Highlights of the Christmas holidays and welcome to 2024: The `virtual’ euro was born 25 years ago with 11 countries; the notes/coins came three years later and 350 million people now use it as their everyday money in 20 countries – a dramatic triumph of the vision espoused by then Commission President Jacques Delors who died last week. The turn of the year also marked the handover from Spain’s very successful Presidency to Belgium for an electorally truncated legislative term but the vital task of preparing to deal with Putin’s friend (Orban) controlling the EU’s agenda in 2H 2024. Will Putin’s war with Ukraine force the EU to develop its democratic constitutional structure to deal with Orban’s autocratic blackmail? The EU’s new fiscal rules were finally agreed but the bond market vigilantes may be surprised to find their only focus – interest payments – are excluded from the affordability analysis. The question of how to make capital markets union a reality under the next Commission’ s mandate will dominate the Belgian Presidency and ESMA produced a Christmas present of a revision of the disclosures that have throttled the success of a key element – securitisation.
London Stock Exchange trading volumes closed the year at half Euronext’s volume – the fourth year of relative decline, and with grim portents for future IPO volume. The was much trumpeting of a financial services deal with Switzerland covering a whole £2.7 billion of trade and based on deference to Swiss rules. These are `rather similar' to EU rules – raising again the question: what was the point of Brexit?
Graham Bishop
Articles from 22 December 2023- 4 January 2024
Policy impacting Finance
Belgian Presidency programme - finance : The Belgian Presidency will foster an effective European response to the different challenges ahead of us, such as fostering the green and digital transition, and promoting the EU’s open strategic autonomy and global competitiveness.
ECB blog: Euro at 25: the value of unity in a changing world : 25 years ago, on 1 January 1999, the euro came into force as the single currency for 11 EU Member States. It now serves the economy and eases life for 350 million people in 20 countries.
EURACTIV: Explainer: The complex fiscal rules that EU finance ministers just agreed to : After months of negotiations, the finance ministers of EU countries on 20 December agreed on a new set of rules to govern member state finances, focussing on lowering budget deficits and public debt at a time when Europe requires investments for green and digital transition and defence capabilities.
Bruegel's Zettlemeyer: Assessing the Ecofin compromise on fiscal rules reform : The compromise reached by the Ecofin Council is imperfect. But it is still a big step forward.
European Parliament: Enhanced political ownership and transparency of the EU economic governance framework : This paper provides an overview of the role of the European Parliament in scrutinising the application and implementation of the EU economic governance framework, notably by holding Economic Dialogues with the EU executive institutions and, when applicable, with Member States’ governments.
Statement by ESM Managing Director Pierre Gramegna on the decision of the Italian Parliament not to ratify the revised ESM Treaty : The ESM regrets the decision of the Italian Parliament to vote against the ratification of the revised ESM Treaty.
CEPS's Emerson: Ukraine and the EU Budget – A Tale of Two Narratives : The manageable versus the alarmist
Chatham House: Orban’s Ukraine gamble is a blow to the EU’s geopolitical ambitions : The EU can no longer ignore the problem of rogue member states and must deal with this challenge as a matter of both urgency and principle – coffee breaks will not suffice.
EU Observer's Hoeksma: How the European Parliament can stop Orbán's EU presidency : Viktor Orban with Vladimir Putin in Beijing in October. Although the legal means for the European Parliament to influence the procedures of the European Council are limited, here is a strategy to stop him
Carnegie Euope's Dempsey: Europe’s Dangerous Comfort Zone : Reluctant to change the status quo, the EU has failed to adapt to today’s unstable world. In the new year, it must answer tough questions about its security and global role.
Banking Union
EBA: EU banks’ liquidity coverage ratio declined but remains well above the minimum requirement : The EBA today published its Report on liquidity measures, which monitors and evaluates the liquidity coverage requirements currently in place in the EU. Between June 2022 and June 2023, the EU banks’ liquidity coverage ratio (LCR) declined but remained comfortably above the minimum requirement.
FT: EU regulators to probe links between banks and non-banks : EBA chair José Manuel Campa said regulators would investigate funding and other connections between sectors
ECB to stress test banks’ ability to recover from cyberattack : The European Central Bank (ECB) will conduct a cyber resilience stress test on 109 directly supervised banks in 2024. The exercise will assess how banks respond to and recover from a cyberattack, rather than their ability to prevent it.
Capital Markets Union
ESMA consults on possible changes to the securitisation disclosure templates : ESMA has launched a consultation on the revision of the Disclosure Regulatory Technical Standards (RTS) and Implementing Technical Standards (ITS). These standards relate to the specific information and details of securitisation transactions that should be made available.
