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Welcome to our Friends weekly e-mail.
Highlights of my week: Ukraine’s EU membershipcontinues to cause much discussion, partly due to the rising risk of a shift to the right in the balance of political power in the European Parliament. 25 years of the euro/ECB and 30 years of the single market also triggered some introspection – and about what ought to come next. The European Systemic Risk Board (ESRB) also fulfilled its duty by continuing to warn about residential real estate risks. Instant payments – cheaply and safely – are now on the horizon as Parliament voted the new law through. The EMIR3 review crossed the line with agreement by Council and Parliament but their press releases showed the difference of view that remain: ESMA gets more powers but Parliament highlighted the next review in two years where the issue of making ESMA into the CMU equivalent of the SSM is bound to come back. There was some crowing in the UK about the much-vaunted Active Account Requirement (AAR) being limited to just five transactions per year. Once the systems are set up and working – lets see what the two-year review brings in 2026! Sustainability reporting is proving to have some thorny details so Council and Parliament wisely agreed on a delay to allow more time for preparations. However, the financial sector wants to have greater co-ordination between various reviews as “greenwashing” appear to be a major deterrent for investors – both institutional and retail. New Brexit border control on imports from the EU are due to come into effect – after five postponements – but plans were leaked to `wave goods through’ if the ports are overwhelmed. With an election perhaps nine months away, it is surprising that the government has chosen this moment to show British electors that “Brexit isn’t working”! Graham Bishop Articles from 2 - 8 February 2024
Policy impacting Finance Carnegie Europe's Dempsey: How Small Member States Shape EU Narratives : Central European and Baltic states have been the driving force of the EU’s response to Russia’s war on Ukraine. Their influence has important implications for the union’s future direction. View Article
ECIPE's Guinea: Expanding the neighbourhood: The benefits of Ukraine joining the EU : It’s clear to everyone that this country, in addition to being at war with Russia, faces dire economic difficulties. Does this mean that its accession to the EU would be negative for the other EU members? The reality is that Ukraine’s economic strengths should not be underestimated. View Article
CEPR's de Souza: Unresolved business: Enlarging the EU towards Moldova and Ukraine (and perhaps Georgia) : This column examines the institutional and financial implications of past and future EU enlargements, and argues that the progress made towards Ukrainian accession has direct – and positive – implications for the other candidate countries of Moldova and Georgia. View Article
Delors Centre's Quaritsch: On the road to the 2024 European elections: Institutional timeline and missed opportunities : The brief provides an overview of how European political parties are approaching the election campaign. .. it discusses election day, possible new majorities in Parliament and inevitable institutional haggling over key positions. It gives a timeline of the dates for key EP and Council meetings. View Article
POLITICO: This time, the far-right threat is real : The next European Parliament looks more pro-Russian and less green than the current one. Could a far-right EU really happen? View Article
SWP's Tokarski: The Euro in a World of Dollar Dominance : Between Strategic Autonomy and Structural Weakness View Article
Report to ECON: The Euro at 25: Fit for purpose? Reichlin, Pisani-Ferry, Zettlemeyer, : This paper reviews the record of European Central Bank policymaking since the 2010-12 euro crisis in order to develop recommendations on: (1) the ECB’s future monetary policy strategy, (2) its operational framework, and (3) the governance of European Economic and Monetary Union. conclusions below: View Article Report to ECON: The euro at 25 and what’s next for the ECB? Whelan : The euro has proved to be remarkably resilient and is popular with the EU’s citizens. This paper reviews the reasons for this and argues that the euro project is more resilient now due to several institutional changes. View Article Bruegel's Zettlemeyer: As it turns 25, has the ECB finally become a normal central bank? : View Article EPC: Europe’s make-or-break moment: Putting economic security at the heart of the EU’s 2024-2029 strategic agenda : The EU has entered the third period of its economic history; a paradigm shift is necessary to align EU policy with economic security needs. There is no alternative in today’s vehemently competitive, fragmented, and shock-prone world. View Article CEPS's Pelkmans: For the EU’s prosperity, we must empower the single market now : When the EU marked 30 years of the single market in 2023, a report should have been written about it but was not even requested. The core of the unwritten report would have concluded that the EU’s single market is far weaker than assumed and not nearly as ‘single’ as the name suggests. View Article
