Welcome to our Friends weekly e-mail.
Highlights of the summer holidays: “UvL” spent her holidays cajoling Member States to propose more female Commissioners and balancing the competing claims of States/political factions with the available jobs. Draghi’s initial briefing on his `competitiveness’ report was describes as `underwhelming' but Bruegel, ECIPE and EPC think-tanks put forward suggestions for the new mandate. Plenty of `old problems’ remain: FSB’s Knott was clear that not enough has been done to mitigate the vulnerability of the financial system to NBFIs; ESRB laid out the policy options for dealing with the risks of bank runs and SSM’s Elderson spoke strongly about the need for operational resilience of banks. The mechanics of the forthcoming `consolidated tape’ attracted attention from the major capital markets associations and ESMA’s review of eligible assets for UCITS caused BETTER FINANCE to say `keep it simple’. The Commission clarified its rules for the Corporate Sustainability Reporting Directive (CSRD) and the insurance world is now grappling with the findings of the Climate Resilience Dialogue about protection gaps for catastrophes. The IMF published the remarkable statistic that AI and crypto mining jointly consume 2% of the world’s electricity and cause 1% of global emissions! As the new UK government settles into its stride, the think tanks are grappling with the reality of achieving a reset in relations with the EU. However, if the EPC’s Duff is right about the scale of the federal impulse that Putin has unleashed in the EU, the UK may have to think about getting on board that train more quickly than anyone in the UK thinks.
Graham Bishop
Articles from 19 July - 5 September
Policy impacting Finance
EURACTIV: The Brief – Von der Leyen’s balancing act : President Ursula von der Leyen has a delicate political balance to strike in her picks for the most important jobs in the EU’s executive: the one-on-one talks with national leaders, and the overall party-political makeup of both national governments and the European Parliament. View Article
EURACTIV: ‘Quite underwhelming’: Draghi briefing on competitiveness report light on details : EU diplomats told Euractiv that the former European Central Bank (ECB) president’s initial briefing to member state representatives on Wednesday morning contained no detailed policy recommendations. View Article
Bruegel: Unite, defend, grow: Memos to the European Union leadership 2024-2029 : by Demertzis, Sapir, Zettelmeyer: The memos are addressed to incoming commissioners responsible for specific policy areas. As Commission portfolios relevant to economic prosperity have grown in scope, so have our memos. This edition covers 18 individual policy areas... View Article
Bruegel: Memo to the commissioner responsible for financial services : The two main areas in which greater EU integration is both necessary and achievable in the near term are banking crisis intervention and capital markets supervision. View Article
EPC's Duff: Keeping the Promise: Reform of governance in the enlarged European Union : Despite disagreements among member states and nationalist political parties, the presumption of enlargement and the necessity of self-defence leaves the EU little choice but to continue on its federative path. View Article
ECIPE: Attractiveness: A Bold Reform Agenda for Competition Enforcement, Taxation and Digital Policy : by Bauer, Pandya, du Roy:Reducing the deterrent effects from EU and Member State laws in three key cross-sector policy areas – competition policy, business taxes and VAT, and digital policies – could significantly enhance the business environment within the Single Market ... View Article
Keynote speech by the Eurogroup President, Paschal Donohoe, at the Bruegel Annual Meetings : The European ideal is rooted in the sharing of sovereignty. Sharing sovereignty, I believe, needs a couple of key ingredients: consent, cooperation, and compromise. Our strength and our power is in our togetherness. And we can only advance where we have commonality. View Article
Introductory statement by Claudia Buch, Chair of the Supervisory Board of the ECB, at the Hearing of the Committee on Economic and Monetary : Europe’s banking sector has shown resilience. Banks possess capital and liquidity buffers that would enable them to absorb potential losses and adverse shocks. Bank profitability has benefited from higher interest rates, which is reflected in higher valuations of bank stocks. View Article
FSB Chair calls for further progress implementing non-bank financial intermediation reforms : FSB Chair highlights high debt levels and vulnerabilities in non-bank financial intermediation (NBFI) as key risks to financial stability.... many of the underlying vulnerabilities in NBFI are still in place. View Article
Banking Union
