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My highlights of the week: SSM is now talking of €1.4 trillion NPLs in the adverse scenario - worse than the last crisis. Hardly surprising as the GDP decline is set to be about three times the 2007/9 decline. The CMU action plan was announced - the fourth iteration of the concept since the FSAP in early 2000s. Strong support amongst all sectors of finance but criticism from retail representatives that protecting retail investors – who actually provide all the money – is still not central. Another action plan – this time on Digital Finance – was launched and also gained strong support across the financial services industry. ESG may be taking another step into “mainstream” as the IFRS Foundation launched a consultation on whether IFRS – used in 140 countries – should develop sustainability standards.
The Brexit crunch looms ever-closer and the FT Editorial Board wrote “The City must not be forgotten in the Brexit talks” – but several years too late as the Government has never listened and the foreseeable, natural consequences are now swinging into action. Next up for Government inaction: the motor industry.
Graham Bishop
Articles from 25 September - 1 October
General Financial Policy
Project Syndicate: Europe’s Recovery Gamble - Pisani-Ferry : If the EU's new recovery program succeeds, it may ultimately pave the way for the establishment of a fiscal union. But if the EU funds fail to deliver on the plan's stated goals, or if political interests prevail over economic necessity, federal aspirations will be dashed for a generation. View Article
Bruegel: Will European Union countries be able to absorb and spend well the bloc’s recovery funding? The European Union is raising large amounts to pass on to its members. But absorption of EU funds is typically slow and some countries might struggle to spend what they can get, even if they will have broad freedom to design spending programmes. View Article
SSM's Enria: Interview with RTE Morning Ireland -- Covid, payment breaks, Brexit : At this time of uncertainty, how are the banks coping with the COVID-19 shock, and are they prepared for Brexit?.... In the severe scenario, however, up to €1.4 trillion of non-performing loans would potentially be generated, which is even higher than what we experienced in the last crisis. View Article
Banking Union
EBA launches EU-wide transparency exercise : The EBA launched today its 7th annual EU-wide transparency exercise, with the objective of providing market participants with updated information on the financial conditions of EU banks as of June 2020, thus assessing the preliminary impact of the COVID-19 crisis on the sector. View Article
EBA publishes work programme for 2021 : The European Banking Authority (EBA) published today its annual work programme for 2021, describing the activities and tasks of the Authority for the coming year and highlighting its key strategic areas of work. View Article
ECB Banking Supervision’s role in Anti-Money Laundering/ Combating the Financing of Terrorism (AML/CFT) : Presentation by Edouard Fernandez-Bollo, Member of the Supervisory Board of the ECB, in an AML roundtable at Copenhagen Business School View Article
Basel Committee approves annual G-SIBs assessment, updates workplan to evaluate post-crisis reforms : Basel Committee discusses Covid-19 risks to banking system; reiterates importance of using capital and liquidity buffers. Approves annual assessment exercise for global systemically important banks (G-SIBs). View Article
Capital Markets Union
Capital Markets Union: Commission to boost Europe's capital markets : The European Commission has today published a new, ambitious Action Plan to boost the European Union's Capital Markets Union (CMU) over the coming years. The EU's top priority today is to ensure that Europe recovers from the unprecedented economic crisis caused by coronavirus. View Article
AFME: now it’s time to deliver on the Capital Markets Union : AFME has welcomed the publication of the European Commission’s Capital Markets Union Action Plan published today. View Article
Capital Markets: EBF salutes the EU Commission’s ambitious CMU Action plan: The European Banking Federation today expresses it support for the European Commission action plan on Capital Markets Union (CMU) proposed today, based on the High-Level Forum’s recommendations published in June 2020. View Article
Association of German Banks welcomes plans for capital markets union : Economy needs more capital as a result of the pandemic, Commission sets out important key points, Plans should be swiftly implemented View Article
Insurance Europe: CMU offers major opportunity for EU insurers to enhance long-term investor role, if EC fixes regulatory obstacles in Solve : “The CMU offers a significant opportunity for Europe’s insurers to play an even bigger role in providing much needed long-term investment to underpin recovery and growth in Europe, if problems with our regulatory framework, Solvency II, are fixed...." View Article