IOSCO: Monitoring Group Reports Strong Progress Implementing Recommendations to Strengthen the International Audit, Assurance, Ethics, an : Stakeholders benefit from high-quality standard setting by the International Auditing and Assurance Standards Board (IAASB) and the International Ethics Standards Board for Accountants (IESBA) (collectively the Standard Setting Boards (SSBs)) View Article
ECON: Deal reached on reform of EU system for collection and use of statistics : Legislators reached a deal to reform the EU’s system for collecting and using statistics making it fit for the digital age, more useful in crises, and protecting statisticians. View Article
Banking Union Parliament: Ensuring euro money transfers arrive within ten seconds : Focus on consumer safety: robust and up-to-date fraud detection and verification of a recipient’s identity; No higher charges for instant payments; Clients will be able to set a maximum limit for their instant transfers View Article
ECB: The Eurosystem policy response to developments in retail payments : Retail payments are undergoing profound changes that are reshaping the European payments landscape. Digitalisation is playing a major role in this, with a trend towards the increased use of cashless payment instruments, instantaneity and a truly seamless payment experience. View Article
ESRB publishes follow-up report on residential real estate sector vulnerabilities : The analysis shows that the level of accumulated vulnerabilities remains significant in most EEA countries. So far, the levelling off in the RRE markets has been too short-lived to bring down the level of accumulated risks, or “stock risks”, significantly. View Article
Single Resolution Board publishes the list of consultations and requests to the industry for the first time : This disclosure marks an important milestone in the SRB’s efforts to cater to the industry’s wish for more predictability and transparency, which is a key element of the upcoming SRB Vision 2028 strategy. It will allow banks to better allocate resources and anticipate workload throughout the year. View Article
SUERF's Raunig & Sigmund: The ECB Single Supervisory Mechanism: Any Effects on Bank Competition? : A clear pattern emerges. In euro area countries that were heavily affected by the sovereign debt crisis, competition for SSM banks decreased. In the other countries, the SSM either had no impact on the competitive position of SSM banks or competition increased. View Article
Capital Markets Union Capital markets Union: Council and Parliament agree on improvements to EU clearing services : The review aims to make the EU clearing landscape more attractive and resilient, to support the EU’s open strategic autonomy and to preserve the EU’s financial stability. View Article
Parliament: Deal to make the EU an attractive clearing hub while addressing sectoral risks : Access to safe and efficient clearing solutions for banks and the real economy; More alternatives and safe clearing infrastructures in the EU; Supervision that is fit for purpose View Article
Commission welcomes political agreement on the clearing package, a boost for the capital markets union : The new framework would also contribute to reducing excessive reliance on systemic CCPs in third countries, by requiring all relevant market participants to hold active accounts at EU CCPs and clear a representative portion of certain systemic derivative contracts within the single market. View Article
ESA’s Joint Board of Appeal confirms ESMA’s decision to withdraw the recognition of Dubai Commodities Clearing Corporation : The decision is a consequence of the United Arab Emirates (UAE) being included by the European Commission on the list of high-risk third countries presenting strategic deficiencies in their national anti-money laundering and counter financing of terrorism (“AML/CFT”) regime... View Article
ESMA: Requirements when posting investments recommendations on social media : They are also warning about the risks of market manipulation in such publications. When posting on social media, transparency and accuracy are key, especially when making recommendations about investments. View Article
Parliament approves deal on updated rules for hedge funds and retail funds : The text updating the existing rules was adopted in plenary with 576 votes in favour, 40 against and 19 abstentions. It strengthens investor protection, improves company access to finance from non-banks, tackles greenwashing, and help complete the customs market union by limiting national approaches View Article
AFME: EU Listing Act a promising first step, but more work needed on boosting equity market liquidity : In light of the dwindling number of EU Initial Public Offerings, the Listing Act alone will not be enough to ensure that the EU is the best place for corporates to go public. In this respect, work is still needed to boost Europe’s equity market liquidity. View Article
