Welcome to our Gold Friends weekly e-mail.
My highlights of the week: Poland and Hungary are attempting to veto the EU budget and the Next Generation recovery plan – Are they too late? Can they be circumvented? In a major step towards the reality of the Single Market for citizens, the Parliament approved rules for "collective redress" against “mass harm”. The ECB published its latest Financial Stability Review with much to review! EFAMA produced the evidence to rebut suggestions that EU Money Market Funds were “bailed out” by the central bank.
ESMA has drawn together some of the mass of new regulatory reporting to produce its first, annual survey of EU capital markets – with fascinating insights for geeks like me including data that shows EU capital markets are not nearly as beholden to the UK as Brexiteers claim. On that inevitable topic, ESMA has also declined to extend the Derivative Trading Obligation (DTO) beyond the end of the transition as it seems that key liquidity providers have already set up on the mainland. However, with just 36 days to go, uncertainty reigns supreme.
Graham Bishop
Articles from 20-26 November 2020
General Financial Policy
MEPs call on EU leaders to end MFF deadlock without giving in on rule of law : EP group leaders and the Commission advise Hungary and Poland to take the EU to Court on rule of law, instead of penalising EU citizens by blocking the budget. View Article
Project Syndicate - Soros: Europe Must Stand Up to Hungary and Poland : The EU cannot afford to compromise on the rule-of-law provisions it applies to the funds it allocates...How the EU responds to the challenge to those provisions now posed by Hungary and Poland will determine whether it survives as an open society true to the values upon which it was founded. View Article
EP: EU consumers will soon be able to defend their rights collectively : Consumers to be better protected against domestic and cross-border “mass harm” ; Safeguards against abusive lawsuits by using “loser pays principle”; Designated consumer organisations to launch actions on behalf of consumers View Article
CRE: Companies face heightened legal risk as EU adopts collective redress rules : The European Parliament as adopted rules that will allow consumers to seek collective redress across the bloc against companies that breach consumer rights, raising the risk of litigation for companies operating in the region. View Article
EPRS: InvestEU programme: The EU's new investment support scheme : Policy Brief: The InvestEU programme is a single investment support mechanism for the 2021-2027 period. It would bring together various EU financial instruments for internal policies that are currently supported by different funds and programmes of the EU budget. View Article
IMF Blog: Time is Ripe for Innovation in the World of Sovereign Debt Restructuring : Investors trade the guaranteed payout of a fixed-income investment for an equity position... In other words, investors accept to share risk. Could a similar mechanism be applied when a sovereign nation has to restructure its debt, tying payouts to its future economic performance? View Article
ECB review sees increased medium-term vulnerabilities for corporates and banks : Dispersed economic and financial market impact on countries and sectors could lead to concentration of risks in some areas; ...Bank profitability prospects remain weak with losses potentially materialising with a lag relative to the recovery View Article
Banking Union
EBA: Banks report a significant use of COVID-19 moratoria and public guarantees : It is expected that upon expiry of EBA-compliant moratoria there might be increases in forborne loans and non-performing loans and therefore institutions and supervisors should monitor closely this effect.Public guarantee schemes (PGS) have supported mainly loans to non-financial corporations (NFC) and were material in a few countries. View Article
SUERF/Deutsche bank: Surge in corporate insolvencies hitting German banks : Nonetheless, corporate insolvencies will rise as a result of the deep recession. Because the government has temporarily waived the obligation to file for bankruptcy, insolvency numbers have continued to fall until now but this may change soon. View Article
ECB Working group on euro risk-free rates launches two public consultations on fallbacks to EURIBOR : Various fallback rates proposed, based upon the euro short-term rate (€STR); Potential events described that could trigger fallbacks; Stakeholders asked to provide their views by 15 January 2021 View Article
SSM's Fernandez-Bollo: Facing up to the challenges posed by COVID 19 and Brexit : Presentation by Edouard Fernandez-Bollo, Member of the Supervisory Board of the ECB, at a virtual meeting of the Working Group Financial Services by Kangaroo Group View Article
