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20 May 2021

This week in "Brussels"



Welcome to our Gold Friends weekly e-mail.

 

Highlights of my week: The ECB’s Financial Stability Review made chilling reading about the risks lurking in financial markets as pandemic support recedes. Almost as if queued up, the price of Bitcoin et al demonstrated what happens in illiquid markets with `poor fundamentals’ – to be diplomatic - when sentiment changes and the mania subsides even a bit. Maybe bank-based instant payments have some attractions after all…Bank supervisors/resolvers reviewed the tools now available to SSM and the crisis management framework. Securitisation should be another component of post-pandemic finance and both ECB and ESAs are reviewing how to implement the new Regulation. But market participants seem most exercised by the practical details of the “Taxonomy”: much criticism of over-lapping/inconsistent rules and too-short timetables for implementation. But perhaps these are just the teething troubles to be expected from such a global trail-blazing project.

 

The Brexit post-mortem of the City may suggest its Golden Age is firmly over but new casualties of the Brexit Ayatollahs are now appearing – musicians and foreign students.

Graham Bishop


 

Articles from 13 - 20 May 2021

General Financial Policy

Conference on the Future of Europe: make your voice heard : Their exchanges will be structured thematically around recommendations from the Citizens’ Panels and input gathered from the Multilingual Digital Platform. The Platform is the single place where input from all Conference-related events will be collected, analysed and published. View Article
Goldschmidt: Can the Conference on the future of the E.U. deliver anything but a damp squib? : One should wonder whether the new political environment has been impacted to such an the extent that the capacity of the debates to offer credible answers to the challenges facing the Union is put into question.  View Article
EURACTIV: Race to succeed Merkel wide open as German election nears : With veteran German Chancellor Angela Merkel set to leave the political stage after the September election, many are wondering what’s next for the globe’s fourth-largest economy. The race for Germany’s top job is heating up, EURACTIV Germany reports. View Article
EURACTIV: Pressure mounts on member states to ensure successful roll-out of recovery fund : As the EU recovery fund slowly nears its implementation phase, member states’ absorption capacity and control mechanisms are considered among of the main challenges for its successful roll-out. View Article
ECB review sees elevated financial stability risks due to uneven impact of pandemic : Uneven economic impact of pandemic implies risks concentrated in specific sectors and countries; Banks’ asset quality holding up, but profitability weak and potential for credit risk to worsen;  View Article
The EBA publishes report on Member States’ reliance on external credit ratings : Based on a survey among EU banking supervisors, no mechanistic reliance on external credit ratings was identified. View Article
German top court rejects complaint against ECB’s bond-buying scheme : Germany’s constitutional court rejected on Tuesday (18 May) a complaint against the European Central Bank’s (ECB) flagship bond-buying scheme, in a ruling that primes the eurozone economy for more stimulus once the bank’s pandemic-related emergency measures end. EURACTIV Germany reports. View Article

Banking Union

SSM blog: Fostering a compliance culture in the European banking system : The establishment of the Single Supervisory Mechanism (SSM) introduced many tools for effectively supervising banks at the European level. One of those tools, which is possibly not always highlighted enough, allows the ECB to impose sanctions on supervised banks that fail to comply with prudential requirements. View Article
SRB publishes blueprint for the crisis management and deposit insurance (CMDI) framework review : The SRB published key considerations on the crisis management and deposit insurance (CMDI) framework review. View Article
BIS: How to improve funding of bank resolution in the banking union: the role of deposit insurance : This is a key issue within the ongoing reflection in the European Union on how to improve the current arrangements for bank failure management and, in particular, on how to best adjust the existing funding mechanisms. View Article
SSM's Elderson:“We can’t afford to drag our heels when it comes to risk” : Frank Elderson, Vice-Chair of the ECB’s Supervisory Board, talks about monitoring credit risks during the pandemic, addressing current and future climate change risks, and the suitability and diversity of banks’ boards. View Article
SRB issues bi-annual reporting note to the Eurogroup : The Chair of the Single Resolution Board, Elke König will inform on Friday 21 May 2021 the Eurogroup ministers about ongoing activities of the SRB, focusing on progress regarding resolution planning, resolvability and minimum requirement for own funds and eligible liabilities (MREL). View Article
EBA announces plans for the 2021 EU-wide Transparency exercise and EBA Risk Assessment Report : The European Banking Authority (EBA) announces that the annual 2021 EU-wide Transparency exercise will be carried out in autumn and the information on banks’ exposures and asset quality during the crisis will be released to market participants. View Article

