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Highlights of my week: Intrigues after the EP election are in full swing! The big political `families’ are trying to attract non-allied/un-attached MEPs to their family, or even entire factions to switch. Currently, these re-alignments have moved the right-wing ECR into third position – potentially increasing their leverage on the top EU jobs and EP committee roles. But the “grand coalition” (EPP/S&D/Renew) still holds 56% of the seats. More immediately for financial markets, the Commission and ECB held their annual Financial Stability and Integration conference after publishing their reports. The stocktake on progress of CMU and banking union, together with recommendations for future action, may short-circuit some of the usual delays while the incoming financial service Commissioner goes round that track for his/her first year. Ominously for the City of London, both Commission and ECB re-iterated (and underlined!) their concerns about the financial stability risks of being dependent on UK clearing services. The Belgian Presidency continued its push to wrap up as many Council positions as possible before the incoming Hungarian Presidency may face other distractions. CMDI and simpler financial reporting were ticked off this week. Both ESMA and EIOPA published their annual reports for 2023 while the ESRB re-iterated its concerns about the structural vulnerabilities in all segments of the NBFI sector. The ESAs proposed improvements to the sustainable finance disclosure regime and the internal auditors body drew its members attention to (and their responsibility for) implementing the EBA’s “greenwashing” report.
Graham Bishop
Articles from 14-20 June 2024
Policy impacting Finance
European Parliament ready to engage, President Metsola tells the European Council : EP President Metsola emphasised the strongest commitment of the Parliament to ensuring the smooth running of the process leading to the election of the next Commission President. View Article
EP RS: Outcome of the informal dinner of EU leaders of 17 June 2024 : The European Council members met for an informal dinner to discuss the results of the 2024 European Parliament elections and possible candidates for the leadership positions in the coming EU institutional cycle. View Article
EURACTIV: Conservative ECR now third group in EU Parliament, but Fidesz drops out : While Renew could yet get additional seats as internal negotiations are still ongoing with parties such as Volt, it is clear that the Liberals and Conservatives are heading into a neck-to-neck race for the third most important top-job in the European Union: the position of EU chief diplomat. View Article
UKansdEU's Hobolt: The 2024 European Parliament elections : Sara Hobolt analyses the results of the European Parliament elections, highlighting that although populist radical right parties performed well, the real winners were the centre-right European People’s Party. She explores the implications for EU policymaking and subsequent national elections. View Article
Delors Centre's Jansen/Nguyen: Between Continuity and a Perforated 'Cordon Sanitaire' - On the 2024 European Elections : While the elections have not led to a landslide shift to the right, there is a notable consolidation of far-right parties at the European level. Still, the pro-European centre is holding firm and maintains a majority. View Article
ECFR's Garton Ash: Wake up! After these elections, Europe is again in danger : Don’t let anyone tell you the results are “not so bad”. The hard-right vote can pull the entire EU to the right, and imperil Ukraine View Article
Commissioner McGuinness at the European Financial Integration 2024 joint conference of the European Commission and the European Central Bank : ...And talk about Capital Markets Union and Banking Union. Both are essential, and they complement one another. But not just talk about the why we need it, but how we're going to make progress in what appears sometimes to be a very difficult landscape. View Article
ECB's de Guindos: Strengthening European financial markets to ensure a more resilient future : The conference is also very timely, coming just before a new European Commission will have to shape the policy agenda for the coming years. Financial integration and financial stability are key to ensuring a resilient and prosperous future for Europe. View Article
Commission: European Financial Stability and Integration Review (EFSIR) 2024 : The European Financial Stability and Integration Review is published annually. It looks at recent economic and financial developments, and discusses specific issues pertaining to the financial sector that might pose challenges to financial integration and stability and raise policy issues. View Article
ECB: Biannual report on financial integration : In a well-integrated financial system, assets with the same risk-return characteristics cost the same, irrespective of the country in which they are traded. Financial integration therefore contributes to the uniform transmission of the European Central Bank’s (ECB) monetary policy across the euro area. View Article
