Welcome to our Friends weekly e-mail.
Highlights of my week: The tentacles of Russia’s war on Ukraine continue to spread dissension between France and Germany and no resolution in sight about the imminent problem of Putin’s ally – Orban – taking over the EU’s rotating Presidency. Should the EU fund - collectively – public goods that are European in scale? If so, how to fund it? Already the RRF has set a precedent – making the EU itself one of the largest bond issuers in the EU and raising questions about how they should be traded in the markets. The SRB welcomed the “Daisy Chain” Act to reinforce banks loss-absorbing capital though the BCBS was able to report the good news that the major global banks’ capital ratios continue above pre-pandemic levels. The vexed issue of `benchmarks’ remains as EFAMA worries that the rush to complete legislation before the EP elections may produce a bad outcome. EIOPA published research on why consumers are reluctant to buy natural catastrophe insurance – perhaps perversely in the light of the extreme weather that has already occurred in recent times. Remarkably, Council went back on an agreement in trialogue over the issue of due diligence in sustainability and human rights. In the run up to a US decision on ESG standards, IFAC reported that 93% of firms use a “jumble” of ESG frameworks - complicating the job of investors. The EU’s pioneering work on digital operational resilience (DORA) continues to stir concern. In far-off Brexitland, the Budget documents show that the OBR maintains its view that there would indeed be a 4% hit to productivity and an additional tax-advantaged scheme for retail investment in UK equities was launched. ESG rating agencies in the UK are to be regulated: how closely will its rules follow the EU’s existing lead?
Graham Bishop
Articles from 1 -7 March 2024
Policy impacting Finance
Carnegie's Dempsey:Germany Must Tackle the Crisis of Trust in Europe : Berlin and Paris are squabbling over how to support Ukraine. To mend divisions and make Europe Kyiv’s number one defender, Chancellor Scholz must take on a leadership role. View Article
Delors Centre's Thu Nguyen: The EU's Hungary problem : The upcoming Hungarian Council Presidency sparks a lot of criticism. But although the prospect of a Council Presidency led by the Orbán government is understandably uncomfortable, in practice, it will do little harm. View Article
Project Syndicate's Bakker, Beetsma, Buti: The Case for a European Public-Goods Fund : With the European Union’s pandemic recovery fund set to end in 2026, there is an urgent need for more durable financial mechanisms to support its long-term objectives...a new investment fund could enhance the EU’s growth potential and ensure compliance with its new fiscal rules and shared values. View Article
Parliament EPRS's Wyplosz: Which European Public Goods? : The recent stunning geopolitical events have prompted a wave of initiatives and proposals that seek to endow the European Union with responsibilities currently exercised at the national level. The present study uses examines which proposals match the principles of fiscal federalism to be considered properly as European public goods View Article
EURACTIV: NextGen 2.N0? Conservatives throw spanner into new EU joint borrowing debate : Conservative lawmakers in the European Parliament, such as Siegfried Muresan, Vice Chair of centre-right EPP group, have declared their strong opposition to a renewed joint borrowing scheme at the EU level, making it unlikely that such a programme would ever see the light of day. View Article
FBF: For a sovereign and sustainably growing Europe: French banks’ proposals for 2024-2029 : As part of an event organised by the French Banking Federation in Brussels, the FBF is publishing “For a sovereign and sustainable growing Europe“, a document detailing the proposals of French banks for the period 2024-2029. View Article
Banking Union
Commissioner McGuinness at Annual Payments Conference 2024 hosted by the Banking & Payments Federation Ireland (BPFI) : ..we have other payment methods that are exploding – both in terms of the type of payments but also the volume of transactions. And digitalisation isn't new, but Covid definitely accelerated the growth in digital payments. View Article
SRB welcomes European Parliament Daisy Chains Act adoption : This will allow resolution authorities more scope in setting internal minimum requirements for own funds and eligible liabilities (MREL) in banking groups, in order to ensure sufficient loss-absorbing capacity View Article