Capital Markets Union

ECB Banking Supervision to supervise securitisation requirements for banks : ECB supervisors to look at requirements related to risk retention, transparency and ban on resecuritisation for significant banks; ECB to operationalise these supervisory tasks over coming months View Article
ESAs’ report on the implementation and functioning of the securitisation regulation : The Report is meant to provide guidance to the European Commission in the context of its review of the functioning of the SECR. It also provides initial inputs to the ongoing discussion on the efficiency of the securitisation framework given the role that securitisation could play in the recovery post the Covid-19 pandemic. View Article
New ICMA industry guide to definitions and best practice for bond pricing distribution : Pre-trade information on bond pricing is currently non-standardised and often misunderstood. The term ‘axe’ is used in fixed income trading to represent a sell-side advertising buy or sell bond interests. View Article

Environmental, Social, Governance (ESG)

Commissioner McGuiness: Opening remarks at the joint ECON-ENVI Meeting on the first Delegated Act for the EU Taxonomy : Because without finance and a financial system re-oriented towards sustainability - we cannot achieve our objectives... Now to the Taxonomy. This really underpins our entire sustainable finance agenda. It is ground-breaking and a world first. View Article
SMSG advice to the ESA’s Joint Consultation Paper on Taxonomy-related sustainability disclosures : By introducing the Taxonomy Regulation’s Environmentally Sustainable Activities into the Sustainable Fi-nance Disclosure Regulation, another piece of the puzzle is completed. View Article
ESAs Joint Consultation paper on Taxonomy-related sustainability disclosures (SFDR RTS): EBF response : Lack of comparable, reliable and standardized data (including from external data providers) and information necessary both for a complete and correct due diligence and classification of the financial products’ sustainability degree remain a critical issue. Companies will only begin to report their taxonomy alignment in 2022. View Article
ISDA Responds to ESAs on Taxonomy-related Sustainability Disclosures : ISDA responded to question four of a joint consultation paper by European Supervisory Authorities on taxonomy-related sustainability disclosures. View Article
Insurance Europe: Workable, clear and consistent disclosures are needed for taxonomy-related information : Insurance Europe has published its response to a consultation conducted by the European Supervisory Authorities (ESAs) on a single template for product disclosures under the Taxonomy Regulation.  View Article
EFAMA calls for consistency of taxonomy KPI metrics in EU sustainable finance regime : EFAMA has published its response to the joint European Supervisory Authorities (ESAs) consultation on taxonomy-related sustainability disclosures in the Sustainable Finance Disclosure Regulation (SFDR). View Article
ICMA AMIC responds to ESAs consultation on taxonomy disclosure for financial products : ICMA AMIC has submitted its response to the ESAs consultation on taxonomy disclosure for financial products. View Article
Commissioner McGuinness invites EFRAG to start technical work on draft sustainability reporting standards and proceed with governance reform : This work is to be undertaken in parallel to the negotiations of the proposed Corporate Sustainability Reporting Directive (CSRD). The Commissioner also asks EFRAG to move ahead with governance reforms. View Article
IFAC: Enabling sustainability a priority for accountants in business & public sector : IFAC’s Professional Accountants in Business (PAIB) Advisory Group has compiled insights on key global trends impacting the future readiness of the accountancy profession in a new report Enabling Purpose Driven Organizations: PAIBs Leading Sustainability and Digital Transformation. View Article
CFA Institute Publishes Exposure Draft of ESG Disclosure Standards for Investment Products : New Standards seek to provide transparency and comparability of investment products with ESG-related features  View Article
ICMA publishes overview of ‘taxonomies’ for sustainable finance and recommends success criteria : There have been both market and official sector initiatives to develop ‘taxonomies’ (classification systems) in an effort to provide clear guidance on which activities, assets and/or projects qualify for sustainable finance, and more widely in some cases as sustainable for regulatory or prudential purposes. View Article

