Welcome to our Friends weekly e-mail.
Highlights of my week: Will defence force more joint borrowing? France hopes so. The European Parliament had a busy week as votes were rushed through. Only one full plenary remains, though Committees will be in almost continuous session after the Easter break. The Artificial Intelligence Act was passed – underlining the EU’s global ground-breaker role. ECON agreed many measures including a package on bank resolution – especially for smaller banks – and for providing financial advice to retail investors. However, the consumer organisations issued a statement that was exceptionally critical of the Retail Investment Strategy proposal on the table – an essential component of CMU. SSM Chair Buch warned EU banks of tougher times ahead while ECB/EBA stepped up efforts to make data reporting more efficient. AFME’s report on German capital markets highlighted the need for Germany to take action to turn CMU into a reality though Veron argued that if ESMA does not become a genuine single regulator, it might be better to stop talking about CMU at all… EFAMA pointed out a classic example of the law of unintended consequences: The US will introduce T+1 settlement in May but EU asset managers will have to find a way of settling their foreign exchange transactions correspondingly to pay for their purchases. Will they have to abandon FX settlement via CLS bank – perhaps bringing back “Herstatt risk” from 50 years ago? EIOPA pointed out how little of pension funds’ investments are aligned with the EU’s Taxonomy – a fifth of what could be. ICMA’s EU/UK bond trading report showed that the UK retains its major position overall but much trading in euro-denominated bonds has shifted to the mainland.
Graham Bishop
Articles from 15-21 March 2024
Policy impacting Finance
Eurogroup President Paschal Donohoe's report to the Euro Summit President ahead of the Euro Summit meeting of 22 March 2024 : The report highlights the agreement reached by all EU finance ministers within the Eurogroup in inclusive format on the future of the CMU..includes a comprehensive set of actions and measures, which constitute a solid foundation for advancing the CMU agenda during the next institutional cycle. View Article
POLITICO: France pitches radical joint EU borrowing plan to pay for defense : “War is back” in Europe, Paris says as it floats idea to counter decades of underinvestment. It’s likely to prove highly controversial, particularly in Germany. View Article
BIS: Safeguarding the financial system's spare tyre: regulating non-bank retail lenders in the digital era : by Ehrentraud, Mure, Noble, Zamil: We find that NBFI lenders are often subject to a piecemeal regulatory approach, despite posing potential vulnerabilities from a microprudential and, in some cases, financial stability perspective. View Article
PubAffairsBrussels: A plea for European pragmatism: Looking ahead towards the European Parliament Elections 2024 : How to ensure a powerful EU in these turbulent geopolitical times? Is further enlargement the solution, or precisely not?How much of a say should member states have in EU policy? Adriaan Schout sees ‘integration’ becoming a prominent theme as we head towards European Parliament elections in June. View Article
CER's Meyers: Better regulation in Europe: An action plan for the next Commission : European businesses are far more likely than US firms to cite regulation as a major obstacle to doing business. As Europe searches for ways to boost economic growth and frets about its competitiveness, the EU needs to ensure its regulations encourage better productivity and more innovation. View Article
ESBG's Boudet: The CSDDD dilemma or how to choose between Kant and Machiavelli? : In Gomart’s opinion, the EU must acknowledge that its model is being threatened and, hence, take the appropriate steps to protect itself and be ready to face these competitors (US, China, Russia etc.) instead of naively trying to cooperate with them since they probably have no wish to do so. View Article
Bruegel's Demertzis/Papadia:The European Central Bank’s timid operational framework update : The European Central Bank announced limited changes to its operational framework – which is probably right given current uncertainty View Article
Banking Union
MEPs agreed on a toolset against bank failures to protect taxpayers and deposits : Costs of banks failures should be borne in the first instance by shareholders and creditors, and if further resources are needed, by industry-funded safety nets not taxpayers; Medium-sized banks in scope of resolution if deemed critical to financial stability in a regional market View Article
FT: Europe’s top banking supervisor warns of tougher times ahead : Claudia Buch says eurozone lenders face rising insolvencies, geopolitical risks and upheaval in energy-intensive industries View Article