BCBS: Basel III capital ratios for largest global banks were largely stable and above pre-pandemic levels in the first half of 2023, latest : Initial Basel III capital ratios were largely stable and above pre-pandemic levels in the first half of 2023 while liquidity coverage ratios increased; Profit after tax of large internationally active banks increased to a record €279 billion. View Article
Basel Committee agrees to revisions to Basel Core Principles, consults on addressing window-dressing in the G-SIB framework : View Article
The EBA publishes its final Guidelines on national lists or registers of credit servicers : The Guidelines are addressed to Competent Authorities managing the lists or registers and specify i) the content of the lists or registers, ii) how they should be made accessible, and iii) the deadlines for updating them. View Article
Capital Markets Union
Committee MEPs voted on new rules for benchmarks : Economic and Monetary Affairs committee aimed at protecting financial stability, while reducing an administrative and regulatory burden for smaller benchmark providers. View Article
EFAMA: A rushed deal on the Benchmarks Regulation would jeopardise transparency, with negative impacts for the sustainable finance framework : Our concerns stem from the Commission’s proposal to remove the majority of benchmarks from the scope of the Regulation. This means removing transparency regarding the methodology used by those benchmarks, among other obligations. View Article
ICMA publishes a new paper on liquidity and resilience in the core European sovereign bond markets : Using data analysis, modelling, as well as interviews with sell-side and buy-side market participants, the report attempts to identify potential vulnerabilities in underlying market structure. View Article
Risk.net: EC adviser: more dealer help needed on EU bond secondary market : For their part, banks want greater clarity around issuance plans after 2026. “Market participants have to treat EU bonds like sovereign bonds. Primary dealers have to trade these bonds on their government bond desks. Investors have to treat our bonds in their investment policies like a sovereign,” View Article
FT Alphaville: The hedge fund-bank nexus : The BIS eyeballs prime brokers View Article
IAIS Newsletter February 2024: Implementation assessment... : has become an increasingly important aspect of the IAIS’ work. Following an intensive period of standard setting, our focus now pivots towards ensuring the comprehensive and consistent implementation of our agreed standards. View Article
New EIOPA research probes reasons behind consumers’ reluctance to taking out natural catastrophe insurance : The Paper explores the barriers that keep consumers from buying insurance against natural catastrophes. It also proposes a number of consumer-tested solutions to overcome these challenges and in so doing, bolster European households’ and businesses’ resilience to extreme weather events. View Article
Environmental, Social, Governance (ESG)
ESG Today: EU Council Fails to Approve New Environmental, Human Rights Sustainability Due Diligence Law : A key piece of EU legislation setting mandatory obligations for companies to address their negative impacts on human rights and the environment was dealt a significant blow - failing to achieve final approval by the European Council, following objections from countries including Germany and Italy, View Article
IFAC: 93% of firms use a mix of ESG standards, thwarting uniformity efforts: IFAC : The spotlight on confusion from a jumble of ESG frameworks comes just days before a vote on an SEC rule aimed at ensuring uniformity in climate disclosure. View Article
Commission publishes third report on EU market for statutory audit services : The number of individual auditors and audit firms in the EU declined further, and the audit market remained highly concentrated...The report also finds that audit firms derived 67% of their revenue from non-audit services, which shows a continued focus beyond statutory audits. View Article
GRI: New training on how to disclose biodiversity impacts : GRI Academy course focuses on the revamped Biodiversity Standard: Sustainability professionals can now build and improve their expertise and knowledge of how to report their impacts on nature with the revised GRI Biodiversity Standard View Article
AccountancyEurope: A greener and more competitive Europe: our manifesto for 2024-2029 : In the dynamic landscape of our society, Accountancy Europe stands at the forefront with clear priorities. We have crafted a Manifesto for the EU financial and green agenda in next five years, envisioning a greener and more competitive Europe View Article
