My take on the week’s news (to 18 June): Tomorrow is EUCO Day –though only the first attempt at finding consensus on the Next Generation recovery plan. EU President Michel did not even mention Brexit in his invitation letter but Boris Johnson-Cummings is now well into his end-game: could an economically irrelevant “triumph” on fishing enable him to cave on the real issues? Probably not.
Banks are suddenly exuding confidence on possible loan losses from a recession twice as deep as the 2007/9 GFC but the regulators want proper disclosure. Moreover, they may give quite some time for a rebuilding of capital buffers but have yet to explain where the new capital will come from. The wave of responses to the Commission consultation on the Non-Financial Disclosure Directive (NRFD) has underlined that this will be a major tool in pushing sustainability.
Graham Bishop
Articles from 11 June to 18 June 2020
General Financial Policy
European Council President Charles Michel: invitation letter ahead of video conference on 19 June 2020 : The central theme of the meeting will be the Multiannual Financial Framework and the Recovery Plan...It is now time for the members of the European Council to discuss the package in depth. View Article
EURACTIV: Visegrad leaders call for ‘fair’ EU recovery fund : Four central European prime ministers called for a “fair” distribution of the EU’s massive recovery fund on Thursday (11 June), at what has been dubbed the bloc’s first major face-to-face political meeting since the coronavirus lockdown. View Article
Remarks by Mário Centeno following the Eurogroup videoconference of 11 June 2020 : The safety nets for workers, firms and sovereign in the emergency phase were agreed and are ready to use. As we turn the page towards the recovery, we took stock of the economic situation and the required policy measures to support this recovery. View Article
Bruegel: The EU’s recovery fund proposals: crisis relief with massive redistribution : Poorer European Union countries and those hardest hit economically by the COVID-19 crisis could obtain up to 15% of their GNI in grants and guarantees from the EU’s proposed recovery instruments. View Article
Oliver Wyman - Doug Elliot: Euro Crisis 2.0 : The key reasons for concern, reasons for hope, and the crucial questions that could tip the balance View Article
The Economist: Why are bank bosses sounding more optimistic about loan losses? : They were hyper-prudent in April. Now the worst-case scenario might be off the cards View Article
European Commission adopted Report on the Impact of Demographic Change in Europe : The European Commission has today adopted its first-ever Report on the Impact of Demographic Change. It presents the drivers of this long-term change and the impact it is having across Europe. View Article
Citizens’ attitudes towards the ECB, the euro and Economic and Monetary Union : The analysis indicates that popular support for EMU – in particular, trust in the ECB – hinges to a large extent on citizens’ perceptions of their personal situation and the overall economic context, as well as their broader attitudes towards the European Union... View Article
Banking Union
SRB: MREL - the next steps : It is realistic to expect that banks with less performing business models and low profitability will be under more pressure, and that non-performing loans will increase. So a strong resolution framework that prepares for and can manage bank failures is a key element in mitigating the current crisis. View Article
Basel Committee meets: discusses impact of Covid-19; reiterates guidance on buffers: All members reaffirmed their expectation of full, timely and consistent implementation of all Basel III standards based on the revised timeline endorsed by the Group of Governors and Heads of Supervision. View Article
Insurance Europe: Response to EBA draft anti-money laundering risk factor guidelines published : Insurance Europe has published its response to a consultation by the European Banking Authority on its draft anti-money laundering risk factor guidelines. View Article
Working group on euro risk-free rates recommends voluntary compensation for legacy swaption contracts affected by the discounting transition : Market participants advised to contact swaption counterparties to discuss and decide on voluntary compensation No single preferred option for implementing voluntary compensation, but several potential modalities identified. View Article
Capital Markets Union
EFAMA: Final Report of the High-Level Forum on Capital Markets Union : “Europe needs more than ever a well-functioning CMU to support its economic recovery and provide alternative sources of financing, putting the financial well-being of European citizens at its centre. We commend the High-Level Forum...” says EFAMA’s Tanguy van de Werve View Article
CMU: ALFI welcomes publication of High-Level Forum report as first step of CMU 2.0 : The Association of the Luxembourg Fund Industry (ALFI) welcomes today’s publication of the final report by the High-Level Forum on capital markets union (CMU) View Article
EIOPA: Supervisory Activities in 2019 : A key area of work in 2019 focused on proposing amendments to Solvency II in the context of the 2020 Review of Solvency II as a result of the identification of inconsistencies in the implementation of some areas of Solvency II. View Article
ESMA publishes 2019 Annual Report and updates 2020 Annual Work Programme : The Annual Report sets out ESMA’s key actions taken in the previous year. Amid the COVID-19 outbreak, its work has been recently focusing on its response. To reflect these challenging times for the financial markets, ESMA has also published a revised version of its 2020 annual Work Programme. View Article
EFAMA’s REPLY TO ESMA’s CONSULTATION PAPER ON POST TRADE RISK REDUCTION SERVICES WITH REGARDS TO THE CLEARING OBLIGATION (EMIR Article 85(3a : General comments: Asset managers and funds are rarely benefiting from post trade risk reduction (“PTRR”) techniques: View Article
EFAMA REPLY TO ESMA’s CONSULTATION PAPER ON MiFID II / MiFIR REVIEW REPORT ON THE TRANSPARENCY REGIME FOR NON-EQUITY AND THE TRADING OBLIGAT : For the most part, the framework is working as intended with provisions being appropriately calibrated. However, we believe that much-needed flexibility can be achieved by making targeted simplification and optimisation to the Level 2 framework and ESMA Q&As. View Article
Environmental, Social, Governance (ESG)
IOSCO encourages issuers’ fair disclosure about COVID-19 related impacts : The Board of IOSCO issued a public statement highlighting the importance to investors and other stakeholders of having timely and high-quality information about the impact of COVID-19 on issuers´ operating performance, financial position and prospects. View Article
FRC: Investors expect timely and clear disclosures : In these times of unparalleled economic uncertainty, investors are calling for clear and timely disclosures from companies, including any going concern considerations, to help them identify those companies which need the most attention and support. View Article
ESMA responds to European Commission consultation on revision of NFRD : The response recommends standardising disclosure requirements, widening the range of companies required to report and ensuring consistency between legislative initiatives on sustainable finance. View Article
EIOPA responds to the European Commission’s consultation on the revision of the Non-Financial Reporting Directive : EIOPA welcomes the initiative... Insurance undertakings and pension funds are at the forefront of pushing long-term, sustainable investments and the integration of environmental, social and governance (ESG) factors.
