Welcome to our Gold Friends weekly e-mail.
My highlights of the week: ECB authors raised the issue of liquid “safe assets” yet again, Bruegel authors analysed the defects of the current banking union while AFME questioned the impact of Basel III on securitisations of large and small corporates. COP27 produced a crop of analyses of the `conclusions’ while `greenwashing’ remained firmly on the agenda. FDX is now history but the broader implications of crypto are definitely not. The 2023 European Semester was launched but served to underline the complexity of the system that has grown up over the last decade. However, the most fascinating aspect of the week was the dawning evidence that British voters have finally “woken” to the hit from Brexit, rather than the so-far elusive opportunities! The decline in support for the Tories roughly mirrors the decline in the belief about Brexit being a `good thing’. Once the tectonic plates of voter opinion have shifted, can the Tory Party avoid being shattered?
Graham Bishop
Articles from 18-26 November 2022
Policy impacting Finance
ECA: EU auditors issue Opinion on a package of proposals including a new borrowing strategy linked to financial aid to Ukraine : In early November, the European Commission proposed amendments to the EU’s Financial Regulation to diversify the EU’s borrowing operations. View Article
CEPR's Wyplosz: Reform of the Stability and Growth Pact: The Commission’s proposal could be a missed opportunity : This column argues that the proposal includes some major improvements, but also suffers from some fatal flaws. The proposal thus appears to be a missed opportunity to achieve the shared goal of forging a proper Stability and Growth Pact. View Article
SUERF: The safe asset potential of EU-issued bonds : Currently, one obstacle to EU bonds achieving a genuine euro-denominated safe asset status, approaching that of Bunds, lies in the one-off, time-limited nature of the EU’s Covid-19-related policy responses. View Article
Banking Union
Bruegel: Completing Europe’s banking union: economic requirements and legal conditions : This contribution analyses the deficiencies of the current framework and identifies possible responses, in line with three levels of reform ambition. Authors: Beck, Krahnen, Martin, Maye, Pisani-Ferry, Tröge, Weder di Mauro,Véron , Zettelmeyer View Article
AFME: Funding to European corporates and SMEs at risk from Basel III regulatory changes finds new study : Notably, the study shows securitisations of large corporates and SME loans are likely to be severely negatively impacted, making them scarcely feasible. At the same time, securitisations of consumer loans, including residential mortgages, auto loans and other consumer loans, may be boosted. View Article
GBIC comments on EBA draft RTS on groups of connected clients : GBIC advocates for a consistent drafting of the RTS which will not lead to further burdens for institutions compared to the already existing EBA guidelines on groups of connected clients. View Article
Capital Markets Union
Keynote speech by Commissioner McGuinness at the European Fund and Asset Management Association (EFAMA) Investment Management Forum : Progress report on CMU View Article
IAIS finalises liquidity metrics as an ancillary indicator for its Global Monitoring Exercise : These will serve as a tool to facilitate the IAIS’ monitoring of the global insurance sector’s liquidity risk and for the IAIS to assess insurers’ liquidity exposure from a macroprudential perspective, which may be critical as insurers have been exposed to liquidity shortfalls in previous crises. View Article
CFA: Investment Gamification and Implications for Capital Markets : Recommendations to Maximize the Benefits and Mitigate the Risks of Gamification View Article
FESE: Policymakers must shape competitive EU financial markets to power the digital and green transitions : Proposed changes to the MiFIR Review miss their targets, to the detriment of investors, EU-global competitiveness, and the capacity of EU markets to finance the green and digital transitions View Article
Environmental, Social, Governance (ESG)
EIOPA underlines its commitment to supporting the insurance and pensions sectors in tackling climate change : As the 2022 United Nations Climate Change Conference (COP27) draws to a close, the European Insurance and Occupational Pensions Authority underlines its commitment to supporting the insurance and pensions sectors in tackling climate change. View Article
EFRAG delivers the first set of draft ESRS to the European Commission : ?EFRAG submitted the first set of draft ESRS to the European Commission in its role as technical adviser to the European Commission. This first set, approved by the EFRAG SRB, supported by the EFRAG SR TEG, takes into consideration the input from the public consultation on the draft ESRS EDs. View Article
ISDA: The Way Forward For Sustainability-linked Derivatives : With the growth of sustainable investing, there is emerging demand for derivatives products that are linked to environmental, social and governance (ESG) goals. Although a nascent market, these products – sustainability-linked derivatives (SLDs) – have the potential to contribute to the green transition. View Article
ICMA appointed by the FCA to jointly provide the Secretariat for a working group to develop a Code of Conduct for ESG data and ratings provi : The group has been tasked with developing a voluntary code of conduct for Environment, Social and Governance (ESG) data and ratings providers. View Article
ICGN Launch Second Edition of ‘Governance, Stewardship and Sustainability: Theory, Practice and Evidence’ : Tthe book links together key issues and current thinking around corporate governance, investor stewardship and sustainability for practitioners and academic and professional education programmes. View Article
The Net-Zero Asset Owner Alliance’s statement on COP27 outcomes : The Net-Zero Asset Owner Alliance is encouraged by the international agreement to establish a ‘loss and damage’ fund. The fund will help the world’s most vulnerable in developing countries withstand and recover from the physical impacts of climate change, today and into the future. View Article