EFAMA: An ambitious CMU Action Plan that will need strong political support from Member States : The new CMU Action Plan adopted today by the European Commission, which largely builds on the recommendation of the CMU High-Level Forum, is a milestone in the journey towards the realisation of this ambition for Europe. View Article
Better Finance: All Talk, Little Action: European Commission releases watered down Capital Markets Union (CMU) Action Plan : DG FISMA published a third action plan to build a Capital Markets Union (CMU) – this time for “people and businesses” - which sets 16 policy and regulatory objectives in order to “finally complete the Capital Markets Union”. View Article
EuropeanIssuers Welcomes the “Capital Markets Union for people and businesses-new action plan” : EuropeanIssuers has issued a press release welcoming the “Capital Markets Union for people and businesses-new action plan” published on September 24 by the European Commission. View Article
Goldschmid: Capital Markets Union New Action Plan “Errare humanum est – perseverare diabolicum” : The European Commission published a Communication entitled “A Capital Markets Union for people and businesses-new action plan”. This is the fourth iteration of a process initiated in the early 2000’s under the name of the Financial Services Action Plan (FSAP). View Article
ICMA publishes discussion paper on Transparency and liquidity in the European bond markets : The state of liquidity in the European bond markets has been hotly debated for a number of years, with the growing realization that due to a culmination of factors market liquidity has been in serial decline for more than a decade. View Article
CRE: EC starts work on pan-European pandemic risk transfer solution : Commercial Risk Europe has learned that the EC is setting up a working group to deliver risk transfer solutions for pandemics and other cat risks, which will consider a pan-European private-public pool with EU funding at the very top. View Article
FCA:Update on Business interruption insurance test case appeals process : The deadline for parties to the FCA’s Business interruption insurance test case to file a 'leapfrog' application to appeal to the Supreme Court any aspects of the High Court’s Judgment was yesterday, Monday 28 September 2020. View Article
BIS: Margin requirements for non-centrally cleared derivatives : The 2007-09 Great Financial Crisis exposed structural weaknesses in the over-the-counter (OTC) derivatives market. This led the Group of Twenty (G20) to initiate a reform programme to reduce the systemic risk posed by OTC derivatives. View Article
Environmental, Social, Governance (ESG)
IASB: IFRS Foundation Trustees consult on global approach to sustainability reporting and on possible Foundation role : The Trustees of the IFRS Foundation have published a Consultation Paper to assess demand for global sustainability standards and, if demand is strong, assess whether and to what extent the Foundation might contribute to the development of such standards. View Article
IFAC Applauds IFRS Consultation on Sustainability Standards Board : IFAC, the global voice of the accounting profession, applauds the IFRS Foundation Trustees in issuing their Consultation Paper on Sustainability Reporting. This marks a critical step on the path towards a global solution to sustainability reporting... View Article
IPE: ‘Breakthrough’ as IFRS body proposes sustainability standards board : IFRS Foundation, the organisation behind financial reporting standards used worldwide, has launched a consultation to assess appetite for global sustainability reporting standards and what role, if any, it might play in the development of any such standards. View Article
CDSB: Open Letter to Erik Thedéen, Director General of Finansinspektionen, Sweden, Chair of the Sustainable Finance Task Force of the IOSCO : CDP, the Climate Disclosure Standards Board (CDSB), the Global Reporting Initiative (GRI), the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB) have written an open letter. View Article
OECD: More efforts needed from governments, regulators and business to unlock full potential of sustainable finance : Governments and regulators should urgently work together to improve the data used for ESG investing, according to a new OECD report. The OECD Outlook 2020 says that ESG investing has grown steadily in recent years, with ESG ratings, indices and other financial products proliferating to meet demand. View Article
Protecting Customers
VOX: Regulatory export and spillovers: How GDPR affects global markets for data : The EU’s GDPR came into effect in 2018 to tackle issues of privacy and personal data. Looking at over 110,700 websites before and after the introduction of the regulation, this column examines its effect on non-EU-based websites and on other policy domains, such as competition or trade policy. View Article
