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Highlights of my week: Today is “Europe Day” – always a moment to reflect on Schuman’s wisdom in 1950 and consider if current regulatory developments are continuing to build that “de facto solidarity”. The answer from several leading financial associations about Capital Markets Union is effectively `not fast enough’. SSM Chair Buch also noted that only two pillars of Banking Union are yet in place. Citizens will also give an answer about solidarity in the now-imminent elections for the European Parliament. However – at a technical level – there is increasing recognition that Non-Bank Financial Institutions (NBFI) really have surpassed the size of the banking system. As they are financed by the capital markets, the need for an effective CMU should be obvious. AFME believes that settlement efficiency is improving though different methodologies may have implications for the T+1 debate. EIOPA wants to see improvements in the Prudent Person Principle to cover new asset types and remains concerned about high levels of investment risk – especially in real estate. In a landmark, ISSB and EFRAG published their interoperability guidance on how EU companies can apply both sets of standards. (Brexit note: this alignment seems to leave little space for the UK to exercise its ‘Brexit freedom’ to develop distinct standards that will appeal to global market players. Perhaps the incoming Labour government will abandon such notions). The EuandUK’s Luke analysed whether the EU would actually want the UK back: only 27% of UK voters believe the EU would but – rather inconsistently – nearly 50% would like to return.
Graham Bishop
Articles from 3-9 May 2024
Policy impacting Finance
Schuman Declaration: 9 May 1950 : "Europe will not be made all at once, or according to a single plan. It will be built through concrete achievements which first create a de facto solidarity." View Article
IMF's Georgieva: An EU Budget for a Global Europe : July 2020 will go down in history as a time of profound European cohesion... , leaders came together to craft a powerful European response to Covid...Basically, NGEU represented a major expansion of the EU budget, financed by common borrowing, with disbursements running until the end of 2026. View Article
CEPS's Rusack: The lead candidate procedure isn’t dead – but it’s no longer what its inventors intended it to be : In this respect, the lead candidate procedure gives visibility and transparency to the EU’s leadership selection. That in itself is an achievement – as ‘sunlight is said to be the best of disinfectants’. That said, appointing the Commission President is likely to remain a (sometimes painful) negotiation process between these two institutions. View Article
Bruegel's Grabbe: The push-pull between geopolitics and domestic resistance: lessons from the 2004 enlargement of the EU : Geopolitics is now a chief concern of political leaders in both the EU and candidate countries, giving them strong reasons to integrate more closely View Article
Bruegel's Pisani-Ferry/Weder di Mauro/Zettlemeyer: How to de-risk: European economic security in a world of interdependence : The question is how exactly the EU should ‘de-risk’ its external economic relationships without foregoing the benefits of trade. View Article
CEPS' Andersson/Pozo: Over-indebtedness in a high inflation and high interest rate landscape : The recent review of the Consumer Credit Directive has proclaimed preventing over-indebtedness as one if its main objectives. A review of the other big piece of European legislation addressing over-indebtedness, the Mortgage Credit Directive, should be conducted over the next few years. View Article
BIS - Knott: Financial stability risks and the FSB's work program : The FSB's review of lessons learned from the 2023 bank failures confirmed the soundness of the international resolution framework. But areas deserving further attention in the implementation of that framework were highlighted too: we need to .. advance the work on bank resolvability. View Article
FT Alphaville: The increasingly blurred lines between banks and NBFIs : Once upon a time, banks were bigger than non-bank financial institutions (NBFIs). Those days are now a dim and distant memory. The blame (or credit) for this is usually laid at the door of regulators. One justification for regulating banks much more heavily than NBFIs is that they matter more. View Article
Banking Union
BIS - Buch: Financial integration in Europe - where do we stand after the banking union's first decade? : The design of the banking union envisaged common supervision, resolution and deposit insurance in the euro area. Ten years on from its launch, only two of its pillars, European supervision and resolution, are in place. Where do we stand? View Article
CEPS' Arnal/Thomadakis: Ten years of the SSM : The past, present and future of banking supervision in the Banking Union View Article
SSM's Elderson You have to know your risks to manage them – banks’ materiality assessments as a crucial precondition for managing climate a : Materiality assessments are not just a “nice to have” – knowing your risks is a precondition for being able to address them. Most banks have now drawn up materiality assessments that are in line with our supervisory expectations. .. View Article
Capital Markets Union
