Welcome to our Gold Friends weekly e-mail.
My highlights of the week: Eurogroup President Donohoe brokered the deal to get the ESM Treaty agreed – opening a credit line for the Single Resolution Fund if (or is it “when”?) the need arises. Clearly, “Brussels” is now thinking more deeply about how to deal with the inevitable surge in loan losses. The Hungarian-Polish veto of the Budget/Next Generation project has triggered thoughts about how to bypass vetoes – potentially re-shaping the nature of the EU in the fullness of time. Moreover, the Council’s agreement to a long-term approach on tax also points to greater co-operation.
As everyone finally stops holding their breath waiting for the Brexit “deal” to be announced – or not – attention is swinging to the technical details such as the impact of EMIR Article 2a. Without an equivalence decision, small or non-financial counterparties may unexpectedly find themselves subject to a different regime. The City is feeling it has been thrown to the lions but now some EU states seem to fear that the UK may gain too much – perhaps precipitating another French veto!
Graham Bishop
Articles from 27 November - 3 December
General Financial Policy
Video conference of the Eurogroup : The Eurogroup agreed to proceed with the reform of the European Stability Mechanism (ESM): to sign the revised ESM treaty and to launch its ratification. View Article
Commissioner Gentiloni at the Eurogroup press conference : "The agreement we reached on the ESM Treaty and on the backstop is good news for the stability and resilience of the euro area and as such it is good news forour citizens and businesses." View Article
Executive Vice-President Dombrovskis at the ECOFIN press conference : "We now need to bring discussions on the Recovery and Resilience Facility to a good conclusion. Our people and businesses are waiting for its funding to flow. It will provide a unique opportunity to push Europe's recovery forward and turn our economies around." View Article
POLITICO: How Europe can bypass Poland and Hungary’s vetoes : EU partners need a credible option to circumvent rule-of-law deviants tying up recovery funds. European partners should prepare for bypass surgery, if necessary, to overcome the blockage by Hungary and Poland of the EU’s urgently needed COVID-19 recovery package. View Article
CER: Judy Asks: Can the EU solve the budget and rule-of-law crisis? : Hungary and Poland have vetoed the next EU budget in protest of a new rule-of-law conditionality. What instruments and treaties can Europe use to circumvent Budapest and Warsaw’s hostage-taking? View Article
Governors and Heads of Supervision commit to ongoing coordinated approach to mitigate Covid-19 risks to the global banking system and endors : The global banking system entered the Covid-19 crisis with ample capital and liquidity, thanks to the Basel III reforms implemented after the GFC. A robust regulatory framework underpins confidence in banks' soundness and helps to maintain a level playing field internationally. View Article
Banking Union
Project Syndicate: European Banking’s Moment of Merger Truth : The 2008-09 GFC left EU Banks saddled with excess capacity, diminished profitability, and tarnished reputations. The COVID-19 pandemic is forcing another sweeping change in the industry. This time, however, the industry's biggest problem is not "too big to fail," but rather "too slow to adapt." View Article
The EBA reactivates its Guidelines on legislative and non-legislative moratoria : The European Banking Authority (EBA) has decided to reactivate its Guidelines on legislative and non-legislative moratoria. This reactivation will ensure that loans, which had previously not benefitted from payment moratoria, can now also benefit from them. View Article
FT: Brussels seeks to help banks offload rising tide of bad loans : Paper will set out ideas for how to tackle forecast increase in corporate distress. Brussels is planning to lay out a raft of proposals in a bid to make it easier for EU banks to offload soured loans as it anticipates the risk of a pandemic-related wave of corporate distress. View Article
Parliament and Council strike a deal on the orderly termination of benchmarks : Negotiators agreed on provisions to ensure EU financial market stability, ahead of the expected cessation of the London Interbank Offered Rate (LIBOR) in 2021. View Article
The EU prepares for the end of LIBOR: the Commission welcomes the agreement reached between the European Parliament and the Council on finan : The European Commission today welcomed the agreement reached by the European Parliament and the Council on important amendments to EU rules on financial benchmarks. View Article
JOINT PRESS RELEASE: 422 arrested and 4,031 money mules identified in global crackdown on money laundering : 422 arrested and 4,031 money mules identified in global crackdown on money laundering; EBF partners with Europol, FinTech FinCrime Exchange, INTERPOL and Western Union in European Money Muling Action View Article
IFAC and ICAEW Release Third Installment of Six-Part Anti-Money Laundering Educational Series : Together with ICAEW, The International Federation of Accountants (IFAC) today released the third installment in its Anti-Money Laundering: The Basics educational series: Installment 3: Company Formation. View Article
Capital Markets Union
CEPS: Is Europe’s Capital Markets Union now in sight? : The Capital Markets Union (CMU) project has now taken on new relevance. Mobilising private funding for recovery coupled with sustainable and digital finance strategies is sorely needed View Article