Fin Tech Regulation
Digital Finance Package: Commission sets out new, ambitious approach to encourage responsible innovation to benefit consumers and businesses : The Commission adopted a new Digital Finance Package, including Digital Finance and Retail Payments Strategies, and legislative proposals on crypto-assets and digital resilience. It will boost Europe's competitiveness and innovation... paving the way for Europe to become a global standard-setter. View Article
EBF: EU digital finance package is major step forward : Today’s European Commission adoption of a comprehensive package on digital finance is a major step towards the comprehensive regulatory framework for financial services that will help make the European Union fit for the digital age, according to the European Banking Federation. View Article
ESBG: EU Digital Finance Package: Ambitious, sweeping : ESBG welcomes the objective of the Digital Finance Package released yesterday by the European Commission to foster competitiveness and innovation in the European financial sector. View Article
Insurance Europe: Digital Finance Strategy for the EU opportunity to boost innovation in insurance to benefit customers : “As consumers embrace new and innovative digital solutions, the insurance industry continues to strive to meet their expectations and use new technologies to better serve its customers...." View Article
MEPs spell out their priorities for the Digital Services Act : MEPs’ demands on how digital services, including online platforms and marketplaces, should be regulated were set out in a vote in the Internal Market Committee on Monday. View Article
Economic Policies Impacting EU Finance
POLITICO: Vestager faces risks in potential appeal of Apple ruling : EU competition chief Margrethe Vestager seems to have no intention of letting go of her €13 billion Apple case, but a potential appeal of the July court verdict against her is fraught with risk, both legal and political. View Article
Brexit
Bloomberg: U.K. Warned of ‘Consequences’ of Splitting From EU Finance Rules : McGuinness comments on Brexit after nomination as EU regulator; EU preparing for a no-equivalence outcome from talks, she says. View Article
FT: The City must not be forgotten in Brexit talks : UK finance has a vital role to play in delivering ‘levelling up’ agenda....While the headlines from the trade talks have been about fisheries and state aid, the City of London is one of Britain’s few global success stories — and an almost indispensable source of tax revenues. View Article
Financial stability: Commission adopts time-limited decision giving market participants the time needed to reduce exposure to UK central counterparties : On 1 January 2021, the UK will leave the Single Market. Today's temporary equivalence decision aims to protect financial stability in the EU and give market participants the time needed to reduce their exposure to UK CCPs. View Article
IPE: Pension funds rush to move UK derivatives contracts to EU : Pension funds in the European Union are facing the dilemma of whether to transfer their interest rate swap contracts with UK-domiciled banks to the EU. View Article
Bloomberg: Brexit Prompts 7,500 Finance Jobs, $1.6 Trillion to Leave U.K. : Financial services firms operating in the U.K. have shifted about 7,500 employees and more than 1.2 trillion pounds ($1.6 trillion) of assets to the European Union ahead of Brexit -- with more likely to follow in coming weeks, according to EY. View Article
BusinessEurope: EU-UK: time is running out, a deal is needed urgently : There might not be enough time to conclude and ratify a deal in time View Article
FT: EU won’t grant preferential trade terms to UK car industry, admits Frost : Chief Brexit negotiator says Brussels not willing to be flexible on zero-tariff access to bloc.The British car industry will face new barriers exporting to Europe even if a UK-EU trade agreement is agreed later this year, the UK’s chief Brexit negotiator has admitted. View Article
Federal Trust: Brexit and Northern Ireland – a Different United Kingdom : Northern Ireland will mark 100 years of its existence on the 3rd of May 2021. Meantime the Government of the Republic has launched a radical new policy calling for “A Shared Island”. This new emphasis on SHARING points to a United Ireland as an aspiration rather than a policy. View Article
POLITICO: Brexit: UK’s Internal Market Bill passes with ease : The U.K.'s controversial Internal Market Bill easily cleared its final hurdle in the House of Commons on Tuesday night. Bill will now go to the House of Lords after a tiny rebellion failed to prevent its passage. View Article
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