Reuters's Jones: EU finance chief says ditch national symbols to boost capital market : Merging national stock exchanges and clearing houses and pan-EU supervision are the next steps needed to achieve a better capital market for the bloc, its financial services chief said. View Article
ECB blog: How banks deal with declining excess liquidity : by Hudepohl, Karl, T Linzert, Nguyen, Skrzypinska, Cru: With the reduction of the Eurosystem’s balance sheet, central bank liquidity is declining. As liquidity is unevenly distributed among banks, an effective redistribution and use of market funding are essential. View Article
FSB Plenary meets in Toronto : The Plenary discussed follow-up work to the lessons learned from the banking sector turmoil and the outlook for global financial stability, as well as the FSB’s deliverables to the July G20 Finance Ministers and Central Bank Governors meeting. View Article
Project Syndicate's Garton Ash: The Economic Case for Seizing Russia’s Frozen Assets to Support Ukraine : Unless Western governments confiscate all frozen Russian assets and give them to Ukraine, the Ukrainians will lose the war, and that outcome will be far more more costly for the West. G7 leaders should stop finding excuses, stop being dishonest with their own taxpayers, and just get it done. View Article
Banking Union
Bank crisis management and deposit insurance framework: Council agrees on its position : The Council today agreed on a negotiating mandate on the review of the crisis management and deposit insurance (CMDI) framework for banks. The review includes a comprehensive set of measures designed to strengthen the existing EU crisis management framework, especially for small/medium-sized banks. View Article
Bankenverband: CMDI Review: despite progress, harmonisation is not yet in sight : Expansion of the resolution process remains extremely limited; Guarantee schemes maintain priority in the creditor hierarchy; It is time to move forward with EU market integration. View Article
AFME welcomes the publication of the EU implementation of final Basel III standards and stresses the need for jurisdictional coordination : “..the EU level 2 legislation must stay true to the political agreement ..no increase in capital requirements beyond what was agreed at level 1..consider the implementation of market risk standards to ensure global consistency and avoid harming the competitiveness of EU capital markets.” View Article
FT: EU to delay Basel bank trading reforms as US revisits plans : Mairead McGuinness says one-year deferral of market risk rules will preserve “level playing field” View Article
BIS: Peering through the hype - assessing suptech tools' transition from experimentation to supervision : Recent episodes of banking stress underscore the need for supervisors to identify issues at an early stage and ensure that financial institutions address them adequately. However, inadequate resources – including unavailability of effective tools – affect supervisory authorities' ability to act. View Article
Capital Markets Union
Council agrees its position on simpler financial reporting requirements : The Council today reached an agreement on a proposal to simplify certain reporting requirements in the field of financial services and investment support. The proposal updates existing rules on data sharing between the European Supervisory authorities (ESAs) and other financial sector authorities.. View Article
PCS: Norway's securitisations to join the EU : It is not a widely known fact that some European Union laws can be adopted by the other three countries of the European Economic Area - namely Norway, Iceland and Lichtenstein - in such a way that, once adopted those countries are considered to be fully part of the EU for the purposes of the subject matter of those laws. View Article
EIOPA publishes its Annual Report : Despite the challenges of geopolitical conflicts, high interest rates, inflation, and market volatility, EIOPA met its goals in line with its overall strategy, including the following key achievements: Sustainable finance; Digitalisation; Supervision; Policy; Risks and financial stability;Governance View Article
ESMA in 2023 - Focus on investor protection, risk monitoring and supervision : It sets out the key achievements of the authority in the first year of implementing its new 5-year strategy, delivering on the mission of enhancing investor protection and promoting stable and orderly financial markets in the European Union (EU). View Article
ESRB publishes EU Non-bank Financial Intermediation Risk Monitor 2024 : This edition of the annual series highlights the key cyclical and structural risks associated with non-bank financial intermediation, specifically investment funds and other financial institutions (OFIs), in 2023. The NBFI Monitor uses both entity and activity-based monitoring to provide a holistic assessment of financial stability risks. View Article
