated, with the emphasis on

increasingly mitigating the operational risks.

Like many other pension funds, pension fund X is under

pressure to reduce problems from the past concerning the

valuation of its derivatives portfolio. The fund has identified

(pro-active) automated reconciliation solutions as the way to

address this issue. The preference for automation combined

with the necessary specialism leads pension fund X to

explore possibilities for outsourcing the collateral

management responsibilities.

The liquidity risk, something which previously received little or no attention in the case of collateral management, is growing in importance


Until recently, the emphasis within collateral management lay

on mitigating the associated operational risks. Following the

bankruptcy of Lehman Brothers in 2008, many parties

renegotiated the existing ISDA/CSAs, generally with the aim

of further mitigating the counterparty and market risk.

Possible adjustments include a more restrictive acceptance

of collateral, lower thresholds, higher haircuts, lower

minimum transfer amounts and more frequent margin calls,

for example. An inherent consequence of the more complex

CSAs was that collateral systems or collateral service

providers came under further pressure to execute these

procedures in an automated manner as far as possible.

In this example, pension fund X has a ‘long’ exposure to US

equities while it is required to pledge European government

bonds or cash as collateral. This is a liquidity risk as well as

implicitly an exchange rate risk for the fund. The liquidity risk,

something which previously received little or no attention in

the case of collateral management, is growing in importance.

This is because pension funds are increasingly exposed to

the risk that they possess inadequate qualitative liquidities to

exercise the collateral. On the one hand this leads to

restrictions in the investment possibilities available to a fund.

On the other hand, the collateral service provider is asked

(out of necessity) not just to perform its operational task as a

collateral manager but also to act as a provider of liquidity.

For pension fund X this would mean the collateral service

provider converting the US equities into European

government bonds for the pension fund.

In the light of new legislation and regulations (EMIR and

Dodd Frank for IRS and CDS OTC derivates, for example),

the market expects to see increased outsourcing of the

collateral management duties as well as a growing demand

for the qualitative provision of liquidity.

New clients

Netherlands

Goldring S.A.Order Execution, Back Office Services, Custody and Settlement

I.P. Intercapital Markets ADDerivatives Clearing

London Capital AssociatesCustody and Settlement

Nationale Nederlanden Financiele DienstenCustody and Settlement

Privium Fund ManagementOrder Execution and Settlement

Stichting Fondsenbeheer WaterbouwCustody, Settlement and Tax Reclaim

United Kingdom

JM Finn & CoOrder Execution and Derivatives Clearing

Linear Investments LimitedBack Office Services, Custody, Settlement and Model B

Wedbush SecuritiesBack Office Services, Clearing, Settlement and Securities Borrowing

Personnel notesClient Management1 March: Martine Sala, The Netherlands, Account Manager

Institutional Services

Sales & Business Development1 March: Edgar Kooter, Sales & Business Development

Institutional Services Netherlands


Tax on financial transactions

In times when the news is dominated by economic

stagnation and increasing government deficits, the

introduction of a tax on financial transactions is a popular

subject of discussion in Europe. Amongst the general

public, because a financial transaction tax is regarded as

a way of making the financial sector share in paying for

the consequences of the financial crisis. And amongst

politicians, because it is seen as an opportunity to

generate additional government revenue and to

discourage undesirable financial activities.

The financial transaction tax can be seen as a modern

version of the ‘Tobin tax’. In 1972, James Tobin, winner of

the 1981 Nobel Prize in economics, proposed a tax on

foreign currency transfers in order to combat speculation.

Although the idea behind the present plans is identical to

that put forward by Tobin, the scope of the financial

transaction tax is far broader. Whilst the Tobin tax was

restricted to foreign exchange trading, today’s transaction

tax targets the buying and selling of virtually all marketable

securities, while foreign currency transfers actually remain

exempt from the levy. Nonetheless, the intention of the

measure is identical to Tobin’s original idea: to combat

speculation and strengthen financial stability.

