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The “shock of the week” prize clearly goes to Boris Johnson for his unilateral decision to “overwrite” parts of the EU Withdrawal Treaty because – at his insistence – it was negotiated “at pace”. Much will be said and written about the implications of this breach of trust but – for financial services – the issue of trust in the UK’s equivalence regime will surface quickly. In the event of a crisis, can the EU rely on quiet UK promises to provide hugely expensive support to parts of the EU’s financial infrastructure located in the UK?
The appointment of MEP McGuinness as the new Commissioner for financial services may slow the rush to CMU as she seems to have no experience in the field. However, the ECB underlined the need for swift moves on CMU. The insurance industry and its supervisors are also grappling with the creation of a pandemic insurance system – at massive cost to “someone”!
Graham Bishop
Articles from 4 September to 10 September 2020
General Financial Policy
EURACTIV: Von der Leyen proposes McGuinness as financial services Commissioner : European Commission President Ursula von der Leyen proposed Ireland’s Mairead McGuinness to become financial services Commissioner, taking over from executive vice-president Valdis Dombrovskis, who will assume the trade portfolio vacated by Phil Hogan. View Article
EURACTIV: Parliament wants to top up EU budget with €110 billion : The European Parliament on Monday (7 September) requested to bolster the EU’s seven-year budget with around €110 billion and legally binding commitments on the introduction of new levies to finance the bloc’s €750 billion stimulus against the COVID-19 crisis, EURACTIV has learnt. View Article
EURACTIV: Finance ministers to discuss fiscal dumping inside the EU at Berlin meeting : EU finance ministers will discuss how to combat harmful tax practices within the EU during their informal meeting in Berlin this weekend, according to the German presidency’s preparatory documents seen by EURACTIV. View Article
Goldschmid: The “Euro” is worth a Mass! : The requalification of Standard & Poor’s sovereign rating of the EU’s debt from “AA+ with a stable outlook” to “AA+ with a positive outlook”, opens the possibility of recapturing its coveted AAA rating. View Article
BIS: New correspondent banking data - the decline continues at a slower pace : - The number of active correspondent banks worldwide fell by about 3% in 2019 and about 22% between 2011 and 2019.- The volume and value of cross-border payments continued to grow over the last eight years, suggesting a higher concentration in payment flows. View Article
Banking Union
BIS: Closing the loop: AML/CFT supervision of correspondent banking : Under the auspice of the Financial Stability Board's four point action plan, several international organisations have taken measures to address the decline in correspondent banking relationships. View Article
CEPS: Responsible lending in times of crisis : Do EBA guidelines strike the right balance between economic growth, financial stability and consumer protection? Is the guidance on the creditworthiness assessment fit for purpose? What is the likely impact on both lenders and borrowers? What more is required to promote responsible lending? View Article
SSM: Banks need better internal capital checks : Banks have improved their internal capital adequacy assessment processes (ICAAPs), but they need to do more. In particular, they need to improve data quality, better manage economic capital adequacy and improve stress testing practices. Sound ICAAPs are a key supervisory priority. View Article
BCBS consultation on NPL securitisations: EBF response : The EBF has responded to the consultation of the Basel Committee on Banking Supervision on a technical amendment regarding the capital treatment of securitisations of non-performing loans (NPL). View Article
SR: Elke König: A sound framework to safeguard financial stability : The COVID-19 pandemic constitutes an unprecedented global shock. The latest economic forecasts point at the deepest recession since World War II and, at this stage, we do not yet know its full and final impact on the economy: it remains a very large ‘known-unknown’. View Article
SRB: Elke König: Paths towards a clear and predictable liquidation regime : When talking about the predictability of the resolution framework, one has to state clearly, that we have a viable system in place, providing clear rules on using resolution tools and allocating losses in case of a bank failure. View Article
EBA publishes its 2019 Annual Report on resolution colleges : The Report sets out the EBA’s observations on the efficiency, effectiveness and consistency of the functioning of resolution colleges during the year and the progress achieved in key areas of resolution planning. View Article
Capital Markets Union
ECB blog: Europe needs a fully fledged capital markets union – now more than ever : CMU is one of the cornerstones of the euro area’s financial architecture. But progress in developing it has been slow. Since the agreement on establishing CMU in 2015, many subprojects have been launched, and some completed, but European capital markets are still far from being fully integrated. View Article
ISDA Responds to EFRAG on Benchmark Reform : ISDA’s members agree with the EFRAG’s assessment that the IASB’s amendments are an improvement to the current rules and are not contrary to the principles and criteria for endorsement set out in Regulation (EC) No 1606/2002. View Article
ICMA ERCC publishes fourth edition of its SFTR recommendations : The aim of the Recommendations is to help members interpret the regulatory reporting framework specified by ESMA and to set out complementary best practice recommendations to provide additional clarity and address ambiguities in the official guidance. View Article
ICMA AMIC responds to ESMA consultation on guidelines for NCAs when they consider potential financial stability risk associated with leverag : The buy-side voice of ICMA recommends focusing on funds with substantial leverage as a first screening phase View Article
CRE: European insurers respond to European Commission’s Solvency II review : Europe’s insurers have largely supported the European Commission’s Solvency II inception impact assessment, but believe there are key omissions and refinements that are necessary to address the flaws in Solvency II. View Article
