Welcome to our Gold Friends weekly e-mail.
Highlights of my week: Politics leapt to the fore this week as the German coalition negotiations produced an unexpectedly rapid conclusion including a stronger stance on European integration (and a tough line on Brexit!) But it will be months before any direct implications crystallise for financial services. Meanwhile, Italy’s Draghi continues to emerge as a political operator - rather than just economic – signing the Quirinale Treaty with French President Macron. The SSM produced a scathing report on banks’ current climate and environment risk management – a practical counter-point to the high-flown commitments at COP26 – now so long ago! EBA cautioned on some of the applications of IFRS 9 on expected credit losses. The Commission is just relaunching CMU – yet again – with some useful small steps including a consolidated tape and a softer line on `delegation’ for investment managers. ESMA is consulting on guidelines for a `failing’ CCP – more ammunition for its mid-2022 review of CCP’s implications for financial stability? Meanwhile the FT keeps up its reporting on the slow bleed of jobs away from London.
Graham Bishop
I have just produced another video with the Federal Trust in my series on Brexit and the City: "Brexit is dimming the lights of the City of London" link to Youtube
Articles from 19-25 November 2021
General Financial Policy
FT: Pragmatist Scholz bridges political differences to become Germany’s heir to Merkel : Social Democrat strikes coalition deal to raise climate investment along with commitments on wages and pensions View Article
POLITICO: What’s in the German coalition deal for Europe (and the UK) : Incoming government vows to push Brussels to be tough on rule of law and Brexit. View Article
Project Syndicate: The New Franco-Italian Alliance in Europe : Behind a new bilateral cooperation agreement between France and Italy is a burgeoning political alliance that could reshape the European Union and its global role. With German Chancellor Angela Merkel departing, all eyes are now on Italian Prime Minister Mario Draghi and French President Emmanuel Macron. View Article
EPC: Germany in the EU after Merkel: A view from the Netherlands : The Dutch government will look back fondly on the Merkel years in Germany, its close ally. But some important divergences did start to appear in the final stages – and may only become more commonplace with the new German government. View Article
European Semester Autumn package - comments and Q&A : Comments by Commissioners Dombrovskis, Gentiloni and Schmid View Article
Banking Union
Elke König, SRB Chair speaks to Boersen Zeitung on weak spots of bank resolution in the EU, the prospects for EDIS and the FDIC as a role mo : I firmly believe in a European deposit guarantee scheme – but with uniform rules of the game for all. What it cannot be is a European pot that is used according to national rules. I would say: The ones who pay are the ones who set the rules of the game. View Article
EPC: Strong corporate appetite for European Request to Pay services : An interview with Thomas Egner, Secretary General, Euro Banking Association (EBA) View Article
Capital Markets Union
European Parliament votes on ‘quick fixes’ for PRIIPs and UCITS - EFAMA statement : We welcome yesterday's vote by the European Parliament plenary formally adopting two ‘quick fixes’ for PRIIPs (Packaged retail investments and insurance-based products) and UCITS (Undertakings for Collective Investment in Transferable Securities). View Article
Bloomberg: Europe Pushes Ahead on Long-Awaited Capital Markets Union : Commission to propose rules on market data, investor access; Project to build cross-EU system was first announced in 2015 View Article
ESMA consults on CCP investment practices for highly liquid financial instruments : The consultation paper (CP) explores the benefits and disadvantages of the potential inclusion of financial instruments that are considered highly liquid with minimal market and credit risk. View Article
ESMA: Consultation Paper on draft Guidelines on the application of the circumstances under which a CCP is deemed to be failing or likely to : These Guidelines list a set of objective elements that should support the determination that a CCP is failing or likely to fail, in accordance with the circumstances laid down in Article 22(3) of CCPRRR. View Article
AFME: Understanding EU Bond Market Structure and Dynamics : European fixed income markets play a critical role in providing funding for corporates and governments. The purpose of this document is to provide an educational overview of the current EU fixed income market size and structure. View Article
ESMA publishes draft commodity derivative technical standards under MiFID II Recovery Package : The draft RTS include proposals on the application procedure for position limit exemptions, a methodology to determine position limits and position management tools for trading venues, which will contribute to stable and orderly commodity derivative markets at a time of heightened scrutiny. View Article
SUERF: Did liquidity limits amplify money market fund redemptions during the COVID crisis? : Regulation of Money Market Funds (MMFs) in the EU requires some categories of MMFs to consider applying liquidity management tools if they breach a minimum “weekly” liquidity requirement. Anticipation of the application of such tools is a plausible amplifier of run risks. View Article
EBA publishes its final revised Guidelines on internal governance for investment firms under the Investment Firms Directive : The IFD contains specific governance requirements for investment firms in parallel to and consistently with the ones already applicable under the Capital Requirements Directive (CRD). View Article
Insurance Europe: Insurers welcome publication of IFRS 17 in Official Journal of the EU : The issue of annual cohorts has been a fundamental concern for insurers because the IASB’s requirements would have added costs and not adequately reflected the true economic nature of certain insurance products. View Article
IASB: IAIS issues Public consultation on the Development of Liquidity Metrics - Phase 2 : The IAIS adopted in November 2019 the Holistic Framework for the assessment and mitigation of systemic risk in the global insurance sector (Holistic Framework) in order to support its mission of effective and globally consistent supervision of the insurance industry to protect policyholders and to contribute to global financial stability. View Article