EBA publishes Report on benchmarking of national insolvency frameworks across the EU : The Report introduces for the first time a set of benchmarks for bank loan recovery and identifies areas where the divergence in the national insolvency regimes is wider. In addition, the Report provides an overview of the characteristics of insolvency regimes that help explain the differences across the EU. View Article
Joint Trade Associations Paper Requesting an Extension of the Third-country Benchmarks Transition Period : ISDA and 13 other trade associations have published a paper expressing concern that the EU Benchmarks Regulation (BMR) third-country benchmarks regime transition period should be extended to end-2025. View Article
Results of the EPC poll on future share of Instant Credit Transfer (SCT Inst) volumes : Substantially more than half of the voters (59%) agreed on a predicted share of volumes in total Credit Transfer volumes above 20% by end-2022 v 7.5% currently. View Article
Capital Markets Union
IOSCO Annual Meeting addresses the impact of COVID 19 and other critical matters on securities markets : The committees discussed the progress made on IOSCO priority work on sustainable finance, financial stability risks, market fragmentation, asset management and retail market conduct. View Article
ESMA's Ross: Future challenges for fund managers : Two topics that I am conviced are also very important for the future of the asset management sector (and beyond): (i) delegation, in light of the looming end of the Brexit transitional period and (ii) sustainable finance. View Article
CEPS: Europe’s Capital Markets puzzle : Creating an attractive framework for more market financing in Europe is proving to be an increasingly complex puzzle. The EU and other European states are battling on several fronts, but without the unity and vision that is needed to move forward. View Article
ESMA: EU securities markets - ESMA Annual Statistical Report : ESMA presents its first statistical report on European securities markets.. using new regulatory data sources to provide for the first time a comprehensive overview of the EEA markets, including the number, characteristics and volumes traded of the instruments offered to trade by EEA trading venues. View Article
ESMA sets out its final view on the derivatives trading obligation (DTO) : The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has released a public statement that clarifies the application of the European Union’s (EU) trading obligation for derivatives (DTO) following the end of the UK’s transition from the EU on 31 December 2020. View Article
ICMA responds to ESMA Consultation Paper on MiFID II/ MiFIR review on the functioning of Organised Trading Facilities (OTF) : ICMA has provided feedback regarding ESMA’s surprisingly wide scoped consultation on the functioning of the Organised Trading Facility regime. The response was based on the views of members ICMA’s OTF taskforce representing buy-side and sell-side investment firms, trading venues and software and... View Article
EBA calls on the European Commission to harmonise the significant risk transfer assessment in securitisation : The European Banking Authority (EBA) publishes today a Report on significant risk transfer (SRT) in securitisation transactions, which includes a set of detailed recommendations to the European Commission on the harmonisation of practices and processes applicable to the SRT assessment. View Article
PCS: important announcements from the EBA on SRT and the FCA on STS : One of the developments of recent years has been the beginning of a return by securitisation to its roots as a capital management tool for banks. The new legislative proposal on STS for synthetics, currently in trilogue in Brussels, is one part of this. View Article
Insurance Europe: Outdated VAT rules for financial services undermine EU single market and must be updated urgently : Insurance Europe has today published its response to the European Commission’s roadmap for the review of VAT rules for financial and insurance services. View Article
CRE: IAIS calls for patience on global regs as risk associations urged to step in : Manuela Zweimueller, head of supervisory practices at the International Association of Insurance Supervisors (IAIS), has told multinational insurance buyers not to expect the supervisory body to magically fix problems with global programme regulations anytime soon, but said it is starting to raise awareness of various issues with regulators. View Article
IOSCO Reviews Money Market Funds Recommendations and Events Arising from the March 2020 Market Turmoil: IOSCO today published a diagnostic report analyzing the events that occurred in the Money Market Funds (MMFs) sector during the market turmoil in March 2020. Simultaneously, IOSCO published a thematic review assessing the implementation of selected IOSCO recommendations issued in 2012 to strengthen the resilience of MMFs globally. View Article
EFAMA report invalidates notion that central bank interventions ‘bailed-out’ MMFs : EFAMA published a report entitled ‘European MMFs in the Covid-19 market turmoil: Evidence, experience and tentative considerations around eventual future reforms’. View Article
