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Highlights of my week: As the Polish Presidency is about to begin, Parliament President Metsola spoke warmly about Poland’s strengths and the IMF published a blog highlighting the substantial benefits to the original EU of the 2004 enlargement but highlighting the reforms that were undertaken and will be necessary for any new members. Coincidentally, the finance minister of a former EU member - UK Chancellor Reeves –- was invited to join a Eurogroup meeting given the “bedrock of shared values”. FSB, ESRB and BIS happened to produce papers that highlighted the risks of “fire sales of safe assets” resulting from the UK’s LDI crisis of 2022. The Commission’s “timely” consultation on securitisation closed - with a clutch of comments from all the relevant professional associations. The IAIS adopted its Insurance Capital Standards (ICS) – welcomed by Insurance Europe as it shares so many building blocks with EU regimes. IASB Chair Barckow pointed out that the EU’s adoption of IFRS 20 years ago ushered in a 150-state language of corporate reporting. Commercial Risk reported that climate change has cost insurers €600 bn in the last two decades but an LSE blog showed that these extreme weather events have not spurred the political action that one might have expected. The Financial Data Sharing Act (FiDA) triggered a joint letter from the six major professional associations cautioning on the need for a thorough assessment across the value chain. Council adopted the new rules for `FASTER’ withholding tax relief – to be implemented just 30 years after the Giovannini Group (of which this author was a member!) identified this as a major barrier to the single market in capital. Chancellor Reeves called for a business-like relationship with EU and greater access for the City of London but seems to fail to grasp the existential nature of the derivative clearing problem for the euro area. Would a future PM Farage pay up to preserve the financial stability of the euro area???
Graham Bishop
Articles from 6 - 12 December 2024
Policy impacting Finance
Economic and Financial Affairs Council : Topics: Customs reform; Energy taxation; Economic governance framework; Recovery and Resilience Facility; Russia’s aggression against Ukraine; European Court of Auditors’ annual report;Taxation; Financial services. View Article
Eurogroup: Main results - International economic dialogue with the UK : View Article
Remarks by Paschal Donohoe following the Eurogroup meeting of 9 December 2024 : Our regular Eurogroup meeting began with a discussion with the IMF on the euro area economy. Both the IMF and the Commission agreed that the euro area has shown remarkable resilience. We have contributed to this stability through our coordinated efforts. Inflation is down. View Article
FSB issues policy recommendations to enhance non-bank market participants’ preparedness for margin and collateral calls : Policy recommendations aim to enhance the liquidity preparedness of non-bank market participants for margin and collateral calls in centrally and non-centrally cleared derivatives and securities markets. View Article
BIS: Fire sales of safe assets : We investigate the impact of forced sales by liability-driven investment funds (LDIs) on gilt prices, the reasons behind the inability of LDIs to recapitalise quickly and the scarcity of liquidity providers during this period. View Article
The General Board of the European Systemic Risk Board held its 56th regular meeting : It concluded that, overall, risks to financial stability in the European Union (EU) have increased over the past three months amid high political uncertainty and elevated geopolitical tensions. This is reflected in the emergence of a number of plausible triggers for tail risk scenarios. View Article
Project Syndicate's Eichengreen: The Crisis that Germany Needs : There is a profound mismatch between Germany’s current economy and its institutional inheritance from the postwar period. If the current crisis prompts a wholesale rethink of that inheritance, the logjam blocking necessary reforms could finally be broken. View Article
Parliament: A strong Poland means that a strong Europe is real: President Metsola : In the margins of Parliament’s Conference of Presidents’ visit to Warsaw ahead of the Polish EU Council Presidency, President Metsola delivered the following speech. View Article
IMF blog: The 2004 EU Enlargement Was a Success Story Built on Deep Reform Efforts : by Robert Beyer, Claire Yi Li, Sebastian Weber: New accession candidates will need to undertake equally ambitious reforms to make the next expansion a comparable success View Article
Banking Union
The EBA publishes final standards on the specification of long and short positions under the derogations for market and counterparty risks : These RTS are part of the Phase 1 deliverables of the EBA roadmap on the implementation of the EU banking package in the area of market risk. View Article
AFME: AML/CFT and Financial Inclusion – proposed changes to FATF Standards : We welcome FATF’s intention to better align its Recommendations with measures to promote financial inclusion. We broadly support the suggested changes. We note however that certain issues are nuanced and need to be carefully considered. View Article
EBF Welcomes Revised IReF Timeline: A Key Step Towards Harmonized EU Reporting : While focused on statistical reporting, the IReF will serve as preamble to a more ambitious integration of EU-wide statistical, prudential and resolution reporting as ultimate objective for both authorities and the industry. View Article
Capital Markets Union
EU securitisation framework: Insurance Europe responds to European Commission consultation : While correcting the Solvency II capital charges and reducing the operational requirements will not necessarily lead to a direct increase in allocations to securitisations for all insurers, it is a necessary step to unlock the potential of the EU securitisation market. View Article
ALFI responds to the Commission targeted consultation on the functioning of the EU securitisation framework : The main concerns that ALFI has highlighted are the impact of the SECR in terms of triggering material additional human and financial costs without any obvious added-value, especially as far as institutional investors are concerned. View Article
EFAMA: EC Targeted consultation on the functioning of the EU securitisation framework : The EU Securitisation Regulation, which aimed to enhance transparency and strengthen trust, is undergoing a very timely review. EFAMA supports the European Commission’s initiative to engage stakeholders in shaping key improvements to this critical framework. View Article
BETTER FINANCE: Targeted Consultation on the EU’s Securitisation Framework : We sincerely believe that expectations of securitisation providing a magical solution to cater for the investment needs of EU corporates, in particular SMEs, are profoundly misguided. Corporate loans are inherently difficult to securitise... View Article