GRI: Beginning of the end for greenwashing? : Mandatory assurance of sustainability data is ‘only a matter of time’: The drive towards a comprehensive global system for sustainability reporting, which evenly addresses both impact and financial disclosure, will be a major instigator for mandatory auditing of sustainability information. View Article
CEPS' Elkerbout: COP27 agreed compensation for loss and damage… but the fear is we’ll just end up seeing even more loss and damage : Not all COPs are made equally. After 2021’s COP26 in Glasgow – successfully hyped up by the Boris Johnson-led UK as a showcase of ‘Global Britain’s’ diplomatic mettle – COP27 in in Egypt was perhaps always fated to be a less significant one. View Article
AFME/EY: ESG and the Role of Compliance : This report sets out observations on how compliance functions can support their firms in robustly and transparently managing the regulatory risks associated with Environmental, Societal and Governance (ESG). View Article
AccountancyEurope: Comparing European corporate governance models - Survey results : This publication explores the different corporate governance systems based on a survey of 17 European countries. We identify significant differences in national legislation and practice to lay the groundwork for EU sustainable corporate governance initiatives to be well integrated into the national corporate structures. View Article
Bloomberg: Capital Market Risks Trigger Calls for New Rules: ESG Survey : A Bloomberg survey shows Europeans are more in favor of enhanced environmental regulations than Americans, while Asians want more rules — period. View Article
Protecting Customers
BETTER FINANCE: Council of the EU is the Last Hurdle to Tackling Conflicts of Interests in Retail Investment Services : The struggle against conflicts of interests and to deliver an adequate, high level of “retail” investor protection now hinges on the positions of representatives of the EU Member States (Council of the EU). BETTER FINANCE firmly advises the co-legislator not to hamper EU progress and to support the proposal to ban “kickbacks” that are detrimental to “retail” investors. View Article
Fin Tech Regulation
Remarks by the IOSCO Fintech Task Force Chair at Singapore Fintech Festival - Applying and Adapting IOSCO Principles to Digital Asset Market : A mere one year ago from today, crypto-assets peaked at just over $3 trillion, but today about two-thirds of that value has been digitally erased and some are calling this a “crypto winter”. View Article
REVIEW OF THE PAYMENT SERVICES DIRECTIVE 2 BEUC recommendations : Moving from coins, notes, cheques, cards and wire transfers, payments increasingly take place online and via mobile phones. This allows for more payment options and more convenience but also brings new challenges to keep consumers’ bank accounts, payment cards and e-wallets secure. View Article
UK Finance: Regulatory reporting for digital banks: how to stay creative, innovative but compliant with regulation : Digital (and challenger) banks come in all shapes and sizes. Some are offshoots of big tech companies, others are fintech startups, and yet others provide banking as a service (BaaS) to non-financial institutions via APIs View Article
Digital New Deal: Report Finds ‘Algorithmic Audits’ Need More Clarity to Bring Accountability to AI : Authors recommend guidelines for designing and deploying audits of opaque AI systems to mitigate algorithmic harms to users and society. View Article
Economic Policies Impacting EU Finance
Remarks by Executive Vice-President Dombrovskis, Commissioner Gentiloni and Commissioner Schmit at the press conference of the 2023 European : Commissioners' overview of the economic situation View Article
Questions and answers on the 2023 European Semester: Autumn Package : Comprehensive package of economic analysis of the state of the EU economy View Article
Brexit
POLITICO: Sunak’s Britain Is Starting to Have Second Thoughts About Brexit : UK leader denies he’d seek ‘Swiss-style’ ties with EU; Public opinion, experts now speaking out against Brexit View Article
CITY AM: Sunak slaps down idea of Swiss-style Brexit deal to bring UK closer to EU : Rishi Sunak will not pursue a post-Brexit “Swiss-style” deal to bring the UK closer to the EU, the PM has said today. Sunak said he was “unequivocal on this” and that “under my leadership, the United Kingdom will not pursue any relationship with Europe that relies on alignment with EU laws”. View Article
YouGov: One in five who voted for Brexit now think it was the wrong decision : The wider public now think Britain was wrong to leave the European Union by 56% to 32% View Article
What UK thinks: Has Britain leaving the EU made the current economic situation generally better or worse, or has it made no real difference? : Worse 55% - Better 10% View Article
FT: UK business leaders urge Sunak to seek better EU relations : Premier will face calls to soften impact of Brexit when he addresses CBI on Monday View Article
Revoking EU law is a distraction and will create substantial uncertainty for business, says IoD : Such a review is likely to create a huge amount of uncertainty around the regulatory framework navigated by business. This is the last thing that business needs in such a fragile economic environment. View Article
Federal Trust video: Hunting for Brexit Benefits : In this new Federal Trust video, Brendan Donnelly argues that Rishi Sunak and Jeremy Hunt realise Brexit is in trouble. View Article
POLITICO: Britain’s trade honeymoon is over : Forging an independent trade policy was a key Brexit selling point — but now the rubber’s hitting the road. Forget the flag-waving Instagram posts — Britain’s post-Brexit trading dreams are coming back down to earth. View Article
UK-EU Forum's Henig: A new dawn for UK-EU relations? : ...in Brussels and London, for those travelling between them, the change of mood with regard to UK-EU relations is palpable, across UK political parties, and within EU institutions. .. View Article
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