Valuable input from the financial sector for our translators
On 1 October 2018, Dr Doris Wohlschlägl-Aschberger, a banking expert and lawyer of 40 years’ experience, gave two information sessions at the Translation Centre on financial instruments and the challenges of the financial supervisory mechanisms. About 40 in-house translators attended and had these financial concepts explained to them.
The sessions related to the Centre’s work for clients working in the field of finance. These include the Single Resolution Board (SRB), the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA), the European Securities and Markets Authority (ESMA) and the European Central Bank (ECB).
The day started with a look at the first EU legislative cornerstone in financial markets dating from 1993, the Investment Service Directive (ISD), 1993. In 2004, this was supplemented by the Markets in Financial Instruments Directive (Directive 2004/39/EU (MiFID I).
Dr Wohlschlägl-Aschberger explained the differences between stocks and bonds, convertible bonds and CoCo bonds (contingent convertible bonds), and various kinds of funds, including hedge funds. During the day, we encountered more curious terms, such as Plain Vanilla Certificates, Managed futures or Junk bonds.
Do you know the difference between non-complex and complex instruments? Examples of non-complex financial instruments include, for instance, shares and fund units that are considered easy to understand and carry a low-to-medium risk. Complex financial instruments, on the other hand, comprise warrants and derivatives. These are more complicated financial instruments for those with little or no professional experience in the field and are regarded therefore as high-risk instruments.
Did you know that companies are choosy about the quality of their investors? Naturally, companies prefer longer-term investors so they sometimes withdraw from the share market in an attempt to rid themselves of ‘day traders’ who only buy shares to offload them fast. Delisting is the term used for removing stock from the stock market.
Then we briefly heard about green bonds, as well as socially responsible investment (SRI). Green bond proceeds are used to fund environmentally-friendly projects and are thus considered a responsible investment.
In the afternoon session, we moved on to supervisory mechanisms and the challenges they present. Before the ISD was implemented, only the Ministry of Finance in each country supervised the banking industry. However, there is still work to be done here as EU law has not been harmonised yet and that remains a real challenge for regulators and supervisors. EBA, ESMA and EIOPA are making a huge contribution as they have managed to put in place effective communication channels between regulators and supervisors. As we know, EBA, like the other two authorities, produces guidelines. These guidelines are passed on to the National Competent Authorities to decide how credit institutions should adopt them nationally. After receiving and examining these guidelines, the National Competent Authorities report back to EBA. EBA then evaluates these reports and compares the data from the member states. Data comparison is complex and time-consuming because of national differences between the systems and financial products.
ESMA’s role is to provide investor protection through the promotion of stable and orderly financial markets.
EIOPA's core responsibilities are to support the stability of the financial system, transparency of markets and financial products as well as the protection of policyholders, pension scheme members and beneficiaries.
At the close of day, Dr Wohlschlägl-Aschberger had imparted a clear understanding of the niche area of financial instruments and supervisory mechanisms and primed us for our ongoing work in this field.