PCS: ESMA's Christmas Present: a Consultation on the Disclosure Templates : To be commended, ESMA's consultation showed no lack of ambition, in that it opens potentially wide vistas of change rather than limiting itself to tweaks.
ALFI responds to the ESMA call for evidence on the shortening of the settlement cycle : In terms of cash management, asset managers will face difficulties to cope with the liquidity gap between the investment date in US securities (T+1) and the fund’s settlement date (typically T+3), combined with FX funding in particular.
EIOPA publishes its Supervisory Convergence Plan for 2024 : In line with EIOPA’s mandate to build a strong, fair and common supervisory culture and promote consistent supervisory practices in the European Union, the Supervisory Convergence Plan identifies EIOPA’s priorities to enhance supervisory convergence over the course of 2024.
ESAs propose extending the EMIR equity option exemption :
Environmental, Social, Governance (ESG)
Sustainable finance: Commission provides additional guidance to help financial undertakings report about environmental performance of their : It will help the financial market participants concerned prepare their first mandatory reporting exercise in 2024. By further increasing the usability of the taxonomy will help the financial market participants concerned prepare their first mandatory reporting exercise in 2024.
UNEP FI: How can policymakers support finance industry action on net-zero: Transparent disclosure of scenarios, metrics, targets and annual : The credibility of a net-zero commitment relies upon the transparent disclosure of science based 1.5° scenarios and respective metrics and targets. Stakeholders must be able to comprehend the transition plan and track progress towards net-zero emissions.
EFAMA calls for new product categories in sustainable finance disclosures : Review of SFDR is an opportunity to improve transparency for investors. The SFDR has promoted transparency in sustainable finance, however its use by market participants as a de facto ESG labelling regime has stretched it beyond its original intentions and not always been helpful.
Fin Tech Regulation
IOSCO Finalises its Policy Recommendations for Decentralized Finance : The nine Policy Recommendations aim to address market integrity and investor protection concerns arising from DeFi by supporting greater consistency of regulatory frameworks and oversight in member jurisdictions.
EBF: Copenhagen Economics study on the impact of a digital euro on financial stability and consumer welfare : The banking industry supports the objective of increased European strategic autonomy in payments and sees that new forms of digital currencies and payment methods will be needed to support the multi-faceted digitalisation of the economy.
EPI successfully executes first instant payment transactions in Europe with wero.. : ..between customers from Banque Populaire and Caisse d’Epargne (Groupe BPCE) in France and Sparkasse Elbe-Elster Bank in Germany
Brexit and the City
City AM's Conchie: Can the London Stock Exchange survive another ‘relentless’ exodus in 2024? : Experts have warned of a an exodus of companies and investors from the London Stock Exchange without a rebound in the City’s fortunes...The London Stock Exchange was bruised and battered by a string of take-privates last year.
CITY AM: London stock trade volumes fall below expectations as Europe maintains lead : London now makes less than half the monthly trades of Euronext, a pan-continental bourse with listing venues in Amsterdam, Brussels, Lisbon, Dublin, Milan, Oslo and Paris. The LSE has not traded with higher levels than Euronext since November 2018.
Proposed new rules to encourage companies to list in the UK and other market improvements set out by financial watchdog: Proposals aimed at making the UK’s listing regime more accessible, effective, and competitive, have today been set out in detail by the Financial Conduct Authority (FCA).
TheCityUK response to the FCA's proposed new rules to make the UK's listing regime more accessible, effective, and competitive : It will be an ongoing process to ensure that the UK is a market of choice for businesses to list, invest and growwever,. More work will be needed in the years ahead.
ACCA: Harmonise UK carbon reporting legislation if you want companies to work successfully : UK carbon reporting legislation needs international standards that work cooperatively to enable companies to report successfully
BCC Welcomes UK financial Services Deal With Switzerland : This Agreement creates new opportunities based upon mutual recognition while preserving regulatory autonomy in those affected sectors of financial services.
POLITICO: UK and Switzerland strike ‘first of its kind’ financial services deal : Top finance minister Jeremy Hunt says deal a signal ‘to all other countries that we are open to doing a deal that boosts choice and competition.’
Brexit
UkandEU's Menon:2023 the year Brexit finally receded into the past - perhaps perhaps not : 2023 may be the year Brexit began receding from public consciousness, but Anand Menon argues its shadow will extend into 2024.
CEPR: Brexit inflation: The role of trade policy uncertainty in increasing UK import prices : Overall, it estimates that trade policy uncertainty increased UK import price indices from the EU by 11% and consumer prices by 0.6%. These effects are likely to be persistent, as post-referendum agreements have reduced trade policy uncertainty, but have not eliminated it.
