Welcome to our Gold Friends weekly e-mail.
Highlights of my week: The Commission continued to justify its new proposals on fiscal rules while the think tanks have got cracking on analysing defects but suggesting fixes. However, risks to the banking sector remain. It has been greatly strengthened since the GFC but that does not reduce the need to re-energise plans for capital market union, including a real-time consolidated tape. UK pension funds’ LDI debacle continued to stir concerns. Council approved the corporate sustainability reporting directive (CSRD), stimulating AccountancyEurope to publish a handy guide for the 50,000 companies who will have to comply with it. The fall-out from the FDX collapse echoed around Europe as the ECB laid into the absence of any serious rationale for Bitcoin and the like. But there is even more fall-out from Brexit as traders are moved to Milan, the economic hit became ever more clear and regulators successfully pushed back against allowing ministerial override/politicisation, while corporates revolted against the proposed bonfire of EU regulations – much trumpeted as the biggest gain from `taking back control’ via Brexit.
Graham Bishop
Articles from 24 November - 1 December 2022
Policy impacting Finance
EPC van Rompuy: Turning fear into hope : Turning Fear into Hope is a series of conversations with the first President of the European Council and former Belgian Prime Minister Herman Van Rompuy that captures the main challenges the EU is facing. He shares his wisdom on some of the major past, current, and future issues confronting the Union and its member states. View Article
Speech by Commissioner Gentiloni at the European Policy Centre: Reforming EU economic governance for the coming decade : Thirty years ago, the Maastricht Treaty recognised the need for sound public finances and coordinated fiscal policies. The idea was to complement the single monetary policy and avoid economic spillover effects between countries. View Article
Bruegel - The European Commission's fiscal rules proposal: a bold plan with flaws that can be fixed : The European Commission’s proposal for reforming the EU fiscal rules is far-reaching, but its shortcomings need to be addressed. Authorred by Blanchard, Sapir, Zettelmeyer. View Article
MEPs clear way for new sources of EU revenue : New EU revenue based on the Emission Trading System, the Carbon Border Adjustment Mechanism, and the OECD/G20 global corporate tax agreement; Funds urgently needed to repay debts from NGEU recovery fund borrowing; New own resources agreed in legally binding roadmap from 2020 View Article
CER's Tordoir: The European Stability Mechanism is not ready for the next crisis : Eurozone finance ministers just appointed a new head of the European Stability Mechanism (ESM). They should seize the opportunity to turn the ESM into a more useful institution. View Article
Banking Union
SSM's af Jochnik: Banking stability amid macroeconomic uncertainty : ...euro area banks have proven themselves to be resilient to adverse and severe macroeconomic shocks characterised by high uncertainty in recent years, unlike during the global financial crisis. View Article
CEPS: The evolving key risks in the banking sector, and related priorities for the SRB : (Authored by Marco Bodellini / Willem Pieter De Groen / Costanza Russo / Rosa M Lastra / Tinatin Akhvlediani / Barbara Casu) View Article
Capital Markets Union
CEPS: Time to re-energise the EU’s capital markets : Building investable and competitive ecosystems (authored by Apostolos Thomadakis / Karel Lannoo / Niamh Moloney) View Article
Keynote speech by Commissioner McGuinness at European Retirement Week : The current challenging economic environment and how that affects pensions. And how what we're doing in financial services policy can contribute to a stronger pensions sector and better pensions for citizens. View Article
EFAMA: The availability of a real-time consolidated tape in Europe is critical for the success of the CMU : Together with a broad majority of market participants, including the sell-side and alternative trading venues, we have consistently made the case for a real-time tape for equities with the inclusion of pre and post-trade data. View Article
ESMA: Final report - Guidelines on stress test scenarios under the MMF Regulation - 2022 update : Updated guidelines on specifications on the type of the stress tests and their calibration, so that managers of MMFs have the information needed to fill in the corresponding fields in the reporting template mentioned in article 37 of the MMF Regulation View Article
EIOPA consults on cyber component in its insurance stress testing framework : This discussion paper contains a set of theoretical and practical approaches to support the design phase of potential future insurance stress tests with a focus on cyber risk. This should further enrich the bottom-up stress test toolbox with additional elements to be potentially applied in future exercises. View Article
