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Highlights of my week: Chancellor Scholz was sworn in and the new German government got to work – but dominated by Covid. However, the positive messages about Europe did not seem to extend to any major shift on the EU’s fiscal rules. Banks are now increasingly involved in social issues such as financial inclusion, health and now remote working of their staff. But a Vox study suggests that banks are not yet pricing in the risk of “stranded assets” whereas the bond market does. The IASB continues to work on the incorporation of sustainability in financial reporting. EIOPA outlined its three-year plan to build sustainability into prudential rules for insurance and pension funds, while ISDA is considering the growing role of derivatives in ESG policy. The latest polls on Brexit continue to point to a completely divided Britain.
Graham Bishop
Articles from 3-9 December 2021
General Financial Policy
POLITICO: 7 early signals from Olaf Scholz : New German chancellor prioritizes pandemic and wants a strong hand on economic and EU policy. Germany’s new Chancellor Olaf Scholz may not have made his first major speech to parliament, but he is already conveying what to expect from his government. View Article
FT: The challenges facing Olaf Scholz’s new German government : The new German government being sworn in on Wednesday amounts to an unprecedented political experiment. The three coalition parties — Social Democrats, Greens and liberal Free Democrats — have never governed together before. View Article
EURACTIV: Germany rejects relaxation of EU fiscal rules : Under a Liberal-led finance ministry, Germany will take a hard line on EU fiscal policy and reject calls from southern EU countries to relax fiscal rules. However, the business-friendly FDP is open to compromise. EURACTIV Germany reports. View Article
Keynote speech by President von der Leyen at the 75th anniversary of the European League for Economic Cooperation : Today, 75 years later, we face very different – but in some ways no less demanding – challenges. Climate change threatens our global livelihoods. We must modernize our economy and find a more sustainable way of living and working. View Article
Eurobarometer: Europeans show support for digital principles : The outcome of this first Eurobarometer survey will help develop the proposal for a European declaration on digital rights and principles of the European Parliament, the Council and the Commission. View Article
BDB: Data economy – we need a new cross-sector data framework : The availability of big data is also indispensable for the use of artificial intelligence and machine learning – both future technologies of critical importance and both technologies where the US and China have a clear head start in development and deployment. View Article
Remarks by Executive Vice-President Dombrovskis at the ECOFIN press conference : Key points : capital markets will play a large part in making the EU economy more inclusive and resilient, and supporting the green and digital transitions. Ministers held a first debate on the proposals that the Commission presented last month - and AML policy View Article
Commissioner McGuiness: 'The ESRB at 10 years – key achievements and future challenges': keynote address at the 5th ESRB annual conference : Since Brexit, the EU depends too heavily on third-country CCPs, an issue that has also been analysed in depth by the ESRB. We need to expand the EU's own clearing capacity to safeguard financial stability in the medium-term. View Article
ECB's de Guindos: Macroprudential policy for non-bank financial intermediation : I will share some considerations on the way forward for a macroprudential approach to non-bank financial intermediation (NBFI)... In the euro area, the financial assets of non-bank financial institutions have more than doubled since the global financial crisis. View Article
UNEP FI: 28 banks collectively accelerate action on universal financial inclusion and health : The Principles for Responsible Banking’s Commitment to Financial Health and Inclusion is a first-of-its-kind accelerator initiative of the banking sector to promote universal financial inclusion and health; 28 signatory banks have joined the leadership group by signing the Commitment View Article
Banking Union
EBA updates on monitoring of CET1 capital instruments : The EBA's monitoring of capital instruments contributes to the enhancement of the quality of institutions' capital across the EU. The EBA will continue to update the Report on a regular basis to give account of new developments in CET1 issuances and practices. View Article
EBA risk assessment shows improvements in EU banks solvency, profitability and liquidity, but asset price corrections remain a key threat : Bank capital and liquidity positions have improved year on year, the CET1 ratio (fully loaded) reached 15.5%, the liquidity coverage ratio (LCR) 174.5%; Profitability has also improved, banks’ return on equity (RoE) reached 7.4% in Q2 2021. However, structural challenges for profitability remain. View Article
European Banking Social Partners Commit to a Common Understanding on Remote Work : The European Banking Social Partners signed a Joint Declaration on Remote Work and New Technologies. The spread of the Covid-19 pandemic and the constantly increasing use of digitalised systems and processes led the Social Partners to reassess and appropriately update our approach to remote work.. View Article
Single Resolution Board publishes MREL dashboard Q2.2021 : In percentage of the total risk exposure amount (TREA), the average MREL final target including the combined buffer requirement (CBR) for resolution entities, to be respected by 1.01.2024, stood at 26.04% TREA, broadly in line with the level registered in Q1.2021 (-0.07% TREA). View Article
CEPS: How to refine the contributions to the Single Resolution Fund? : The current methodology used to determine the SRF contributions is difficult to replicate, overly complex and not fully coherent with the remainder of the resolution framework and capital requirements. View Article
EBA consults on draft technical standards setting requirements for crowdfunding service providers : The proposed requirements cover the method used for the calculation of credit scores and loan prices, the factors that the providers need to consider when carrying out a credit risk assessment and conducting a valuation of a loan, and the underlying policies and governance arrangements. View Article
Insurance Europe: The EU's AML framework must remain risk-based and avoid unnecessary burdens for very low risk sectors like life insurance : It emphasised the importance of having a risk-based approach to ensure that the framework works in practice and reflects the very low risk of money laundering/terrorism financing (ML/TF) in the life insurance sector as a whole View Article
Capital Markets Union