Insurance Europe: Insurers respond to EC consultation on Non-Financial Reporting Directive : Insurance Europe has published its response to the European Commission’s Non-Financial Reporting Directive (NFRD) consultation. View Article
Accountancy Europe. EC’s consultation on the Non-Financial Reporting Directive revision : We advocate for strengthening NFI assurance requirements, building a common comprehensive NFI standard and tackling the substantial issues in NFI reporting. View Article
ALFI responds to EU Commission consultation on NFRD review : ALFI responded to the European Commission consultation on the review of the Non-Financial Reporting Directive (NFRD). View Article
?GRI ready to support European reporting standards on sustainability impacts : GRI, provider of the world’s leading standards for sustainability reporting, has expressed full support for the European Commission’s plans to revise the Non-Financial Reporting Directive (NFRD), for which a public consultation closed on 11 June. View Article
SSEI: New SSE ESG Guidance Database : The United Nations Sustainable Stock Exchanges (SSE) initiative launched its new ESG Guidance Database which contains a comprehensive list of all stock exchange ESG guidance documents in the world. View Article
IFAC Responds to WEF Consultation on Improving Reporting for ESG and Value Creation : It is well acknowledged by investors, business leaders, and other stakeholders that, in addition to financials, effective corporate reporting must also measure value creation, sustainability and environmental, social, and governance factors. View Article
Protecting Customers
BETTER FINANCE - BEUC letter on Collective Redress - HLF CMU: : Better Finance/BEUC reaffirm the necessity of creating a pan-EU collective redress mechanism that does not exclude European citizens as financial consumers and individual investors and enables them to obtain compensation for the damages incurred. View Article
Fin Tech Regulation
EURACTIV: Commission charts new competition tool ‘fit for the digital age’ : A new competition tool ‘fit for the digital age’ is set to be unveiled by the European Commission before the end of this year, which has prompted stakeholders to begin analysing the wider impact that it could have on fostering competition across the EU’s market economies. View Article
Insurance Europe: European insurers call for principles-based EU framework for AI that supports innovation : Insurance Europe has today published its response to a white paper by the European Commission on its upcoming consultation on a framework for artificial intelligence (AI). View Article
Insurance Europe: Key messages published on EIOPA cyber strategy : Insurance Europe has commented on the strategic priorities that the European Insurance and Occupational Pensions Authority (EIOPA) published in February 2020 for the European cyber insurance market. View Article
Economic Policies Impacting EU Finance
POLITICO: US is only country blocking deal on digital tax, says French finance minister : "All the others have rallied around [the OECD] proposal,” Le Maire said told hearing in the French Senate, referring to the Organization for Economic Cooperation and Development, where countries are negotiating a deal on taxing digital companies. View Article
Brexit
POLITICO: Brexit deal’s last hope: Germany : Chancellor Angela Merkel’s pragmatism could help rejuvenate talks as Berlin takes on the EU presidency, politicians on both sides say. View Article
Speech by President von der Leyen at the European Parliament Plenary on the preparations for the European Council of 19 June 2020, and the n : The Prime Minister confirmed that he does not want to extend the transition period beyond the end of this year.We, on our side, have always been ready to grant an extension.But it takes two to tango. View Article
EU-UK debate: MEPs will not back a deal at any cost : Parliament will not back a deal at any cost, warned several MEPs commenting on the ongoing negotiations about the future relationship between the EU and the UK. They rejected the UK’s intention to select certain policy areas on which to negotiate while ignoring others. View Article
FT: Barnier ‘ready’ to compromise with UK in trade talks : EU’s chief Brexit negotiator signals flexibility on key issue of level playing field View Article
Senior European Experts: Brexit: Extending the transition period: Arguments for and against : Article 132 of the Withdrawal Agreement provides for a single extension to the transition period for up to two years if the UK/EU agree by 1 July 2020 (as the EU’s chief negotiator Michel Barnier reiterated in a letter recently that, from the point of view of the EU27, this remained an option). View Article
Federal Trust: UK-EU Summit: Fishy : The key development is claimed to be a weakening of the European negotiating mandate with regard to fishing. View Article
CER: EU-UK negotiations: No need to panic (yet) : A deal between the EU and UK remains possible. But neither side is likely to compromise on its current negotiating position until later in the year, when the cost of failure will become significantly more tangible. View Article
UKTPO: Foreign Investment as a Stepping Stone for Services Trade : Since the beginning of the pandemic, attention has shifted away from the economic implications of Brexit and towards what a post-COVID economy might look like. View Article
EPC: Towards an ambitious, broad, deep and flexible EU-UK partnership? (New book) : Brexit is an irreversible fact. Everyone will be worse off. But what are the exact ramifications, for the UK, the EU, and the partnership between the two? View Article
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