CEPR: A proposal to refocus the EU Carbon Border Adjustment Mechanism on preventing carbon leakage : This column argues that the EU’s Carbon Border Adjustment Mechanism constitutes an important step forward from current anti-leakage policies, but only if it can prevent evasion and impose no unnecessary economic harm on Europe’s trading partners. View Article
Invest Europe ESG KPI report shows increased engagement, progress on climate change and higher female representation : 78% of firms had ESG processes in place, women hold 38% of all jobs at PE and VC-backed companies; Women held on average 26% of board seats in PE, VC; Record participation: 1,057 firms were covered in second ESG KPI survey for 2022, an increase of 60% from previous year View Article
The IFRS Foundation Monitoring Board reaffirmed the importance of ongoing oversight of the standard-setting activities and governance of the : The Monitoring Board recognized significant efforts made by the IFRS Foundation to support the implementation of the ISSB Standards, including the publication of the Preview of the Inaugural Adoption Guide in February 2024. View Article
Fin Tech Regulation
PensionsEurope answers to ESAs consultation on DORA second batch policy products : PensionsEurope’s answers highlight the lack of proportionality of draft level 2 and 3 measures which would put excessive burdens on IORPs, especially given the short timeframe left before the application of DORA, planned on 17 January 2025. View Article
ALFI responds to the ESA’s consultation on the proposed RTS on subcontracting ICT services supporting critical and important functions, unde : In its response to this consultation, ALFI highlighted the following points: Criticality; Bargaining power; ICT TPP enhanced liability; FE need-to-know right View Article
FESE response to the ESAs consultation on the DORA second batch policy products : FESE welcomes the opportunity to contribute its views to the ESAs consultation papers on the second batch of DORA policy products. View Article
FSB's Knott: At a cross-roads: the path towards responsible innovation in the crypto-asset ecosystem : The crypto-ecosystem itself also continues to evolve rapidly and in different directions. It is not just some retail investors that are ‘dipping their toes’ into crypto. Large institutional parties continue to show serious interest in crypto-assets and its underlying technologies. View Article
CER's Meyers: What to expect from the Digital Markets Act : Thanks to the Digital Markets Act, large tech firms must now give Europeans more choices about how online services work. But competition authorities will see few reasons to relax. View Article
ICGN Investor Viewpoint: Artificial intelligence: An engagement guide : An increasing number of companies are using AI to transform existing business models or create new ones, generate greater efficiencies, and enhance strategic decision-making, all of which are critical for their competitiveness. View Article
Brexit and the City
HM Treasury: Chancellor backs British business with pension fund reforms : The Chancellor has today (2 March) announced the reforms as a further step in the government’s plan to boost business and increase returns for savers. View Article
HM Treasury: Consultation on UK ISA : The government is now looking to introduce the UK ISA. This will have a new ISA allowance of £5,000 in addition to the existing ISA allowance, and will provide a new tax-free savings opportunity for peopleto invest in the UK, View Article
Reuters: Britain's finance ministry to regulate ESG ratings : "A full consultation response and legislative steps will follow later this year," the ministry said in a statement. View Article
PRA: PS2/24 – Review of Solvency II: Adapting to the UK insurance market : The related rules and policy materials are considered near-final due to the potential for further changes resulting from the PRA’s phased plan for consulting on Solvency II reforms and the transfer of the remaining Solvency II requirements from assimilated law (previously known as retained EU law) View Article
Finextra: Ebury explores £2bn London listing : Ebury, the Banco Santander-backed provider of corporate banking services to SMEs that trade internationally, is investigating a London IPO at a £2 billion valuation, according to Bloomberg. View Article
Brexit
Bloomberg's Rees: UK Is ‘On Track’ for 4% Hit to Economy From Brexit, OBR Says : OBR says UK ‘on track’ for 4% hit to potential productivity; Brexit supporters have faulted BOE and OBR for pessimism View Article
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