European Commission Proposal

At the end of 2011, the European Commission (EC)

presented a proposal for a tax on financial transactions in

the Member States of the European Union (EU). Under this

proposal, the tax would be levied on all transactions on

financial instruments between financial institutions when at

least one party to the transaction is located in the EU. The

exchange of shares and bonds would be taxed at a rate of

0.1 percent and derivative contracts at a rate of 0.01

percent. It is estimated this could raise approximately €57

billion every year.

The proposal is based on the concept of ‘making the

polluter pay’. The EC sees it as a way of ensuring that the

financial sector pays a share of the costs of the financial

crisis. Furthermore, the EC believes it will discourage risky

trading activities (such as speculation), since high-frequency

traders will be particularly heavily hit by a tax on financial

transactions.

Disagreement amongst European leaders

The EC’s proposal has led to disagreement amongst EU

Member States. Supporters stress that a financial

transaction tax will combat undesirable financial activities

and make financial institutions pay their fair share of the

consequences of the crisis. Opponents, however, argue

that financial institutions will merely charge the costs of the

tax to their clients. As a result, it is not the financial

institutions but rather their clients who will ultimately help

foot the bill for the consequences of the financial crisis.

Opponents also fear the possibility of decreasing liquidity in

the market and argue that activities will be moved to financial

centres outside the EU.


UK policymakers, for example, fear that the City of London

will be disproportionately severely affected by the measure.

Whilst most of the revenue from the tax would come from

London, Europe’s largest financial centre, many banking

transactions would actually be lost to financial centres

outside the EU. Sweden has bad experiences with a tax on

financial transactions. The country abolished a tax on

financial transactions just a few years after it was introduced

because financial institutions were settling transactions

outside Sweden.

Dutch Finance Minister Jan Kees de Jager has also criticised

the EC’s proposal. He has referred to studies carried out by

DNB and CPB, the Netherlands Bureau for Economic Policy

Analysis, which indicate that the introduction of the tax

would have a negative effect on economic development and

make little contribution to the aim of attaining greater

financial market stability.

The former French president Nicolas Sarkozy, by contrast,

was a supporter of the tax. Unwilling to await the outcome of

the debate between European government leaders, he has

approved the introduction in France of a tax on the purchase

of French shares, high-frequency trading activities and the

purchase of unsecured Credit Default Swaps (CDS) from

1 August 2012.

The next steps

The financial transaction tax would require unanimous

acceptance of the proposal by the Member States in order

to be implemented across the EU. According to a British

government spokesman, the UK would only back a global

financial transaction tax. This is unlikely, however, since US

Treasury Secretary Timothy Geithner announced during the

G20 meeting in November 2011 that such a tax was out of

the question. In order to circumvent a British veto, an

alternative plan has been prepared under which the tax

would be restricted to the eurozone.

European leaders met in Copenhagen at the end of March in

order to break the impasse in the continuing discussions

surrounding the financial transaction tax. At this meeting,

Germany presented an alternative plan that proposed a tax

modelled on the UK’s ‘stamp duty’. Under this proposal,

only share transfers would be taxed. European leaders may

also choose to look at other ways of making financial

institutions pay their fair share. Mr De Jager, for example,

has already suggested examining a levy on the profits or on

the balance sheet size of financial institutions.

In order to accommodate the Member States who were less

than enthusiastic about the plans, European Commission

president Jose Manuel Barosso said that the revenues from

the financial transaction tax could be used to help reduce

the national contributions of EU Member States. An

argument that in times of increasing government deficits just

might be enough to convince doubting government leaders.

KAS BANK AMSTERDAMP.O. Box 240011000 DB AmsterdamThe Netherlands

Spuistraat 1721012 VT AmsterdamThe NetherlandsT: +31 20 557 59 11

KAS BANK LONDON5th Floor10 Old Broad StreetLondon EC2N 1AAUnited KingdomT: +44 20 7153 36 00

KAS BANK WIESBADENBiebricher Allee 265187 WiesbadenGermanyT: +49 611 1865 3800

www.kasbank.com

NETHERLANDS

NETHERLANDS

GERMANYUNITED KINGDOM

http://www.kasbank.com

KAS Selections May 2012

Documents

Transcript of KAS Selections May 2012