PCS: Everything you need to know about reforming Europe’s securitisation rules… and some you don’t : At 167 questions, there is no doubt the Commission’s survey was comprehensive. At a little over 30,000 words, we hope PCS’ response was too. View Article
AFME: Targeted consultation on the functioning of the EU Securitisation Framework : The Association for Financial Markets in Europe (AFME) welcomes the opportunity to comment on the European Commission’s targeted consultation on the functioning of the EU Securitisation Framework. Please find our responses below. View Article
IAIS adopts Insurance Capital Standard and other enhancements to its global standards to promote a resilient insurance sector : IAIS adopts first comprehensive global capital standard for insurance supervision, the Insurance Capital Standard (ICS), providing a risk-based measure of capital adequacy for internationally active insurance groups (IAIGs). View Article
Insurance Europe welcomes IAIS adoption of global Insurance Capital Standards : Insurance Europe welcomes the decision as ICS shares many of the key building blocks with existing European supervisory regimes, such as market-value balance sheet with key elements to recognise insurers’ long-term nature, risk-based capital requirements and full integration of internal models. View Article
IAIS welcomes the release of the FSB’s first list of insurers subject to resolution planning standards consistent with the FSB Key Attribute : The list provides transparency to markets, policyholders and the larger public that the reported insurers and relevant authorities are working to be prepared for the insurers’ entry into resolution if it ever becomes necessary. View Article
Commercial Risk: Climate change cost insurers $600bn over past two decades, says campaign group : Insure Our Future says carriers adding to rate increases by backing fossil fuel industry View Article
Environmental, Social, Governance (ESG)
Adapting to a changing world—Keynote address by the IASB Chair at the EFRAG Conference : Twenty years ago, the widespread adoption of IFRS Accounting Standards ushered in a new era of transparency in corporate reporting. This pivotal moment was driven by Europe, which took the step of mandating the adoption of IFRS Accounting Standards by listed companies across its member states. View Article
LSE: There is little evidence extreme weather events spur political action on climate change : By Wappenhans, Valentim, Klüver, Stoetzer: Extreme weather events like flooding and wildfires are often cited as evidence of the need to tackle climate change. But do these events lead to real political change? View Article
AccountancyEurope: CSRD readiness: limited assurance approach to transition plans : In this series of 3 papers, we share some key aspects on the assurance practitioner’s approach to double materiality assessment, value chain information and transition plans to contribute to the CSRD implementation and readiness debate. View Article
Commission DG FISMA's Mai: Sustainable finance Coming soon – a new European standard for green bonds. : ...from 21 December of this year, issuers seeking to tap capital markets to help them become more sustainable will have an additional option: they will be able to issue European green bonds under a voluntary new standard that the EU is introducing. View Article
Fin Tech Regulation
ESAs provide Guidelines to facilitate consistency in the regulatory classification of crypto-assets by industry and supervisors : The Guidelines include a standardised test to promote a common approach to classification as well as templates market participants should use when communicating to supervisors the regulatory classification of a crypto-asset. View Article
Six major EU professional associations: Financial Data Sharing (FiDA): Finding a sound approach for an effective Open Finance Framework : They call on the co-legislators to deliver on commitments to boost European competitiveness and to avoid concluding the Financial Data Access (FiDA) Regulation before a thorough assessment of its impact across the entire value chain is completed. View Article
ICMA publishes DLT Bonds Reference Guide : The guide, produced by ICMA’s DLT Bonds Working Group, and authored by Gabriel Callsen, Senior Director for FinTech and Digitalisation at ICMA, highlights considerations for the end-to-end lifecycle of DLT-based debt securities. View Article
Commercial Risk: Europe’s financial services criticise new data exchange rules : View Article
CER's Meyer: Implementing the AI Act: The Commission's first big test for better regulation : Ursula von der Leyen has said her next Commission will simplify the EU’s complex regulatory environment to boost growth, especially in high-tech sectors. How the EU implements its Artificial Intelligence Act will be its first big test. View Article
Economic Policies Impacting EU Finance
Taxation: Council adopts new rules for withholding tax procedures (FASTER) : The Council today adopted new rules setting up safer and faster procedures to obtain double taxation relief that will encourage cross-border investment and help fight tax fraud. View Article
Brexit and the City
Remarks by Paschal Donohoe following the meeting of Eurogroup in inclusive format with the UK Chancellor of the Exchequer, Rachel Reeves, : ...it is very important to refocus on those relationships that have a bedrock of shared values, of shared outlook on the really important questions of our time, and also similar and shared policy priorities. View Article
FT: Reeves calls on EU to give greater access for City of London : Plea comes in first appearance by a UK chancellor at a Euro finance meeting since Brexit View Article
Chancellor calls for business-like relationship with EU : Rachel Reeves calls for business-like relationship with the EU to drive more trade, support businesses and boost economic growth that benefits working people; Reeves to be the first UK Chancellor to address EU finance ministers since the UK left the EU View Article
City UK: UK maintains its reputation as a world leader for international legal services : TheCityUK’s 13th annual report on UK legal services looks at the sector’s contribution to the UK economy through revenue, exports, employment and innovation View Article
Brexit
CER's Springford: The gap between the 'Brexit reset' rhetoric and the reality : Rough-and-ready calculations based on the stated demands of the UK and EU suggest the reset might raise Britain’s GDP by 0.3-0.7 per cent. View Article
FT's Gross, Parker: Can Nigel Farage turn Reform into a serious contender for government? : Support for the rightwing populist party is growing fast but its path to power remains rocky View Article
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