EFAMA’s REPLY TO ESMA’s CONSULTATION PAPER ON MiFIR REVIEW REPORT ON THE OBLIGATIONS TO REPORT TRANSACTIONS AND REFERENCE DATA : We disagree with an extension of its scope to UCITS’ and AIFs’ management companies to the scope of the reporting requirements imposed by MiFIR, Art. 26. View Article
ESMA CONSULTS ON DEROGATION CRITERIA FOR DATA REPORTING SERVICES PROVIDERS : Following the ESAs’ Review, authorisation and supervision of data reporting services providers (DRSP) will move from competent authorities to ESMA. View Article
ESAs propose to adapt the EMIR implementation timelines for intragroup transactions, equity options and novations to EU counterparties : ESMA has also published a final report with new draft RTS proposing to amend the three Commission Delegated Regulations on the clearing obligation under EMIR. View Article
Environmental, Social, Governance (ESG)
EFAMA publishes report on the level and nature of sustainable investment by the European asset management industry : EFAMA collaborated with its member associations and strategy consultants at INDEFI to estimate the level and nature of ESG investment by European asset managers at the end of 2019... View Article
Investment managers place stewardship at the heart of sustainable growth : The HM Treasury-led Asset Management Taskforce has today outlined a series of twenty recommendations to place stewardship at the heart of an agenda to ‘build back better’ post-coronavirus. View Article
IIRC and SASB announce intent to merge in major step towards simplifying the corporate reporting system : Creating a unified organization, the Value Reporting Foundation, that provides investors and corporates with a comprehensive corporate reporting framework across the full range of enterprise value drivers and standards to drive global sustainability performance. View Article
IASB: Educational material: the effects of climate-related matters on financial statements prepared applying IFRS Standards : The IFRS Foundation has today published educational material to highlight how existing requirements in IFRS Standards require companies to consider climate-related matters when their effect is material to the financial statements. View Article
IIGCC: Investor Expectations for Paris-aligned Accounts : Financial statements that leave out material climate impacts misinform executives and shareholdersand thus, result in misdirected capital. View Article
IPE: EC taxonomy consultation triggers ‘environmental integrity’ warnings : The European Commission has launched a public consultation on the first two sets of detailed screening criteria under the EU sustainability taxonomy regulation, triggering warnings that they are at risk of deviating from scientific evidence. View Article
Protecting Customers
EURACTIV: UK firms face hefty compliance costs without EU data deal, report warns : British firms face a bill of up to £1.6 billion if Boris Johnson’s government fails to convince the EU to grant an adequacy decision allowing dataflows to continue, according to a new report published by the New Economics Foundation thinktank and University College. View Article
Invest Europe: Europe needs a new deal on investor protection : The Agreement for the Termination of IntraEU Bilateral Investment Treaties (BITs) was signed by 23 EU Member States. This far-reaching piece of EU legislation may well come back to haunt private equity firms: View Article
Friends' Standard Services
168th Brussels 4 Breakfast : Brexit talks, 'equivalence', the Recovery Fund, CMU and payments... View Article
Brexit
FT: Europe’s finance sector hits ‘peak uncertainty’ over Brexit : City firms and regulators in the dark over future market access as talks stall. Europe’s financial sector has reached “peak uncertainty” as regulators and banks rush to stave off the harshest effects of the UK leaving the single market with just 36 days left before the end of the Brexit transition View Article
Federal Trust: Brexit, the City and equivalence : As discussions on an EU/UK trade deal post transition are now nearing the end, the City of London continues to worry about where it will be left from 1st January 2021. Financial services are not part of the main FTA agreement as had been hoped. View Article
Federal Trust: Johnson’s Brexit Dilemma: No good outcome in sight : Shortly after the EU referendum of 2016, a “former Conservative minister” supposedly remarked that Brexit would force the Conservative Party to choose between destroying the country and destroying itself. View Article
Julian King: A UK/EU deal is needed for Northern Ireland : There’s been a lot of speculation about the impact of the Biden presidency on Brexit and for the island of Ireland. But the key issue for Northern Ireland remains whether there’s a deal on the future relationship between the UK and the EU in the coming days. View Article
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