EIOPA publishes annual report on the use of capital add-ons during 2020 under Solvency II : The objective of the capital add-on measure is to ensure that the regulatory capital requirements reflect the risk profile of the solo undertaking or of the insurance group. View Article
Environmental, Social, Governance (ESG)
SSM's Elderson: How well are European banks managing their climate-related and environmental risks? : Covering 112 banks directly supervised by the ECB with €24 trillion of combined assets, the report is an unprecedented stocktake of European banks’ preparedness to adequately manage and disclose their exposure to C&E risks View Article
EBA notes significant efforts in IFRS 9 implementation by EU institutions but cautions on some of the observed accounting practices, especia : The aim of this Report is to assist supervisors evaluate the quality and adequacy of IFRS 9 Expected Credit Loss (ECL) models, in order to contribute to a high-quality and consistent application of the IFRS 9 standard in the EU View Article
FT: EU seeks more independence for bank regulators after Wirecard scandal : German supervisor BaFin set to have to cut ties with industry representatives View Article
CDSB: Leading international organisations launch Platform to address calls for clarity on how to improve sustainability impacts : The ‘Platform’, whose steering committee brings together a set of multilateral organisations, has launched a web tool that outlines the core actions of impact management and links to the resources to help organisations and investors implement them View Article
The SASB Investor Advisory Group (IAG) Welcomes Formation of The International Sustainability Standards Board (ISSB) : Investor group applauds the IFRS Trustees’ landmark decision to deliver a global baseline of sustainability disclosure to meet investor needs View Article
EFRAG: Proposed due process procedures for EU Sustainability Reporting Standard Setting – summary of the comments received : In June 2021, EFRAG launched a public consultation, seeking stakeholders input on its Proposed Due Process Procedures for EU Sustainability Reporting Standard Setting. Today’s summary report summarises the comments received. View Article
ESMA publishes its Preliminary Report on the EU carbon market : The Report presents an overview of the financial regulatory environment for the carbon market under MAR, MiFID II and EMIR and the tools available to securities supervisors to fulfil their responsibilities. View Article
IFAC publication highlights opportunities in sustainability information for small businesses and their advisers : It highlights a range of emerging services that practitioners can provide to their clients, including advisory services, reporting, agreed-upon procedures (AUP) engagements, and assurance services. View Article
ACCA: Accountants could be the ‘sustainability trailblazers’ needed to drive the green agenda in the SME space : COP26 may have focused on big business, but 90% are SMEs, which is why ACCA and CA ANZ (Chartered Accountants Australia and New Zealand) are equipping accountants with a new playbook to help them and their SME clients achieve their sustainability goals. View Article
AFME and Linklaters publish guide to navigating sustainable finance regulation : A new report by the Association for Financial Markets in Europe (AFME) and Linklaters titled, “Sustainable Finance in Europe: Regulatory State of Play” provides a practical guide to the significant number of initiatives which make up the regulatory framework for sustainable finance in the EU, UK and Switzerland. View Article
IOSCO calls for oversight of ESG Ratings and Data Product Providers : The market for ESG ratings and data has grown over the past few years, in part due to a lack ofconsistent information disclosures at the entity level. View Article
ESMA's Ross: ESG – Next Level Reporting, Risk Management, Strategy and Responsibility : We are incorporating ESG factors across the full range of our activities. ESMA, in particular, has a key role in helping investors better understand the impact of environmental, social and governance (ESG) factors on their investments View Article
Fin Tech Regulation
Digital finance package: Council reaches agreement on MiCA and DORA : The Council today adopted its position on two proposals that are part of the digital finance package: the ‘Regulation on Markets in Crypto Assets' (MiCA) and the ‘Digital Operational Resilience Act' (DORA). View Article
SSM's Hakkarainen: Digitalisation in European banking: no time like the present : I will argue that the impact of these changes will generally be positive for banks’ customers, who will benefit from better and more convenient services, and for the economy at large. View Article
Vox: Central bank digital currency: Considerations, projects, outlook : Central bank digital currency has become a major preoccupation of central bankers. .. academics and policymakers review the economic, legal, and political implications, discuss current projects, and look ahead. While consensus on the ‘right’ CBDC choices remains elusive, common perspectives emerge. View Article
Friends' Standard Services
Federal Trust video: Brexit is dimming the lights of the City of London : In his new Federal Trust video, Graham Bishop argues that the current controversy over central counterparties (CCPs) is symbolic of the difficulties facing the City after Brexit. View Article
Economic Policies Impacting EU Finance
Bruegel: Fiscal arithmetic and risk of sovereign insolvency : The record-high debt levels in advanced economies increase the risk of sovereign insolvency. Governments should start fiscal consolidation soon in an environment of low nominal and real interest rates and post-COVID growth. View Article
EPC: Rethinking EU economic governance: The Stability and Growth Pact : It is time to reimagine the EU’s economic governance. In early 2021, the EPC set out to do just that in its Rethinking EU Economic Governance Task Force. View Article
Brexit and the City
FT: Brussels to curb banks’ use of ‘cross-border’ permissions to access EU : Measure in new capital regulations would tighten patchwork of national arrangements and affect banks in London View Article
FT Brexit is a slow bleed for the City of London : After a pandemic pause, the movement of jobs and business towards the continent is set to resume View Article
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