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ELEC position paper: Why EU Capital Markets Union has become a “must have” and how to get there – ELEC Group of Wise Persons: Its report highlighted the need for CMU - with five concrete proposals for action by EU policymakers on insolvency proceedings, securitisation, stimulating retail investment, expand ESMA's powers, check feasibility of a globally significant `safe asset'. link (NOTE: Graham Bishop was a member of the Group)
Highlights of my week: To nobody’s surprise, Ursula von der Leyen announced her intention to run for a second term but her biggest obstacle may be getting the support of the absolute majority of newly elected MEPs. SSM and SRB leaders produced a battery of comments about the need for banks to ensure their resilience while Angeloni – in a paper for ECON – called for a `single jurisdiction’ for cross- border banks. Bloomberg reported that Eurogroup are planning to push for a more integrated capital oversight – re-enforcing the calls from ELEC (see paper above) for much wider powers for ESMA. The UK announced the opening of gilt sales direct to retail – following the examples of Italy, Belgium and Portugal but begging the question of why public debt managers are so far behind the technological curve? The ECB seems to be opening a campaign to `demystify’ the digital euro and generate support for it – just as the European Payments Council’s new Instant Credit transfer system went live 24x7. That would seem to be formidable competition for the digital euro in the payments field. However, the ECB is warning banks about the dangers of outsourcing risk – especially of processing personal data. The UK government has moved forward on delivering the Edinburgh Reforms but Parliament’s Treasury Committee pointed out that some of the actions had not in fact been completed and that just publishing a document could hardly count as a reform completed! POLITICO unravelled some of the Franco/German intrigue on EMIR 3 that left the UK feeling more secure in keeping clearing in London.
Graham Bishop
Articles from 16-22 January 2024
Policy impacting Finance
Reuters: EU's von der Leyen vows to defend democracy in bid for second term : Germany's centre right CDU party nominates Ursula von der Leyen as EU election candidate; Von der Leyen still needs pan-European centre-right umbrella group (EPP) backing; EPP ahead in polls despite far-right rise in some EU countries; Von der Leyen may come under pressure on climate goals View Article
Chatham House's Kundnani: Ukraine means enlargement is again the EU’s priority – but not for the reasons it claims : The European Union is using an old tool for a new purpose as it looks to its defence. The Russian invasion of Ukraine in February 2022 changed all that. Enlargement is now not just back on the EU’s agenda but has become its highest priority. View Article
Bruegel's Maes: A tale of two treatises: the Werner and Delors Reports and the birth of the euro : Focusing on the Werner and Delors Reports, this essay aims to capture key ideas and debates, giving a chronological overview of the EMU process View Article
Banking Union
SSM's Buch: “Strengthening bank resilience is priority” : We are indeed facing heightened uncertainty. The new macro-financial environment, geopolitical risks, climate change and the risk of cyber threats are all highly relevant challenges for banks. This is why strengthening banks’ resilience is one of our priorities. View Article
SSM's Tuominen - for Eurofi Magazine: Crisis management: reform on the way : When a bank does not meet or is unlikely to meet its supervisory requirements, we are empowered to take supervisory and early intervention measures aimed at keeping it viable and preserving financial stability. View Article
SSM's Fernandez-Bollo: Effective supervision to enhance the resilience of European bank business models : ECB Banking Supervision welcomes the diversity of banking business models in Europe. This diversity is a key strength that enables various financing needs to be met and facilitates the inclusion of different groups of economic operators in the financial system. View Article
SRB's Laboureix: Building a stronger crisis framework in a financial world always in motion - Columbia University : Banks remain private enterprises so, even if tightly regulated and of critical importance, they should be allowed to fail. Since no systemic bank should be considered “too big to fail”.. View Article
Bloomberg: BaFin Signals Tough Stance on Banks’ Bail-In Bonds Despite Costs : While higher rates make it more expensive to replace maturing notes, banks will still need to meet a minimum requirement for securities such as AT1 bonds and subordinated debt, said Birgit Rodolphe, executive director for bank resolution at German regulator BaFin. View Article
The EBA consults on amendments to the operational risk Pillar 3 and supervisory reporting requirements to implement the Basel III reforms in : EBA seeks to implement the changes driven by the revised operational risk framework. The new data will allow supervisors and users of reporting and disclosure data to monitor institutions’ compliance with Basel III framework for operational risk..foster consistent supervision..market discipline. View Article
The EBA consults on the new framework for the business indicator for operational risk as part of the implementation of the EU Banking Packag : The draft RTS on the specification on the BI items provide a list of typical items developed for each component of the business indicator in line with the work provided in the EBA Policy Advice on the Basel III Reform. View Article
ECB updates Guide to internal models : ECB publishes final revised guide to internal models, covering general topics, credit risk, market risk and counterparty credit risk; Guide clarifies ECB’s understanding of rules on banks’ internal models View Article
ECON study - Angeloni:The Next Goal: euro area banking integration -- A single jurisdiction for cross-border banks : In its first ten years (2014-2023), the banking union was successful in its prudential agenda but failed spectacularly in its underlying objective: establishing a single banking market in the euro area. This goal is more important than ever, and easier to attain than at any time in the last decade. View Article
finextra's Madavi: How to implement an instant payments system : Swift connected domestic payment schemes - end-to-end transparency for EU instant cross-border transfers.The European Payment Council’s One-Leg Out Instant Credit Transfer scheme (OCT Inst) went live and now enables payments to and from Europe to be processed 24 hours a day, seven days a week. View Article
Capital Markets Union
