Welcome to our Friends weekly e-mail.
Highlights of my week: Finally, the list of new Commissioners was unveiled by Commission President von der Leyen but now begins the great guessing game of how many will be voted down at their European Parliament hearings. Indeed, will the new Commission start on schedule on 1 November? The Draghi Report has triggered a wave of competitiveness - but only between the think tanks, academics and professional associations at this early stage! However, the sheer volume of analysis will make it much more difficult for the EU’s political leaders to shelve the main thrust of the report without engendering massive disillusion with the “European project”. Moreover, the defence issues uncovered by the Ukraine war cannot be ducked and are already surfacing innovative ideas to finance the air defence of “Europe” – all highlighting the need for a proper Capital Markets Union to provide the finance. Insurance Europe pointed to the opportunity for the Solvency II Review to open the way for the massive life insurance funds to invest in more risk-bearing assets, though the BIS Quarterly Review highlighted the shift of insures to riskier, less liquid assets. The role of AI continues to generate much comment - whether from bank regulators like the SSM’s McCaul or the OECD. The Commission consultation on Artificial Intelligence in the financial sector drew responses from AFME, ICMA and ALFI. Aston University caused a stir by detailing the 27% drop in UK exports since Brexit in 2021.
Graham Bishop
Articles from 13-19 September 2024
Policy impacting Finance
Commissioners-designate (2024-2029) : See the list of Commissioners-designate and their portfolios, reflecting the ambitions set out in the Political Guidelines. View Article
Future Commission discussed by EP leaders : EP leaders had an exchange of views with the President-elect of the Commission on the new College of Commissioners. The presentation paves the way for the start of the confirmation hearing process, once Parliament receives all the necessary documentation View Article
Next Commission: Maria Luís Albuquerque is Commissioner-designate for Financial Services and the Savings and Investments Union : Her role will be vital to strengthen and complete our capital markets union and ensure that private investment powers our productivity and innovation. View Article
Draghi to MEPs: “Europe faces a choice between exit, paralysis, or integration” : Mario Draghi outlined his blueprint for improving Europe’s competitiveness through closer cooperation in core areas and massive investment in shared objectives. View Article
CER: Draghi's plan to rescue the European economy: Will EU leaders do whatever it takes? : by Tordoir , Berg , Cornago , Meyers , Scazzieri: Draghi’s report on the ailing European economy contains hard truths for EU leaders, who have long failed to confront Europe’s declining growth rate head-on. View Article
LSE's Wolf: Will Mario Draghi’s plan for European competitiveness work? : On 9 September, Mario Draghi published a new report on European competitiveness. André Wolf argues that while the report identifies many of the key challenges facing Europe, it contains questionable policy solutions. View Article
Bruegel's Grabbe: A circular single market for sustainable competitivenes : The Draghi report’s focus on critical raw materials misses the contribution of resource efficiency to productivity View Article
CEPR: Draghi is right on many issues, but he is wrong on telecoms : By Duso, Motta, Peitz, Valletti: This column argues while the report rightly recognises that the availability, affordability, and quality of telecoms services are a key driver of European competitiveness, its recommendations on telecoms are misguided and dangerous. View Article
Bruegel's Martens: The Draghi report’s emphasis on hardware and telecoms is out of touch with modern digital developments : The Draghi report’s emphasis on hardware and telecoms is out of touch with modern digital developments View Article
CEPR's Caffarra: Draghi’s real message on European competition enforcement: “Not delivering on innovation and growth” : Draghi's report on European competitiveness has been largely well received, although concerns have been raised that Draghi is prescribing a rollback of competition enforcement and regulation, particularly in telecoms and digital. This column argues that this is a misrepresentation of what he says. View Article
EuropeanIssuers Welcomes Mario Draghi’s Report on the Future of European Competitiveness : EuropeanIssuers believes that achieving this goal requires a clear commitment to reducing regulatory burdens and the achievement of the Capital Markets Union (CMU), both of which are crucial to enabling innovation. View Article
EFAMA: Draghi report highlights underdeveloped occupational and private pension systems as an issue for European competitiveness : We particularly agree that the underdevelopment of the occupational and private pension systems in many EU Member States is limiting the flow of capital into the markets. Strengthening these pillars is essential for increasing the volume of finance available in capital markets... View Article
Bruegel's Steinbach, Wolf: Financing European air defence through European Union debt : In this paper, we propose the creation of an EU funding mechanism to internalise the positive externalities provided by national air-defence systems. View Article
SUERF: The Next European Commission's Policy Choices: A Credit Perspective (Part 3): Capital Markets Union (CMU) and Banking Union (BU) : by Broyer, Charnay: we see renewed political impetus to drive the CMU forward – in the direction of developing a pan-European capital markets infrastructure, improving access to finance to enable companies to innovate, and broadening investment opportunities for EU citizens. View Article
Fondation Robert Schuman's Giuliani: European governance in difficulty : Thje Commission president wants to lead alone an institution that wants to extend its expertise to geostrategy, i.e. foreign and defence policy.... The Member States are reluctant and in its college, free minds have no place, which explains the resignation of Thierry Breton. View Article
Remarks by Paschal Donohoe following the Eurogroup meeting of 13 September 2024 : Discussions we had today mostly focussed on the economic outlook and the work underway with regard to budget planning. View Article