FSB's Knot: Planning is everything: the FSB’s Key Attributes and what we have learnt from them : Developed in the aftermath of the 2008 Global Financial Crisis, as part of a sweeping reform agenda, the Key Attributes were designed to tackle the problem of “too big to fail” financialinstitutions. View Article
EuropeanIssuers: European listed companies discussed the EU regulatory environment at the EuropeanIssuers Capital Markets Webinar Series : EuropeanIssuers held webinars on the link between Capital Markets Union and Europe’seconomic recovery, sustainability reporting and digitalisation of European companies. View Article
AFME: European Benchmarking Exercise (EBE) for Private Securitisations : Its purpose is further to enhance the quality and usefulness of disclosure in the private cash securitisation market, both ABCP and balance sheet financed, in the EU and UK, in order to assist market participants and reassure supervisors View Article
ICMA proposal for a new post-trade transparency regime for the EU corporate bond market : ICMA fully supports the establishment of a single consolidated tape for EU bond markets. ICMA views this as being the necessary vehicle for providing comprehensive, meaningful market transparency. View Article
OECD: Pensions protected during COVID-19 pandemic but ageing challenges persist, says OECD : The COVID-19 pandemic has taken a heavy toll among elderly people although retirees have seen their pension payments well protected across OECD countries. View Article
EIOPA analyses trends in cross-border IORPs : Cross-border IORPs within the EEA have approximately 70.000 members and beneficiaries and manage assets worth around €11.3 billion. This represents 0.2% of all members and beneficiaries and 0.4% of total assets of IORPs in the region. View Article
IPE: EU could fund DC transition by issuing debt, says Bernardino : He suggested the EU give financial support to member states who opt to develop second pillar retirement savings by reducing social security contributions, and where the transition in funding would create economic difficulties. View Article
ESMA publishes latest edition of its newsletter : Your one-stop-shop in the world of EU financial markets focuses this month on the Preliminary Report the EU Carbon Market and on ESMA’s contribution to a more sustainable financial system. View Article
Environmental, Social, Governance (ESG)
IASB: Connectivity, core work and convergence—what next for IFRS Accounting Standards? : IASB Chair Barckow outlined the IASB’s immediate and future priorities, talked about the growing importance of sustainability issues in financial reporting and shared his views on convergence with the FASB. View Article
Vox: Too big to strand? Bond versus bank financing in the transition to a low carbon economy : This column looks at the role bond market-based and bank-based debt plays in the allocation of resources to fossil fuel in the context of the risk of stranded assets. View Article
Sustainable finance roundtable: EIOPA announces its sustainable finance activities for the coming three years : Integration of sustainability risks in the prudential framework of insurers and pension funds by developing proposals for supervisory reporting of climate risks in Solvency II, analysing prudential treatment under Solvency II of assets and/or activities...with environmental and/or social objectives. View Article
UNEP FI: 200 members are now part of the Principles for Sustainable Insurance Initiative : The global collaborative initiative strengthens the industry’s contribution as risk managers, insurers and investors to building resilient, inclusive and sustainable communities and economies on a healthy planet. View Article
IFAC charts the way forward for assurance of sustainability information : This vision addresses the importance of global standards, regulation that supports decision-useful disclosure, and the value of an interconnected approach to sustainability and financial information reporting and assurance. View Article
Irish Funds: Publication on the Corporate Sustainability Reporting Directive : This is essential for funds and asset managers seeking to integrate ESG considerations into their investment decisions and to comply with their obligations under the EU sustainable finance regime. CSRD is therefore foundational to the EU sustainable finance regime and the European Green Deal. View Article
ISDA: Regulatory Considerations for Sustainability-Linked Derivatives : As individual and institutional investors increasingly invest in environmental, social and governance (ESG) activities, the role of derivatives to help meet ESG goals has grown. View Article
ISDA: Legal Implications of Voluntary Carbon Credits : A robust voluntary carbon market must be grounded in a strong legal foundation. Much of the process of creating, verifying and transferring the benefit of project activities that reduce emissions already exists within robust legal frameworks. View Article
Fin Tech Regulation
BIS, Bank of France and Swiss National Bank conclude successful cross-border wholesale CBDC experiment : Project Jura explored settlement of tokenised euro commercial paper and foreign exchange transactions; Tests were conducted in a near real-life setting and met current regulatory requirements. View Article
EBF response to CR 03/2021: Application of the Principles for Financial Market Infrastructures to Stablecoin Arrangements : We agree with the general aim of this report, notably that of applying the current principles for financial markets infrastructures (PFMI) to systemically important stablecoin arrangements (SAs) without creating additional standards for SAs. View Article
Economic Policies Impacting EU Finance
Remarks by Commissioner Gentiloni at the Eurogroup press conference : As we had recommended, in 2022 all Member States will preserve nationally financed investment. Nearly all low and medium debt countries will pursue or maintain a supportive fiscal stance. And high debt countries will use the RRF to finance additional investment in support of the recovery. View Article
EPC: Rethinking EU economic governance: The European Semester : Reforming and strengthening it is vital given the multiple challenges the EU faces, from the twin green and digital transitions to implementing the Recovery and Resilience Facility (RRF) and tackling the macroeconomic and structural scars left by COVID-19. View Article
Brexit
UKandEU: What do the British electorate think of Brexit now? : UK in a Changing Europe in partnership with Redfield and Wilton Strategies are launching a new poll to track attitudes of the British electorate to Brexit, in the broadest sense. View Article
UKandEU Curtice: Voters still Divided over Brexit – but Back UK Government in Battles with Brussels : It suggests that in a referendum on whether Britain should join or stay out of the EU, 47% would vote to join and 53% to stay out. View Article
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