Environmental, Social, Governance (ESG)
ESAs propose improvements to the sustainable finance disclosure regulation : The ESAs call for a coherent sustainable finance framework that caters for both the green transition and enhanced consumer protection, taking into account the lessons learned from the functioning of the SFDR. View Article
UNEP FI: Pioneering holistic sustainability risk management for financial institutions : Designed to offer a comprehensive approach, the virtual hub aims to simplify the complexities of climate change, biodiversity loss for financial institutions, with pollution to be addressed soon. The initiative underscores the importance of understanding the interconnectedness of these challenges.. View Article
GRI: Streamlining digital reporting with GRI’s new taxonomy : A global consultation is underway to gather views on GRI’s planned new sustainability reporting taxonomy. Consisting of a digital, structured framework for using the GRI Standards, it will enable companies to organize and classify their disclosures and standards-related information. View Article
ECIIA: EBA Report 2024: How to Identify and Prevent Greenwashing in Banking and Investments : The European Banking Authority (EBA) has recently published a new report “Greenwashing Monitoring and Supervision,” which addresses the increasing risks of greenwashing in banking and investments firms. View Article
CEPS: Green and enviable How to deliver net zero and a more competitive EU : The report presents 30 policy recommendations across seven thematic chapters, addressing various aspects of the European Green Deal. These provide a comprehensive roadmap for policymakers, offering insights and guidance for the 2024–2029 political cycle. View Article
No one-size-fits-all: GFIA responds to IAIS paper on supervising diversity, equity and inclusion : GFIA stresses the importance of ensuring that any new requirements on DEI are not redundant nor overlapping with existing regulations and standards, given they are often addressed by a range of other governmental and regulatory policies. View Article
Supervising diversity, equity and inclusion: Insurance Europe responds to IAIS paper : Insurance Europe welcomes the IAIS’ commitment to support DEI. It also welcomes the IAIS’ recognition that specific local conditions, such as the legal, cultural and historical context, will inevitably influence and shape DEI activities. View Article
Fin Tech Regulation
BIS: Embracing diversity, advancing together - results of the 2023 BIS survey on central bank digital currencies and crypto : Ninety-four percent of surveyed central banks are exploring a central bank digital currency (CBDC). The survey suggests that central banks are proceeding at their own speed, taking diverse approaches and considering different design features. View Article
Economic Policies Impacting EU Finance
POLITICO: France and Italy denounced by European Commission for overspending : Second and third-largest eurozone economies under pressure over budget deficits. View Article
Brexit and the City
ECB: The derivatives clearing landscape in the euro area three years after Brexit : A high degree of reliance on non-EU services is not in keeping with the goals of the Capital Markets Union (CMU), which aims to foster the development of deep and liquid capital markets in the EU, advance financial integration within the euro area, and preserve financial stability. View Article
Reuters' Jones: Banks have a year to shift clearing from London to EU, Eurex says : A shift in chunks of euro derivatives clearing from London to European Union countries is now inevitable and banks should get ready, industry officials were told on Wednesday, but others warned the EU intervention would backfire. View Article
TheCityUK's Richards: Strengthening the core of the UK’s competitiveness : To harness the full potential of the UK’s financial and related professional services industry, regulatory policies need to strike a delicate balance between protecting consumers from harm while allowing new ideas to flourish. View Article
City A.M's Dorrell: London continues to roar back as City overtakes Amsterdam to be Europe’s share trading hub : London has knocked Amsterdam off its position as Europe’s top share trading hub for the first time in nearly three years. View Article
Brexit
BCC: Goods Imports Up And Exports Down In April : “Services continue to perform particularly well among UK exports, with solid increases in the past three months. Goods exports performed less well in April, as in recent months. View Article
UKTPO's Smith: Making Brexit work: An analysis of the Labour manifesto : The Labour Party’s ambition for the future EU-UK relationship is set out in two paragraphs in their manifesto published on 13 June:...Labour will work to improve the UK’s trade and investment relationship with the EU, by tearing down unnecessary [my emphasis] barriers to trade. ... View Article
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