ESMA Consultation Paper Review of the RTS on the information to be provided in an application for authorisation and registration under the B : This consultation paper (CP) explains ESMA’s proposal. Stakeholders are invited to provide feedback on this proposal. The input from stakeholders will help ESMA to finalise its proposed amendments to the RTS. View Article
BDB: EBA/CP/2022/05 Draft Implementing Technical Standards (NPL Transaction Data Templates) : 76 data fields (45 are mandatory) require information which has no equivalent in data already collected to meet other reporting obligations (ANACREDIT, FINREP, ESMA RTS 2020/1124, CRR, IAS/IFRS). It may therefore be assumed that institutions will initially have to collect substantially more data.. View Article
Irish Funds Briefing paper on LDI and recent market events : LDI strategies have worked well for UK DB pension schemes for over 20 years, bringing stability to schemes’ funding ratios. By stabilising the funding ratio of a scheme, the scheme sponsor benefits from more predictable funding costs. View Article
ALFI Survey: Luxembourg private debt industry grows by 45.4% : The annual KPMG Private Debt Fund Survey powered by the Association of the Luxembourg Fund Industry (ALFI) highlights the consistently strong growth momentum of private debt funds domiciled in Luxembourg. View Article
Environmental, Social, Governance (ESG)
Council gives final green light to corporate sustainability reporting directive : Council approved the corporate sustainability reporting directive (CSRD). Companies will soon be required to publish detailed information on sustainability matters... increasing a company’s accountability, prevent divergent sustainability standards, and ease the transition to a sustainable economy. View Article
EFAMA: Corporate sustainability reporting legislation adopted but still some years of uncertainty ahead for sustainable investing : Following in the footsteps of the European Parliament earlier this month, the Council of the EU has now finalised the legislative process by adopting the Corporate Sustainability Reporting Directive (CSRD), a move which is very much welcomed by EFAMA. View Article
AccountancyEurope: FAQs: all you need to know about the Corporate Sustainability Reporting Directive : The CSRD introduces more detailed reporting requirements than its predecessor the Non-Financial Reporting Directive (NFRD). 50,000 companies will now have to comply with the new rules, compared to 12,000 for the NFRD. View Article
ESBG stresses the need for timely assessment of loans with ESG-linked features in its letter to the IASB Chair : The ESBG sent a letter to the International Accounting Standards Board (IASB) Chair, Andreas Barckow. The letter stressed the urgency of for the IASB to deliver the solution for the Solely Payments of Principal and Interest (SPPI) assessment of loans with ESG-linked features on a timely manner View Article
Interoperability between ESRS and GRI Standards good news for reporters : GRI has hailed the European Sustainability Reporting Standards (ESRS) as an important step towards implementing the Corporate Sustainability Reporting Directive (CSRD) and holding companies operating in the EU market accountable for their impacts. View Article
Platform on Sustainable Finance’s report with supplementary advice on methodology and technical screening criteria for the climate .. : This additional advice will be carefully analysed and will inform the Commission’s continued reflections on the matter. The Platform’s advice does not bind the Commission on any decision. View Article
AFME and EY highlight growing investor demand for nature-related finance, but banks face challenges to scale products : The Association for Financial Markets in Europe (AFME) and EY have today published a new report “Into the Wild: Why Nature May be the Next Frontier for Capital Markets”. View Article
Protecting Customers
BETTER FINANCE/ BEUC/ Finance Watch: Joint Letter: Upcoming Retail Investment Strategy: debunking the “advice gap” : BETTER FINANCE ; BEUC and Finance Watch published a public letter to Vice-President Dombrovskis, and Commissioners McGuinness and Reynders, to encourage them to continue with an ambitious approach with regards to the Retail Investment Strategy and the stated goal of creating bias-free advice. View Article
FCA's Shepperd: From Zeroes to Heroes: How culture in financial services can change for everyone’s benefit : FCA cares about culture because this drives conduct: The Consumer Duty will encourage firms to analyse their culture and how that affects their conduct; Firms should offer the right environment for employees of all backgrounds to feel safe in challenging and speaking out. View Article
Fin Tech Regulation
Committee MEPs discuss impact of the FTX cryptocurrency exchange collapse : MEPs said that risks with an unregulated crypto market are not the blockchain technology but governance failures, calling for the rapid implementation of EU rules for crypto. View Article