ECB and EBA step up efforts to make banking industry data reporting more efficient : ECB and EBA establish Joint Bank Reporting Committee to make data reporting by the banking industry more efficient; New structure will harmonise and integrate reporting of statistical, supervisory and resolution data with the aim of developing common definitions and standards View Article
SRB welcomes plans by ECB and EBA to step up efforts to make banking industry data reporting more efficient : The aim is to harmonise and integrate data reporting by the banking industry to improve efficiency and cut the associated costs. View Article
EBF welcomes plans by ECB and EBA to step up efforts to make banking industry data reporting more efficient : EBF welcomes the ECB/EBA announcement on the establishment of the Joint Bank Reporting Committee (JBRC) to intensify joint work to achieving an integrated/standardized reporting framework in Europe helping to reduce reporting burden for banks and improving the quality of data reported authorities. View Article
Capital Markets Union
Committee MEPs vote to boost citizens’ involvement in financial markets : Clear guidelines for financial advice; Comparable financial products with good price and high quality suited for retail investors; Improving financial literacy and supervising “finfluencers” View Article
Joint Consumer Organisations' Statement on the Retail Investment Strategy Compromise Proposal : The Retail Investment Strategy (RIS) compromise currently on the table for a European Parliament vote blatantly disregards the interests of retail investors and the establishment of a competitive Capital Markets Union (CMU). View Article
Veron paper for ECON: Capital Markets Union: Ten Years Later : The European Union’s project of capital markets union (CMU) has disappointed in its first decade. The best way to revitalise it is to focus on supervisory integration through in-depth reform and further empowerment of the European Securities and Markets Authority. View Article
AFME: The role of capital markets in Germany - Five questions on the state of play, current opportunities, and themes for the future : This study, published in partnership with zeb Consulting, shows the potential that stronger financing via capital markets offers for Germany. View Article
EFAMA: Unlocking private investment to fund Europe's triple transitions : ...building on the in-depth expertise of our members... practical recommendations for keeping Europe competitive and developing deeper, more integrated and liquid capital markets in Europe. View Article
AIMA/ACC respond to ESMA consultation on changes to securitisation disclosure templates : The response emphasised that it is necessary to undertake a full revision of the EU Securitisation Regulation in order to address challenges arising from the disclosure templates regime and other interconnected parts of the Regulation. View Article
PCS files its response to ESMA's consultation on disclosure : Our views are that the current disclosure templates are overly prescriptive, contain many unnecessary requirements and have become a deterrent to potential originators. View Article
FESE response to the EIOPA consultation on the methodology for Value for Money (VfM) benchmarks : FESE welcomes the opportunity to contribute its views to the EIOPA consultation on the methodology for Value for Money (VfM) benchmarks. In its response, FESE stresses the need for a clear focus on “cost-efficiency” when constructing the benchmarks. View Article
BETTER FINANCE’s response to EIOPA’s consultation on Methodology on Value for Money benchmarks : We welcome and supports EIOPA’s ongoing work on a supervisory toolkit to assess the value for money offered by unit linked and hybrid insurance products. BETTER FINANCE has always been fighting for regulatory and supervisory action to improve the returns of long-term and pension saving products. View Article
ICMA publishes the fourth semi-annual report that provides detailed data on EU and UK bond market trading activity : One of the core objectives of MiFID II/MiFIR was to provide greater public transparency of secondary trading activity in the EU and UK markets. View Article
BETTER FINANCE answer to ESMA Discussion Paper on MiFID II investor protection topics linked to digitalisation : BETTER FINANCE advocates for a proactive approach to ensure that the shift towards digital financial services does not undermine investor rights and protections. View Article
EFAMA: US move to T+1 creates FX settlement risks for European asset managers : Ahead of the US go-live on T+1 implementation on May 28th, EFAMA calls on central banks and regulators to consider the impacts on FX settlement risk. A recent EFAMA survey of European fund managers estimates that 40% of daily FX flows will no longer be able to settle through the CLS platform. View Article
Environmental, Social, Governance (ESG)
OECD: Global Corporate Sustainability Report 2024 : ..presents an overview of the main trends and issues on sustainability policies and practices for corporate governance globally. Through an analysis of key policy issues..supports the adoption of corporate governance policies and practices aligned to G20/OECD Principles of Corporate Governance. View Article