Environmental, Social, Governance (ESG) Council: Net-Zero Industry Act: Council and Parliament strike a deal to boost EU’s green industry : The regulation aims at boosting the industrial deployment of net-zero technologies needed to achieve EU’s climate goals, using the strength of the single market to reinforce Europe’s leadership in industrial green technologies. View Article
Council and Parliament agree to delay sustainability reporting for certain sectors and third-country companies by two years : Today’s agreement will give more time for companies to prepare for the sectorial European Sustainability Reporting Standards (ESRS) and for specific standards for large non-EU companies, which will be adopted in June 2026, two years later than the originally scheduled date. View Article
Financial sector calls for a coordinated approach by regulators when changing sustainable finance disclosures : Our associations are concerned about the lack of coordination between these major review projects,which put investors’ confidence in sustainable investment solutions and the reliability of the EU standards for sustainable disclosures at risk. View Article
Reuters' Jones: Financial sector seeks delay to revising EU sustainability rules for asset managers : "Our associations are concerned about the lack of coordination between these major review projects, which put investors’ confidence in sustainable investment solutions and the reliability of the EU standards for sustainable disclosures at risk," View Article
ECON: New rules agreed on Environmental, Social and Governance ratings : Legislators on Monday agreed on rules which will add considerable transparency and structure to how environmental, social and governance (ESG) ratings are undertaken and communicated. View ArticleInterview by de Volkskrant with Frank Elderson, Vice-Chair of the Supervisory Board of the ECB, : How climate change affects our mandate: We will no longer understand the financial system if we ignore the climate and nature crises and green transition plans, says Frank Elderson. We will therefore monitor politicians’ climate policy while assessing how climate change impacts our tasks. View Article
UNEP FI: To serve net-zero clients, asset managers need a systematic approach to climate : ..asset owners committed to net-zero, such as members of the Alliance, expect their asset managers in private and public markets to pursue integrated and tailored climate strategies across all their functions. View Article
Bloomberg: Deutsche Bank Unit Says New ESG Rules to Trigger Divestments : EU markets watchdog is set to roll out new fund-naming rules; Fund managers are preparing to adjust portfolios in response View Article
City AM: New study: What’s holding back sustainable funds? Greenwashing. : The study found that an uptick in greenwashing stories causes institutional investors to decrease their investments in green funds by eight per cent the following month, and retail investors by 10 per cent within two months. View Article
Fin Tech Regulation Gigabit infrastructure act: Council and Parliament strike a deal for faster deployment of high-speed networks in the EU : In Europe, the roll-out of fibre and 5G could be a lot easier with less administration. We are tackling that administrative burden through the so-called Gigabit Infrastructure Act. We have struck a preliminary agreement with the European Parliament now. This would allow European citizens to surf faster using fibre or 5G. View Article
ICMA co-signs joint trade association response to BCBS consultation on banks' disclosure of crypto-asset exposures : While the Associations support the development of responsible, well-balanced disclosures of crypto-asset exposures, they have a number of concerns with the general policy approach, and level of detail, reflected in the Consultation’s proposed disclosure requirements which are outlined in this response. View Article
Brexit and the City FT: Brussels weakens plans to shift derivatives clearing from London : EU-based traders required to send just five trades a year to ‘active accounts’ in the bloc. The new rules are part of Brussels’ efforts to reduce Europe’s reliance on the UK financial services market after Brexit and boost its own capital markets View Article
Financial News's Cash: European Banking Federation boss Wim Mijs: Brexit was ‘mutually destructive’ : Can the EBF chief executive and ‘voice of banking’ help to bring the continent’s lenders together — and still have fun after three decades in the sector? View Article
Bank of England: Results of the Semi-Annual FX Turnover Surveys in October 2023 : Market share of the top three traded currency pairs; EUR/USD, GBP/USD and USD/JPY, remained broadly in line with the April 2023 survey. EUR/USD continued to be the most traded currency pair in London, with an average daily turnover of $738 billion, making up 25% of overall volume in October 2023. View Article
Brexit FT: UK admits ports could be overwhelmed under post-Brexit rules : Contingency plan comes after trade bodies warn new checks risk disrupting supply chains View Article
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