Leading European associations' shared view on improving competitiveness of European capital markets : The report, co-developed by the three European associations (EFAMA, EBF, FESE) and authored by Oliver Wyman, sheds light on progress made towards the Capital Markets Union (CMU) and gathers insights from various capital markets leaders on how to succeed in the coming decade and beyond. View Article
ESMA publishes latest edition of its newsletter : It focused in April on the DORA preparations for the European Supervisory Authorities (ESAs) and the industry: the arrangements for the next implementation stage, the consultation on for joint examination teams, and the first recruitments to set up the oversight team. View Article
ESMA asks for input on assets eligible for UCITS : The objective of this call is to gather information from stakeholders to assess possible risk and benefits of UCITS gaining exposure to various asset classes. View Article
ISDA's O'Malia: Margin Transparency Will Help Market Resilience : ISDA Chief Executive Officer Scott O'Malia offers informal comments on important OTC derivatives issues in derivatiViews, reflecting ISDA's long-held commitment to making the market safer and more efficient. View Article
AFME's Tomlinson: Is Settlement Efficiency Improving? The Answer is “Yes”! : The question arises as to whether settlement efficiency is being measured correctly. Different methodologies can produce different results, which could have a significant impact on informing policy decisions taken by public authorities. View Article
EIOPA recommends improvements in the supervision of the ‘Prudent Person Principle’ following peer review : The review focused primarily on the supervision of investments in non-traditional and complex assets, including derivatives, and the use of such assets in unit-linked and index-linked contracts – where market risk is typically borne by the policyholder. View Article
EIOPA’s IORP Risk Dashboard highlights market risks as key concern for occupational pension funds : It shows that the exposure of Institutions for occupational retirement provisions (IORPs) to market & asset return risks remains at a high level due to market volatility and real estate market vulnerabilities. View Article
Environmental, Social, Governance (ESG)
IFRS Foundation and EFRAG publish interoperability guidance : The IFRS Foundation and EFRAG have published guidance material to illustrate the high level of alignment achieved between the ISSB Standards and the ESRS and how a company can apply both sets of standards, including detailed analysis of the alignment in climate-related disclosures. View Article
Corporate sustainability reporting: Commission welcomes guidance on interoperability of European and global sustainability reporting standar : The guidance provides support to companies that want to comply with both standards, with a particular focus on climate reporting. While designing the ESRS, the Commission worked with international standards setters to ensure that European standards effectively incorporate the global baseline.. View Article
IPE's Robinson-Tillet: CA100+ drives reduction in corporate climate waffle, study finds : A study looking into the impact of key sustainable finance initiatives on the disclosure practices of companies found that those targeted by Climate Action 100+ (CA100+) had lower levels of ‘cheap talk’ in their public statements. View Article
Bankenverband's Neuman/Schwantes: 3 questions, 3 answers: ESG risk management : Nowadays, sustainability risks in the three areas of environmental, social and governance – or ESG for short – have become an integral part of banks’ risk management. After all, one of the main tasks of a bank is to quantify and manage risk. And ESG risks are no exception. View Article
Fin Tech Regulation
SNB's Jordan: Project Helvetia III - The Swiss National Bank's pilot for wholesale CBDC : The pilot represents the world's first issuance of a wholesale CBDC on a regulated third-party platform to settle commercial transactions with tokenised assets. View Article
The EBA publishes final draft technical standards under the Markets in Crypto-Assets Regulation : These technical standards are key to regulate access to the EU market by applicant issuers of ARTs and persons intending to exercise significant influence on these undertakings via the acquisition of qualifying holdings. View Article
Brexit and the City
Reuters: UK financial regulator stands ground on 'naming and shaming' proposal : FCA surprised by "stern reaction" to proposal; Will take several months to consider backlash, FCA says; Watchdog says proposal not inconsistent with growth duties; "Naming and shaming" plan triggered backlash View Article
Brexit
EUandUK's Luke: Do EU member states want the UK back? : Stephanie Luke explores whether voters think EU member states would even accept the UK back into the European Union if there ever was an attempt to re-join, and what member states actually say about the possibility. View Article
FT's Pfeifer: Why Britain’s defence industry may regret Brexit : EU plans to ‘spend more, spend better, spend European’ have run alarm bells among UK executives View Article
POLITICO: France tops UK (again) in foreign investment race amid European slowdown : The U.K. bucked a Europe-wide trend of declining investments. View Article
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