EBF and S&P Global Market Intelligence – Navigating the Green Asset Ratio (GAR): What can it tell us about the sustainability performance of : European Banking Federation & S&P Global Market Intelligence held a webinar titled ‘Navigating the Green Asset Ratio (GAR): What can it tell us about the sustainbility performance of banks?’ View Article
EBF Response to the Basel Committee’s consultation on a Pillar 3 disclosure framework for climate-related financial risk : Disclosure frameworks are crucial in fostering transparency in the banking sector so investors/stakeholders can assess risks, vulnerabilities, and mitigation strategies...quantitative/qualitative information is essential, encompassing traditional and climate-related financial risk drivers. View Article
EIOPA factsheet shows how occupational pension funds’ investments align with the EU Taxonomy for sustainable activities : The analysis reveals that a total of 4.5% of these investments are currently aligned with the EU Taxonomy, while another 26.1% are eligible for alignment. View Article
UNEP FI: Net-Zero Banking Alliance Members Vote to Reinforce Guidelines for Climate Target Setting : NZBA member banks vote in favour of adopting updated guidelines; Emissions attributable to banks’ capital markets services included for first time; Overall ambition and key principles of original guidelines maintained View Article
PensionsEurope answers to EIOPA’s consultation on its draft opinion on sustainability claims and greenwashing : PensionsEurope supports the efforts of the European institutions to eliminate greenwashing. However, it emphasises that pension funds are active as buyers on the financial market, providing pension schemes, and do not provide personal financial products. View Article
IAIS: Public consultation on climate risk supervisory guidance – ICP guidance and supporting material : To promote a globally consistent approach and address any gaps in the global framework for insurance supervision, the IAIS is conducting four public consultations on proposed changes to guidance in Insurance Core Principles (ICPs) and on new supporting material to better incorporate climate risk. View Article
March 2024 ISSB Update and podcast now available : The ISSB’s work with jurisdictions around the world as they look to adopt or otherwise use the ISSB Standards. Faber/Lloyd also share reflections on the recent SEC ruling. View Article
Protecting Customers
Commissioner McGuinness at OECD launch of Global Money Week 2024 : This year's theme – ‘Protect your money, secure your future' – is really important' OECD continued leadership on the issue of financial literacy. View Article
Fin Tech Regulation
Artificial Intelligence Act: MEPs adopt landmark law : Safeguards on general purpose artificial intelligence; Limits on the use of biometric identification systems by law enforcement; Bans on social scoring and AI used to manipulate or exploit user vulnerabilities; Right of consumers to launch complaints and receive meaningful explanations View Article
Chatham House's Krasodomski/Buchser: The EU’s new AI Act could have global impact : The landmark AI legislation is the latest example of the EU’s role as a global digital rule-maker. The European Parliament today passed its landmark AI Act – a sweeping piece of legislation targeting the risks posed by the fast-moving technology. View Article
Brexit and the City
City AM: London closes in on New York as world’s top financial centre with Square Mile set for rebound : According to a new survey, London is narrowing the gap with New York for the title of the world’s top financial centre. View Article
City UK's Bardelai: The UK remains the world’s largest net exporter of financial services – but the underlying data show how the picture has : As our research makes clear, US financial services exports exceed those of the UK, but when the net position (exports minus imports) is considered, the UK leads because its financial services imports are considerably less than those of the US. View Article
Bloomberg's Winkler: Brexit’s Lasting Damage Is Looking Inescapable : By almost every economic and financial measure, parting ways with the EU almost eight years ago has been disastrous for the UK. Is there no end in sight? View Article
Brexit
UKandEU's Walker/Rutter/Reland: Brexit and the state : This report assesses how, and how far, the UK state has adapted to Brexit. It examines how Brexit has changed the size and shape of the state, the new tasks, functions and policies it has to manage, and the impact on its relationships with key stakeholders. View Article
EIAG's Dashwood: An Ambitious Form of UK/EU Cooperation on Foreign, Security and Defence Policy – Why and How : How I understand the notion of structured cooperation in this context; Why the FSD policy area should be seen as suitable for an ambitious form of structured cooperation between the UK and the EU; How to set about establishing such cooperation. View Article
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