Basel III: EU applies banking package from January 2025, postpones market risk rules to preserve the international level playing field. : On 9 July 2024, with the entry into force of the new banking package, the EU completed its implementation of the Basel III standards into EU law. This is a key milestone towards further strengthening the stability and resilience of the EU banking sector. View Article
The EBA responds to the European Commission’s Delegated Act postponing the application of the market risk framework in the EU : ...the front-loaded application of the revised provisions on the boundary and internal risk transfers, compared to the rest of the FRTB framework,... would subject institutions to an operationally complex, fragmented and costly two-step implementation View Article
The EBA publishes final draft technical standards on market risk as part of its roadmap for the implementation of the Banking Package : The revisions mostly aim to align these RTS with the Capital Requirements Regulation (CRR3) and ensure stability in the applicable regulatory framework. View Article
SSM's Elderson: The art of bending without breaking – banking on operational resilience : The banks we supervise operate in an ever more complex risk environment, marked by heightened climate and nature-related risks, increasingly sophisticated cyberattacks and risks stemming from non-bank financial institutions .. View Article
ESRB: Advisory Scientific Committee publishes report on banks’ vulnerability to deposit runs : The report reflects on banks’ vulnerability to deposit runs in the aftermath of the latest banking crisis. It discusses pros and cons of proposed policy options to strengthen resilience of the banking sector to crisis. View Article
The EBA launches consultation to overhaul its resolution planning reporting framework : These draft ITS on the provision of information for the purposes of resolution plans aim to ensure that resolution authorities have the data they need, thus improving the usability of this reporting framework and enhancing a consistent monitoring of resolution planning. View Article
ECB and EBA publish joint report on payment fraud : Report confirms effectiveness of strong customer authentication requirements, in particular for protecting against card fraud View Article
Anti-money laundering: GFIA responds to Financial Action Task Force consultation : Any new rules to fight money laundering/terrorism financing should only consider covering life insurance, which has some, albeit very low, exposure to these risks. General insurance exposure to both anti-money laundering/terrorism financing is close to non-existent. NRAs should consider this position in the guidance review process. View Article
Capital Markets Union
EFR: Boosting European Savings : The EFR supports the proposals in these recent reports, since it is essential to extend the EU’s financing capacity by deepening and further integrating its capital markets and to deliver the higher investment needed for the EU’s competitiveness, fund the digital and green transitions... View Article
EFAMA: Robust governance needed for future consolidated tape providers : ESMA technical standards move one step closer to consolidated tape launch. In its response for the buy-side, EFAMA stressed that a robust governance framework for the operators of the tapes is critical. View Article
FESE response to the ESMA consultation on CTP and DRSPs : FESE welcomes many of the proposals and has leveraged the expertise of its members as future data contributors to provide thoughtful feedback on certain elements that could be refined. View Article
ICMA responds to the MiFIR Consultation Package on the Review of RTS 2 on transparency for bonds, structured finance products and emission a : ICMA has been a longstanding advocate of increased transparency in the European bond markets and the introduction of an EU consolidated tape for bonds. ICMA therefore welcomes the objective of the MiFIR Review to support the establishment of a consolidated tape. View Article
FESE Response to the ESMA Consultation on RCB and RTS 23 : It is crucial to carefully calibrate the various provisions to avoid a restrictive approach that could have unintended consequences for the market and its participants....FESE welcomes ESMA’s proposals related to RTS 23. View Article
FESE response to the ESMA consultation on the MiFIR Review – RTS 2 Transparency for bonds, SFP and EUA : FESE believes that ESMA should extend the definition of CLOB to other execution channels that are integral parts of the same system as the CLOB and thus, form a hybrid trading system of the exchange. View Article
ICMA responds to the ESMA MiFIR Review Consultation Package on Technical Standards related to Consolidated Tape Providers and DRSPs and asse : ICMA welcomes ESMA’s proposals to further define the EU consolidated tape framework with a view to improving transparency in the EU bond markets, following the latest amendment of the Markets in Financial Instruments Regulation (MiFIR) which entered into force on 28 March 2024. View Article