EBF Paper: Open Strategic Autonomy & Market Access : What is the role of banks in the OSA debate and what is the optimal contribution of the European banking sector to the EU’s OSA goals? To what extent is a sector-specific approach needed? View Article
FSB's Schindler: Building bridges: the case for better data and coordination for the non-bank secto : ...we face a different financial system. The system has evolved because of our regulatory interventions, innovation, and shifts in global economic and financial conditions. One of the most notable changes has been the increasing importance of the non-bank sector. View Article
BIS Quarterly Review, September 2024 : The BIS Quarterly Review includes analysis on recent developments in financial markets, life insurance, global alignment and trade, capital flows to EMEs and global banking statistics. View Article
Banking Union
SSM's McCaul: The future of European banking supervision – connecting people and technology : To keep the banking sector safe and sound in the face of these trends, we need to equip the supervisors of the future with the right tools and skills. And it is this principle that has guided our strategic work on the digital agenda. View Article
SRM: "CMDI will enhance the EU crisis management framework if its tools are effective" - Eurofi article by Dominique Laboureix : With CMDI, banks entering in the scope of resolution, even the smaller ones, would have to respect the same standards as their larger peers, in a proportionate way - ensuring a level playing field. This means that these banks would have to build and maintain MREL like their larger peers. View Article
CEPR: The impact of de-risking by correspondent banks on international trade : By Borchert, De Haas, Kirschenmann, Schultz: The sharp decline in correspondent banking over the past decade has raised concerns that the associated disruptions in cross-border payments could hamper international trade and economic growth. View Article
European credit sector associations call for boosting fraud prevention efforts across the fraud chain : It identifies four “gamechanger” actions that are necessary to strengthen the fraud prevention and mitigation across Europe, as well as a set of best practices identified to combat fraud. View Article
Parliament briefing: The Banking Union and the decisions of the CJEU : The purpose of this paper is to assess the impact of some of the key CJEU decisions on the legal framework established 10 years ago, showing how they have been instrumental in supporting a centralised and integrated model of banking supervision at the EU level. View Article
EP briefing for public hearing with Dominique Laboureix, Chair of the Single Resolution Board - 23 September 2024 : This briefing addresses: • Regular reporting on MREL- Q1 2024 • Resolvability assessment 2023 • Bail-in mechanics • Forthcoming expectations on valuation capabilities • SRB‘s 2023 annual report and more... View Article
CEPS's Thomadakis: Why we need to rewire Europe’s financial sector – to end fragmentation and bolster integration : The new European Commission should have a focused agenda that balances regulatory simplicity with forward-looking strategies. This is particularly the case in capital market integration, bank competitiveness, digital finance and sustainability. View Article
Capital Markets Union
InsuranceEurope: Solvency II: EU insurance rules review a prime chance to unlock investment and increase competitiveness in Europe : ..welcomes the changes introduced by the EP and Council to improve the treatment of long-term business, ...However, the final impact of the Solvency II review will now depend heavily on the upcoming Level 2 technical measures which are under discussion. View Article
BIS: Shifting landscapes: life insurance and financial stability : by Garavito, Lewrick, Stastny, Todorov: Why have insurers and private equity firms steered investments towards private markets, increasing exposure to riskier and less liquid assets? 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
Parliament briefing: One Money, One Financial Market- The Capital Markets Union : Bringing all European financial markets under one roof, the Capital Markets Union (CMU), stands to provide European savers and borrowers with better opportunities. View Article
Fin Tech Regulation
AFME responds to European Commission’s Consultation on Artificial Intelligence (AI) in the Financial Sector : “While traditional AI techniques remain relevant, recent advancements in Generative AI present new opportunities for value creation, particularly in service delivery, software development, and operational efficiencies." View Article
ICMA responds to the European Commission’s targeted consultation on artificial intelligence in the financial sector : ICMA members emphasise the importance of human validation and an internal framework to manage the responsible use of AI in an organisation. Internal risk frameworks covering AI-related risk have been longstanding in financial organisations... View Article
ALFI responds to the EC’s targeted consultation on AI in the financial sector : ALFI, while responding to this consultation from the perspective of the investment fund industry, confirms that AI solutions, and large language model (LLM) tools in particular, are increasingly used among asset managers. View Article
OECD: AI in finance: how to regulate to enhance its benefits & limit risks? : Our latest report, Regulatory approaches to Artificial Intelligence in finance, examines regulatory approaches to artificial intelligence in the financial sector in 49 jurisdictions, based on an OECD survey. View Article
Brexit
Aston University: EU-UK Trade Deal continues to stifle trade with 27% drop in exports since 2021 : Monthly data show a 27% drop in UK exports and a 32% reduction in imports to and from the EU between 2021 and 2023 View Article
BCC: Difficult July for UK goods exports : Export volumes saw a double-digit drop in July. This was driven by lower sales of chemicals, pharmaceuticals, machinery and transport equipment to customers in the EU, including lower aircraft sales to Germany. These were all sectors that performed strongly in June. View Article
UKandEU's Hunsaker: UK Trade Tracker Q3 2024 : ... UK goods and services trade as a percentage of GDP as well as trade trends in 1H 2024... break down the data by goods trade with the EU and non- EU countries; exploring whether the previously puzzling trends of declining non-EU trade and stable EU trade continue to defy Brexit expectations. View Article
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