ECB's Bindseil/ Schaaf: Bitcoin’s last stand : The ECB Blog takes a look at Bitcoin. The apparent stabilisation of bitcoin’s value is likely to be an artificially induced last gasp before the crypto-asset embarks on a road to irrelevance. The latest ECB Blog post looks at where bitcoin stands amid widespread fallout in the crypto markets. View Article
CEPR's Danielsson: The beginning of the end for cryptocurrencies : While crypto currencies are not much of a public concern, they will leave a fine legacy by forcing much-needed reform on the financial system. View Article
Project Syndicate's Harold James: Faking It, Making It, Losing It : The spectacular rise and fall of FTX and Sam Bankman-Fried were driven by effective marketing, trickery, and financial speculation..they bear a striking resemblance to the disastrous eighteenth-century experiment that fueled the Mississippi Company bubble .. the template for all future Ponzi schemes View Articl
Digital finance: Council adopts Digital Operational Resilience Act : Given the ever-increasing risks of cyber attacks, the EU is strengthening the IT security of financial entities such as banks, insurance companies and investment firms. Council adopted the DORA - to ensure the EU financial sector is able to stay resilient through a severe operational disruption. View Article
CPMI and IOSCO report on financial market infrastructures' cyber resilience finds reasonably high adoption of cyber guidance but highlights : The report finds one serious issue of concern and four issues of concern. The serious issue of concern relates to a small number of FMIs not fully meeting expectations regarding the development of cyber response and recovery plans to meet the two-hour recovery time objective (2hRTO). View Article
Economic Policies Impacting EU Finance
Speech by Commissioner Gentiloni at the first EU Tax Symposium : Last year's historic global tax reform, agreed by 136 countries, will bring major improvements - making it fairer and better adapted to the modern economy. To reap the full benefits of this agreement, we must now ensure the implementation of both Pillars of that reform – in Europe and worldwide. View Article
Special report 26/2022: European statistics – Potential to further improve quality : While the auditors give the Commission a passing grade, they also warn of a number of weaknesses. European statistics should be more useful to their users and better tailored to their needs. View Article
Brexit and the City
Bloomberg: Goldman Moves London Traders to Milan in Fresh Brexit Shift : Wall Street firm relocating some of euro swaps trading desk; Headhunters say bankers are drawn by generous tax incentives View Article
Treasury Committee publishes correspondence on proposed regulatory ‘call in’ power : The proposed power would have enabled the Treasury to make, amend or revoke regulators’ rules. View Article
Project Syndicate's Howard Davies: The Regulators’ Revolt : Britain's Conservative government recently sought a "call-in" power that would authorize it “to direct a regulator to make, amend or revoke rules.” But facing full frontal opposition to the plan from the regulators themselves, the government found itself in a hole – and wisely stopped digging. View Article
UK Finance: Global capital markets: the insights behind the numbers : UK Finance and EY explore the key drivers behind the utilisation and competitiveness of UK capital markets. There is a clear appetite and willingness amongst UK policy makers and the regulatory community to address deficiencies in markets regulation. View Article
Brexit
FT: UK’s growth prospects worst among top economies, warns OECD : Global body highlights bleak outlook for country and hits out at government’s energy support View Article
FT: Brexit and the economy: the hit has been ‘substantially negative’ : Economists agree that leaving the EU has made Britain poorer, the only question is the scale of the setback View Article
Encompass: Keir Starmer's post Brexit positioning : The idea of Brexit resurfacing as an issue might well be one that keeps Starmer awake at night. Yet the prospect that the issue of the UK’s relationship with Europe has not been resolved.. critical mass of the electorate could support rejoining the European Union.. a long-term benefit to Labour. View Article
British Chambers of Commerce: Large-scale deregulation not a priority for UK businesses : “They don’t want to see divergence from EU regulations which makes it more difficult, costly or impossible to export their goods and services. ..." View Article
UK and EU: Rejoin vs stay out: Who has changed their mind about Brexit? : ..recent polling showing that a record number of people have changed their minds about Brexit, Paula Surridge and Alan Wager unpack shifting public attitudes, looking at age, education and changing geographic patterns, highlighting that Brexit may continue to shape our politics for some time yet. View Article
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