Welcome to our Friends weekly e-mail.
Highlights of my week: All the Commissioners-designate have had Parliament’s green light on their “conflict of interest” declaration. Now to the main test: answering the written questions and Financial Services Commissioner Albuquerque has been asked directly the “Brexit” question: “Do you think that the recent review of EMIR will succeed in bringing the clearing business of derivatives denominated in euro to EU financial centres?” She also has to answer on how she will respond to the CMU recommendations in the Draghi, Letta and Noyer reports. UK Prime Minister Starmer may also reflect on the EU response to Switzerland when considering his “re-set” in relations: The EU is not an `a la carte’ menu. The flow of technical matters continues unabated: EIOPA Chair Hielkema testified to ECON about the role of insurance and pension funds while the BIS discussed the liquidity issues from the 2023 banking turmoil. SSM Chair Buch highlighted that banks' apparent profitability can conceal underlying, fatal risks. But the biggest technical announcement undoubtedly came from the Commission: the settlement cycle will indeed be shortened to T+1. There is not yet an explicit timeline but it should be synchronised with the UK and Switzerland so 2027 looks likely. Hopefully, the industry’s advice will be taken and a number of long-standing bottlenecks will be swept away at the same time. The Commission rejected two recommendations from the ESAs and ESMA on DORA and MiCA. The Lord Mayor of the City of London described Brexit as a disaster and pointed to the 40,000 finance jobs gained in EU financial centres rather than in London.
Graham Bishop
Articles from 11-17 October 2024
Policy impacting Finance
EP leaders adopt calendar for Commissioners-designate hearings : After the consultation of committee chairs, the European Parliament President and political group leaders adopted the detailed schedule of which Commissioner-designate will be heard by which committees and at which time slot. They also adopted the written questions to be answered by 22 October. View Article
MEPs complete check on possible conflicts of interest of Commissioners-designate : The Legal Affairs Committee gave its green light for the confirmation hearings for all 26 Commissioners-designate to go ahead. View Article
Project Syndicate's Eichengreen: Europe’s Wake-Up Call : Given the challenges identified by the Draghi Report... identifying mutually advantageous policy trades among member states is a promising approach to achieving deeper integration... because national governments are more likely to agree to deeper integration when it strengthens them domestically. View Article
BusinessEurope President Persson: How to enhance the conditions for productive investment and quality jobs in Europe? : For BusinessEurope, meeting Europe’s huge investment needs requires first and foremost to improve the EU attractiveness as a location for private investment. View Article
EURACTIV: EU not an ‘ à la carte menu’, members tell Switzerland : Switzerland wants a so-called safeguard clause on suspending free movement of people with the EU in certain circumstances. EU ministers rejected a push by non-member Switzerland to add a clause to bilateral agreements under negotiation that would allow it to limit immigration from the bloc. View Article
LSE's Aspide: The non-effect of European fiscal rules on public opinion : Do European fiscal rules make it easier for governments to “sell” spending cuts to their voters? Drawing on a survey experiment in Italy, Alessia Aspide finds such rules have little impact on domestic support for austerity policies. View Article
LSE's Heinisch: The far right won Austria’s election, but may end up in opposition : Austria’s parliamentary elections were a watershed. For the first time in the country’s democratic history, the populist far-right Freedom Party of Austria (FPÖ) came first in a national election, beating the two parties that founded and long dominated Austria... View Article
Introductory statement of Petra Hielkema at hearing of the ECON Committee : These sectors not only provide financial security and peace of mind for individuals, but also enable the broader economy to flourish. But what should policy-makers pay attention to, to ensure insurance and pensions deliver on this essential role? View Article
CPMI reports to G20 on fast payment system interlinking and APIs provide insights and recommendations to enhance cross-border payments : Report on the interlinking of fast payment systems aims to support private and public stakeholders when deciding on the governance and oversight of these arrangements; Report on greater harmonisation of the use of application programming interfaces (APIs) sets out 10 key recommendations. View Article
BIS: The 2023 banking turmoil and liquidity risk: a progress report : The progress report includes updated empirical analysis on the liquidity outflow rates experienced by distressed banks during the turmoil and assesses the materiality of liquidity risk factors that are not explicitly covered by the Basel III Liquidity Coverage Ratio (LCR). View Article
BIS: Liquidity stress tests for banks – range of practices and possible developments : In a stress situation liquidity becomes concentrated in stronger firms: liquidity stress tests help the authorities to identify the weakest banks. They can also help to understand the propagation of the initial shock. View Article
ICMA Quarterly Report Fourth Quarter 2024 : .. underpinning recent developments is the ongoing and accelerating change in underlying market structure which, while adding depth to the market overall, often makes resilience harder to read. Non-traditional market players, in particular hedge funds, are playing a bigger role... View Article
SUERF's Cucic, Gorea: Nonbank Lending and the Transmission of Monetary Policy : Nonbanks have emerged as a primary source of credit for both firms and households, yet the impact of monetary policy on their lending practices is not well understood...evidence that nonbanks increase their credit supply after a monetary contraction, both relative to banks and in absolute terms. View Article
Banking Union
SSM's Buch: Bank profitability: a mirror of the past, creating a vision for the future : The history of banking contains many examples of institutions that reported high profitability before failing. It concealed underlying risks and proved to be illusory. Before the global financial crisis, bank profitability was relatively high but the profits declined sharply and turned into losses. View Article