OECD: Responding to the COVID-19 and pandemic protection gap in insurance : This note provides an overview of how business interruption insurance against pandemic risk could be provided with support from governments, and some of the challenges and considerations necessary for establishing such a programme. View Article
IAIS issues a survey invitation on the existing prudential treatments for investments in infrastructure and strategic equity : he IAIS is exploring whether there should be a differentiated capital treatment of certain eligible infrastructure (both equity and debt) as well as strategic equity investments within the ICS. View Article
Insurance Europe: European insurers respond to IAIS consultation on impact of COVID-19 : Insurance Europe has today published its response to a consultation by the International Association of Insurance Supervisors (IAIS) on the impact of COVID-19 on insurers. View Article
ESMA working paper on Closet indexing indicators and investor outcomes : Closet indexers appear to pass on to consumers only a small share of the lower economic costs of benchmark-tracking compared to active management, rather than engaging in price competition. View Article
Environmental, Social, Governance (ESG)
IPE: UK secretary confirms plan to match ambition of EU sustainable finance : John Glen, the economic secretary to the UK treasury, has confirmed the UK’s intent to, “at the very least”, match the ambition of the European Union’s sustainable finance action plan despite current events such as the pandemic and the state of the global economy. View Article
ICMA AMIC responds to ESAs' consultation on the Sustainable Finance Disclosure Regulation : The buy-side voice of ICMA highlighted several challenges with the implementation measures proposed by the three European authorities, including both firm and product disclosure requirements View Article
EC’s Inception Impact Assessment on art. 8: EBF feedback : The European Banking Federation has given its feedback on the EC’s Inception Impact Assessment on the Commission Delegated Regulation on taxonomy-related disclosures by undertakings reporting non-financial information. View Article
UNEP FI launches “Charting a New Climate”, a report on physical climate risks and opportunities from Phase II of its TCFD Banking Programme : The report, “Charting a New Climate”, provides a state-of-the-art blueprint to support financial institutions to navigate the changing physical climate risk landscape. View Article
Accountancy Europe: What COVID-19 made clear: corporate governance needs to focus on the right risks : Is corporate governance just a set of rules that we must reluctantly follow? Some seem to think so, focussing only on the burden and cost. They fail to see the added value of having proper governance in place. View Article
CEPS: Germany’s inaugural green bond… not so green after all : Some consider it to be a watershed moment for the wider environmental and sustainability bond market but..the bond will probably disappoint those hoping to see it as an important building block for Europe’s green transition. View Article
Fin Tech Regulation
Design choices for central bank digital currency Vox EU: Design choices for central bank digital currency : Many central banks are considering, and some are even piloting, central bank digital currency. This column provides an overview of important considerations for central bank digital currency design. View Article
Project Syndicate: The Coming Global Technology Fracture : Today's international trade regime was not designed for a world of data, software, and artificial intelligence. Already under severe pressure from China’s rise and the backlash against hyper-globalization, it is utterly inadequate to face the three main challenges these new technologies pose View Article
Insurance Europe: EC digital ID proposals welcomed in principle; should not increase regulatory burden : Insurance Europe has today published its response to a roadmap consultation by the European Commission on an EU digital ID scheme. Digital identities and the associated processes of authentication and authorisation are an essential component of the digital single market. View Article
Brexit
FT: UK bid to circumvent Brexit deal risks far-reaching consequences : Planned internal market bill will contradict obligations in withdrawal agreement on Northern Ireland and state aid View Article
Bloomberg: Why Boris Johnson’s Britain Is Turning ‘Rogue State’ Over Brexit : Boris Johnson’s government published legislation Wednesday allowing it to re-write parts of the Brexit divorce deal it signed with the European Union last year. View Article
FT: Micheál Martin says controversial UK move risks forfeiting trust of EU : Micheál Martin says controversial UK move risks forfeiting trust of EU .Ireland has called on the UK to abandon moves to unpick parts of its Brexit treaty, warning that London risks forfeiting the EU’s trust as time runs out in talks on a free trade deal. View Article
POLITICO: Pelosi: ‘Absolutely no’ US trade deal if UK breaks Brexit pact : There’s “absolutely no chance” a U.K. trade deal will pass the U.S. Congress if London breaks its Brexit pact with the EU over the Irish border, House Speaker Nancy Pelosi warned Wednesday. View Article
European Policy Centre: Brexit: Endgame : The UK Government's recent statements make a deal between the EU and UK less likely, regardless of whether that is the intent or not...The Brexit negotiation are heading into the final phase, with Boris Johnson claiming that the United Kingdom (UK) will walk away if no deal is found by mid-October. View Article
Federal Trust: Brexit: Little lies have long legs : The government’s willingness, announced brazenly in the House of Commons yesterday, illegally to break the terms of the Withdrawal Agreement (WA) with the EU, should be a salutary corrective to any illusions. View Article
Bloomberg: ECB Keeps Up Pressure on Banks to Deliver on Brexit Preparation : The European Central Bank says some lenders still haven’t done enough to beef up their European Union operations before the Brexit transition phase expires at the end of the year. View Article
FT ECB supervisors turn the screw on banks’ Brexit plans : Ending up with overlapping operations in London and the eurozone is the last thing cost-cutting lenders want. Europe’s top financial supervisor is fed up with waiting for big banks to prepare for Brexit. View Article
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