EFAMA: ESMA's call for Evidence on the Eligible Assets Directive : ESMA’s Call for Evidence on the UCITS Eligible Assets Directive is a welcome opportunity to take stock of the existing UCITS framework. View Article
ALFI responds to the ESMA call for evidence on the review of the UCITS Eligible Assets Directive : In its response, ALFI highlights the importance of maintaining a strong and competitive UCITS regime when envisaging changes to the UCITS Eligible Assets Directive. Moreover, flexibility should be left in the Directive to be able to accommodate new market developments. View Article
BETTER FINANCE’s response to ESMA’s Consultation on the review of the UCITS Eligible Assets Directive : Listed equity and fixed-income securities should remain the core of UCITS investments, ensuring that investment policies are clear, transparent, and intelligible for the average individual investor. View Article
FESE: T+1 European Impact on Corporate Actions : Having witnessed the move to T+1 in the North American markets during the week commencing 27th May 2024 and the relatively smooth transition within the region, this paper is to focus on the viewpoint within European markets and the different approaches with regard to corporate actions processing. View Article
Joint FESE and European Startup Network Statement on CMU: Europe Needs to Keep Its Best Tech IPOs at Home : The goal is to create a competitive and integrated European listing and trading environment to support the continent’s most promising tech companies. View Article
Insurance Europe: Solvency II a ‘golden opportunity’ to unlock billions of capital for Europe : The EU is in discussions on the technical details needed to implement the review of Solvency II,.. In its statement accompanied by several position papers, Insurance Europe said that the details must closely reflect the political agreement made last year. View Article
EIOPA consults on the capital treatment of insurers’ direct exposure to central clearing counterparties in the standard formula : Under the so-called ‘sponsored model’, (re)insurers can now become direct members of CCPs with a sponsor handling default fund contributions and default management obligations on their behalf. View Article
ACC and AIMA respond to FSB review of securitisation framework : Our response highlighted the value of the securitisation market to the real economy and to mobilise capital to invest in SME growth and key strategic areas, while highlighting the policy failures. View Article
ISDA and IIF Respond to BCBS Consultation on CCR Management : ISDA and the Institute of International Finance (IIF) submitted a joint response to the Basel Committee on Banking Supervision’s (BCBS) consultation on guidelines for counterparty credit risk (CCR) management. View Article
Environmental, Social, Governance (ESG)
Commission provides further clarifications on EU corporate sustainability reporting rules : The FAQs take into account input received from companies and cover issues such as scope of the rules, application dates, and exemptions. For example, they clarify when companies may use estimates rather than having to collect value chain information from suppliers or partners. View Article
ESMA sets out its long-term vision on the functioning of the Sustainable Finance Framework : ESMA acknowledges that it is already well developed and includes safeguards against greenwashing. ESMA considers that the Framework could further evolve to facilitate investors’ access to sustainable investments and support the effective functioning of the Sustainable Investment Value Chain. View Article
ICMA publishes summary report following its 2024 Repo & Sustainability Survey : ICMA’s Repo & Sustainability Taskforce has published a summary report to reflect the feedback received in response to its 2024 Repo & Sustainability Market Survey. View Article
EIOPA: Leveraging insurance to shore up Europe’s climate resilience : The Climate Resilience Dialogue report identifies the need to actively explore the potential for new public-private collaborations schemes, at the EU or national level. EIOPA supports such partnerships... View Article
Insurance Europe: Climate change: EU report proposes ways to tackle insurance protection gap : Acknowledging that natural catastrophes caused by climate change are becoming increasingly intense and frequent, the report notes that today only around 25% of climate change-related losses are covered by insurance across Europe, albeit with big differences between countries. View Article
FERMA calls for establishment of Expert Group on Protection Gaps by the European Commission following release of EU Climate Resilience Dialogue : Findings of major study underline need for permanent body to advise on EU adaptation strategy View Article