EBA consults on draft technical standards to support the centralised EBA Pillar 3 data hub : It defines the IT solutions and processes that large and other institutions shall follow to publish Pillar 3 information centrally in the EBA data hub..which will centralise the Pillar 3 disclosures of all EU institutions, thus allowing users to download data and visualize the Pillar 3 information. View Article
Karen Braun-Munzinger's opening words at the SRB Annual Press Breakfast : Flexibility is what authorities need to achieve successful resolution decisions. A resolution decision is successful when it promotes financial stability while protecting taxpayers. View Article
CEPR: Addressing banks’ vulnerability to runs, part 2: Policy options : by Beck, Ioannidou, Perotti, Sánchez, Suarez, Vives:Three policy proposals (amendments to liquidity requirements, enhancements to supervision policy, and recognition of funding fragilities in the computation of Pillar 2 requirements) could be implemented quickly... View Article
Parliament study: Banking union and the long wait for cross-border integration : By GOTTI, MCCAFFREY, VERON:The banking union project has achieved European-level policy integration of microprudential supervision but not of crisis intervention. This largely explains the disappointing progress in the cross-border integration of the banking sector... View Article
Capital Markets Union
Commission: Shortening the standard securities settlement cycle in the European Union: next steps : Joint statement by the European Securities & Markets Authority (ESMA), the European Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA), & the European Central Bank. View Article
EFAMA European move to T+1 settlement crucial for asset managers : European asset managers welcome the joint statement from the European Commission, ESMA and the ECB putting a firm foot forward, and ‘accelerating the technical work’ needed to prepare the EU’s T1 transition View Article
EFAMA: High-Level Roadmap for Adoption of T+1 in EU Securities Markets : The Task Force is supportive of a move to T+1 in the EU, and recognises the potential benefits in terms of efficiency improvements and risk reduction. View Article
Commission: Breaking down barriers to market integration : A roundtable on financial markets integration in the EU. The event was part of the European Commission’s broader initiative to pinpoint obstacles to the flow of capital across the EU, with a focus on fostering competitiveness and scaling up of EU capital markets. View Article
EFAMA: How to ensure Market Data is available at a genuine cost-based approach under new MiFIDIII/MiFIR2 rules : EFAMA has released a joint statement together with AFME (Association for Financial Markets in Europe), EFSA and the Nordic Securities Association on significant issues with the supervision of market data costs. View Article
GFIA responds to IAIS’ draft application on draft application paper on operational resilience : Consistency: GFIA requests that the draft AP does not set new standards but provides support for implementing existing ones. Additionally, GFIA recommends that definitions, such as "operational resilience" be aligned with those used by regulators to ensure global consistency. View Article
Protecting Customers
OECD: Stronger consumer protections needed to address current and emerging harms consumers face online : Nine out of ten consumers have been affected by “dark commercial patterns” - manipulative online design tactics such as countdown timers, hidden fees, and subscription traps that influence consumer behaviour and often lead to unintended purchases or privacy compromises. View Article
ACCA: Accountants face new era of ethical challenges : New research reveals that top three areas for ethical challenges are leadership, culture and sustainability - and that ethical dilemmas are becoming more complex View Article
Fin Tech Regulation
ESAs respond to the European Commission’s rejection of the technical standards on registers of information under DORA and call for swift adoption : The ESAs raise concerns over the impacts and practicalities of the proposed EC changes to the draft ITS on the registers of information in relation to financial entities’ contractual arrangements with ICT third-party service providers. View Article
ESMA responds to the Commission rejection of certain MiCA Technical Standards : ESMA also reiterates that the final objective of these RTS is to ensure a thorough entry point assessment for applicant CASPs etc intending to provide crypto-asset services. This will increase the resilience of the crypto assets market and enhance investor protection in the crypto-assets space. View Article
FT: EU markets watchdog pushes for extra cyber defences in new crypto rules : Esma asks for amendment to tighten regulation with demand for external audits of defences against hackers View Article
ALFI responds to the ESA’s consultation on guidelines for the classification of crypto-assets, under Article 97(1) of MiCAR : ALFI provided comments, proposed alignments and raised some concerns as the views of the investment fund industry, in a segment focused on cross-border distribution within the European Union and globally. View Article
PensionsEurope seeks clarification on DORA’s definition of ICT services : We requested the EC to provide legal certainty around the definition of “ICT services,” as we understand that the EC is working on a FAQ. We appealed for clarification that ‘regulated financial services’ do not fall within this definition. View Article
The EBA publishes Guidelines on redemption plans under the Markets in Crypto-Assets Regulation : The Guidelines specify the content of the redemption plan to be developed by issuers of ARTs and EMTs in going concern, including the liquidation strategies of the reserve of assets, the mapping of critical activities, the content of the redemption claims... View Article
Brexit and the City
Reuters: Brexit 'disaster' cost London 40,000 finance jobs, City chief says : City of London Lord Mayor tally higher than other estimates; City's Mainelli - Dublin, Milan, Paris and others benefited; Lord Mayor redoubles efforts to engage with Europe View Article
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