MiFIR and MiFID II: Council adopts new rules to strengthen market data transparency : The Council adopted changes to the EU’s trading rules, which will give investors a better access to the market data necessary to invest in financial instruments and increase the global competitiveness of the EU’s capital markets and ensure a level playing field. View Article
Bloomberg's Valero: EU Finance Chiefs Push for Integrated Capital Market Oversight : Ministers ask European Commission to come up with proposals; Draft statement calls for convergence of listing requirements View Article
ELEC position paper: Why EU Capital Markets Union has become a “must have” and how to get there – ELEC Group of Wise Persons : Its report highlighted the need for CMU - with five concrete proposals for action by EU policymakers on insolvency proceedings, securitisation, stimulating retail investment, expand ESMA's powers, check feasibility of a globally significant `safe asset'. (Graham Bishop was a member of the Group) View Article
FT: UK opens up gilts sales to retail investors : Treasury courts new sources of demand as it faces record bond issuance needs View Article
Environmental, Social, Governance (ESG)
SSEI: The Luxembourg Green Exchange (LGX) now counts EUR 1 trillion worth of green, social, sustainability and sustainability-linked (GSSS) : LGX's growth reflects the shift towards more sustainable investment practices and demonstrates the commitment of market participants to addressing environmental and social challenges through finance. View Article
UNEP FI: Serving Asset Owner Clients through Climate Stewardship: A call to action to the asset management industry : This call to action sends a clear message to the asset management industry that “Serving Asset Owner Clients [is only possible] through Climate Stewardship”. View Article
Dutch Banking Association - NVB: Joint acceleration sustainability possible, but via a different route : Banks want and can contribute to the acceleration of the climate and energy transition in the Netherlands in cooperation with the government, business and consumers. This requires a different route with different choices than proposed in a recent government consultation. View Article
Protecting Customers
Commissioner McGuinness at 'Money Matters: Financial literacy, resilience and inclusion' conference organised by the European Commission and : ...all too often when we think of financial services, it's for the finance industry, so it's set apart. But in fact the financial sector is for people and business... View Article
Fin Tech Regulation
CEPR: The digital euro after the investigation phase: Demystifying fears about bank disintermediation : ECB's Bindseil, Cipollone, Schaaf: On 18 October 2023, following the conclusion of its “investigation phase”, the ECB’s Governing Council announced a specification of the functional scope and key features of a digital euro and also decided to proceed with the “preparation phase” of the project. View Article
Finextra: Banks "barking up the wrong tree" over CBDC deposit flight says ECB : In a blog post, the ECB is at pains to debunk a number of myths about the role of a future digital euro, insisting that the new digital currency would be designed from the outset to preserve the economic function of commercial banks. View Article
finextra: ECB warns banks on outsourcing risks : The European Central Bank is warning banks that their management of outsourcing risk must improve, with a stringent focus on the processing of personal data. View Article
POLITICO: British banks want Big Tech to pay up when people are scammed online : British banks are fed up with footing the bill for a tidal wave of fraud that originates online. They want tech platforms to cough up. View Article
Finextra: European banks are challenging the challengers : According to the study, 'Challenging the challengers: Europe’s banks face the competition', almost half (43%) are investing in fintech start-ups and a third (36%) are building their own greenfield digital bank or fintech company. View Article
Economic Policies Impacting EU Finance
ECON's IPOL: EU economic developments and projections : This briefing provides a summary of the recent economic developments in the EU Member States and gives an overview of relevant economic projections forecasted by major international and EU institutions. Annex 1 includes latest GDP data and forecasts for all EU Member States... View Article
Taxation: Bahamas, Belize, Seychelles and Turks and Caicos Islands removed from the EU list of non-cooperative jurisdictions for tax purpose : This EU list of non-cooperative tax jurisdictions (Annex I) includes countries that either have not engaged in a constructive dialogue with the EU on tax governance or have failed to deliver on their commitments to implement the necessary reforms. View Article
Brexit and the City
Government responds to Treasury Committee on progress of Edinburgh Reforms : Analysis by the Committee concluded that six of the actions which the Government had marked as ‘delivered’ had not been completed as the work to implement them was ongoing. A further six measures should not be considered as reforms as they relate to actions such as publishing a document... View Article
POLITICO: Brexit’s latest twist: Britain pushes the EU to increase red tape : The City of London was supposed to have been set free by Britain’s departure from the EU. That’s not how it’s turning out. View Article
FT: The limits of splitting UK and EU financial services : London and Brussels should collaborate more on regulation View Article
FESE response to the UK FCA consultation on the commodity derivatives regulatory framework : FESE calls on the FCA to reconsider its proposal for enlarging the reporting of derivatives traded on overseas markets. It should be avoided that UK trading venues can request position data from direct foreign competitors as this data constitutes commercially highly sensitive information. View Article
POLITICO: France backs UK as banking mecca, denying Germany win in Brexit surprise : Some in Brussels thought Brexit was a chance to reroute financial “plumbing” away from London but the banks still had eyes for the U.K. View Article
Brexit
Irish Times: Opinion poll finds nearly two-thirds in Northern Ireland would vote to rejoin the EU : Weighted to reflect the population, 62% chose to rejoin, 35% to stay out while 3% were unsure or offering no opinion. In the original 2016 referendum, the UK-wide result narrowly passed Brexit by 51.89%. View Article
UK TPO's Gasiorek/Tamberi: Some goods (and some less good) news from UK trade : This blog reviews trends in UK trade with the world and the effects of the TCA on UK-EU trade. There is good and bad news for UK trade in goods. Starting with the bitter pill, the UK’s trade in goods with the world has underperformed compared to other comparable countries over the last few years. View Article
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