Protecting Customers

CRE: German insurers and business seek flexibility on international data transfer : The German insurance association (GDV) has stepped up its call for flexibility from regulators on the hot topic of international data transfer standards, while politicians in Europe and the US are working on a pragmatic solution for a huge headache for German businesses created by the European Court of Justice’s Schrems II judgment made in July 2020. View Article

Fin Tech Regulation

ECB's Panetta: At the edge of tomorrow: preparing the future of European retail payments : Digitalisation has indisputably come a long way in reshaping the European retail payments landscape. So it is natural for digitalisation to be one of the starting points of our retail payments strategy View Article
Bloomberg:Musk Sends Bitcoin Tumbling With Shock U-Turn on Payments : EV maker cites concerns on cryptocurrency mining energy use, Tesla’s endorsement of Bitcoin in February powered rally View Article
Bruegel: Crypto… mania : Cryptocurrencies are here to stay but are unlikely to be considered a credible alternative to money anytime soon. View Article
FT: Bitcoin gyrates on fears of regulatory crackdown : Digital asset market under intense pressure after China warns on use of cryptocurrencies.Cryptocurrency markets swung in chaotic trading and related stocks were hit after Chinese regulators signalled a crackdown on the use of digital coins, which have soared in price this year.  View Article
FT: Asset managers express caution on cryptocurrency after price swings : Adoption by mainstream finance industry remains in question, executives say View Article
BIS: The digitalisation of money : The ongoing digital revolution may lead to fundamental changes to the traditional model of monetary exchange. Digital currencies facilitate instantaneous peer-to-peer transfers in a way that was previously impossible. New currencies that transcend national borders could redefine how payments and user data interact.  View Article
DTCC: Evolution in Capital Markets: Digitalization of Assets : DTCC has been closely evaluating and engaging around blockchain, tokenization, and other emerging technologies for several years,” stated Peve, noting that these technologies have several purposes and can drive efficiency in the capital markets ecosystem. View Article

Economic Policies Impacting EU Finance

Remarks by Executive Vice-President Dombrovskis at the press conference on the Communication on Business Taxation 21 : Today's tax bases are changing. Our existing tax environment is no longer in line with our broader objectives and ambitions. It does not reflect long-term priorities such as the green and digital transitions. View Article
Remarks by Commissioner Gentiloni at the press conference on the Communication on Business Taxation 21 : EU States are losing tens of billions each year to tax fraud, evasion and avoidance: an estimated €50 billion per year to cross-border VAT fraud; €46 billion to international tax evasion by individuals; ans between €35 and €70 billion as a result of corporate tax avoidance in the EU. View Article

Brexit

Project Syndicate's Davies: A Brexit Post-Mortem for the City : Almost five years after the Brexit referendum, and five months after Britain's exit from the European Union, the future of London as a global financial center seems secure. But although the City will remain Europe’s largest financial marketplace, its Golden Age as Europe’s financial capital is over. View Article
ISM: The impact of the Brexit Trade Deal on music businesses: the first 100 days : New ISM survey reveals how the Brexit Trade Deal has been a disaster for music businesses View Article
Vox: Brexit deterred international students from applying to UK universities : Attracting international students is critical for public universities in the UK increasingly facing funding cuts and a diminishing domestic youth population. This column discusses how Brexit may have affected students’ willingness to study in the UK... factors likely driving the students’ choices. View Article

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