Commercial Risk: EC lays out strategies to reduce climate change protection gap : The report acknowledges that natural catastrophes caused by climate change are becoming increasingly intense and frequent, but notes that only around 25% of climate change-related losses are covered by insurance across Europe, albeit with big differences between countries. View Article
IFRS Foundation publishes guide to support regulators implementing the IFRS digital taxonomies : The guide aims to assist regulators and others to implement the IFRS digital taxonomies in a manner that supports cross-border digital comparability and analysis of information prepared using IFRS Standards. View Article
ECIIA Paper: Auditing Risk Culture : ECIIA’s new paper explores the evolution of risk culture since the 2008 financial crisis, examining the key initiatives and reforms implemented by regulators globally. View Article
IMF: Carbon Emissions from AI and Crypto Are Surging and Tax Policy Can Help : Crypto mining and data centers now account for 2 percent of global electricity use and nearly 1 percent of global emissions, and their footprint is growing. View Article
Protecting Customers
AMICE: Industry coalition calls for the reaffirmation of the GDPR’s risk-based approach : An industry coalition of 23 associations from multiple sectors issued a joint statement on the application of the GDPR. The joint statement stresses the need for a paradigm shift in the current interpretation of the GDPR to revamp the risk-based approach as the guiding principle of the GDPR. View Article
Fin Tech Regulation
EBF: Stress test reaffirms the need for close cooperation between banks and supervisors to ensure cyber resilience : The cyber resilience stress test, conducted on 109 directly supervised banks this year, assessed how banks respond to and recover from a cyberattack. The exercise confirmed that banks have cyber incident response and recovery frameworks in place and identified areas for improvement. View Article
ESMA delivers opinion on global crypto firms using their non-EU execution venues : ...risks presented by global crypto firms seeking authorisation under the Markets in Crypto Assets (MiCA) Regulation for part of their activities (crypto brokerage) while keeping a substantial part of their group activities (intra-group execution venues) outside the EU regulatory scope. View Article
New CFA Institute Survey Reveals Industry-Wide Need for Standards and Education on AI/GenAI in Investing : It found widespread agreement on the need for standards for the use of artificial intelligence and that the absence of standards is preventing faster industry adoption of the technologies. It also identified a need for workforce upskilling in the responsible use of AI and Generative AI tools View Article
Economic Policies Impacting EU Finance
OECD: Statement by the Secretary-General on the Rio de Janeiro G20 Ministerial Declaration on International Tax Cooperation : The Declaration highlights the OECD’s work to make international tax arrangements fairer and work better, including through the “landmark achievement” of the automatic exchange of information through the Global Forum on Transparency and Exchange of Information for Tax Purposes. View Article
Brexit
TheCityUK: FCA and PRA reports on their secondary international competitiveness and growth objective : The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) recently published reports detailing their progress on the newly introduced secondary competitiveness and growth objectives under the Financial Services and Markets Act 2023. View Article
TheCityUK's Bardalai: UK-EU financial services exports: which countries are most prominent? : Growth in UK financial services exports to the EU at a headline level obscures some divergent country-specific trends. View Article
EU-UK Forum' Henig: UK Election campaign shows need for another reset in handling EU relations : On my calculation, the UK is currently in its fourth distinctive approach to Brexit, all of which have so far been failures. Primarily this has been because the issue is too sprawling for the narrow ways in which it has been handled. View Article
NIER: How Has UK Trade Been Impacted by Leaving the European Union? : What has been the impact on trade from the UK leaving the European Union? In today’s Monday Interview, our Deputy Director for Macroeconomics, Stephen Millard, asked Post-Doctoral Researcher, Antonio Haro Bañón, for his thoughts on the topic. View Article
UK-EU: What next? : The new government has made an energetic start as it begins to ‘reset’ the UK’s relationship with the EU. But can Keir Starmer’s administration fulfil its manifesto promises? What are the challenges on the EU and domestic front that it will face? View Article
CER's Meyer: In the UK's plans for AI, Brussels still looms large : The new British government plans to regulate powerful AI models. But it should also influence how European authorities implement their law on AI and help shape global norms on AI regulation. View Article
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