EFAMA: Joint Association letter to the EC on the equivalence of UK derivatives regulated markets under EMIR Article 2a : ..equivalence decisions are still outstanding in other critical areas of financial services, including in relation to UK regulated markets under EMIR Article 2a. This is a standalone issue, for EU EMIR purposes only, and can be addressed independently... View Article
ISDA: Letter on Equivalence of UK Derivatives Regulated Markets Under EMIR Article 2a : ISDA co-signed a joint trade association letter asking the European Commission to issue an equivalence determination under EMIR Article 2a for UK regulated markets. View Article
FT: Dispute brews between EU and currency traders on Mifid reform : FX professionals warn of an exodus of trading from European centres if rules are tightened View Article
EFAMA ANNUAL ASSET MANAGEMENT REPORT: THE INDUSTRY BELLWETHER : EFAMA publishedthe 12th edition of its Asset Management Report??*. The report aims to provide a unique and comprehensive set of facts and figures on the state of the industry at the end of 2018 but also to highlight the fundamental role of asset managers in the financial system and wider economy. View Article
EIOPA consults on insurers’ key performance indicators on sustainability for non-financial reporting : The European Insurance and Occupational Pensions Authority (EIOPA) started today a consultation on the relevant ratios to be mandatorily disclosed by insurers and reinsurers falling within the scope of the Non-Financial Reporting Directive as well as on the methodologies to build those ratios. View Article
Insurance Europe: EIOPA must not undermine the ability of insurers to use reinsurance to manage risk : Insurance Europe has responded to a consultation conducted by the European Insurance and Occupational Pensions Authority (EIOPA) on its draft supervisory statement on the use of reinsurance risk mitigation techniques (RMT). View Article
CRE: Covid-19 to elevate risk management but insurance found lacking, finds Ferma survey : According to the survey of more than 300 risk managers in 21 European countries, the majority of respondents expect risk management to play a bigger role post-Covid-19. Three quarters of risk managers believe demand for risk management will grow as a result of the pandemic. View Article
EIOPA launches discussion paper on a methodology for integrating climate change in the standard formula : The European Insurance and Occupational Pensions Authority (EIOPA) published a discussion paper on a methodology for the potential inclusion of climate change in the Solvency II standard formula when calculating natural catastrophe underwriting risk. View Article
Environmental, Social, Governance (ESG)
GRI: Sustainability reporting is growing, with GRI the global common language : GRI has welcomed research that shows a record number of companies, spanning sectors and geographic regions, are voluntarily choosing to disclose their sustainability impacts – with the GRI Standards the most widely used for reporting. View Article
Bruegel: Green certificates: a better version of green bonds : "... We propose an alternative: issuance of regular bonds with attached green certificates that ensure earmarking for green purposes. The new design would reduce financing costs and in turn would provide incentives to start a greater number of environmentally-friendly projects." View Article
Deloitte: We comment on the IFRS Foundation Trustees' sustainability consultation : In our comment letter, we stress that we support standard-setting at a global level because global issues need global solutions. Supply and value chains are global and, therefore, face global risks and require a global approach. View Article
EFRAG: JEAN-PAUL GAUZÈS IS SEEKING INPUT ON HIS PRELIMINARY PROPOSALS RESULTING FROM HIS EC AD PERSONAM MANDATE ON NON-FINANCIAL REPORTING S : ?EFRAG President Jean-Paul Gauzès is inviting all interested stakeholders to contribute input to his preliminary proposals regarding changes to the governance structure and financing of EFRAG if the latter were entrusted with the development of EU non-financial reporting standards. View Article
Fin Tech Regulation
ECB's Panetta: Money in the digital era : ECB Blog: In recent years, the digital revolution has led people to significantly change their payment habits – tapping a card, swiping a phone, or using a smartwatch to pay is becoming increasingly common. View Article
EP: FinTech Working Group monitors benefits and threats of digital finance : In a meeting dedicated primarily to analysing the benefits, risks and challenges of global stablecoins, MEPs quizzed the invited speakers about the prospects of a digital euro. View Article
Economic Policies Impacting EU Finance
European Council: Fair and effective taxation: Council adopts conclusions : EU member states want to ensure that EU tax policy remains fit for purpose and results in fair and effective taxation in the increasingly globalised and digitalised economy of the 21st century. View Article
Brexit
EURACTIV: Members worry EU will bend as Brexit talks run out of road : EU member states on Tuesday (1 December) warned European negotiators not to lose their nerve in negotiations with Britain, in a rare reproach as post-Brexit talks entered their most delicate phase. View Article
Bloomberg: France Floats Veto Threat Over Brexit Deal as EU Feels Strains : EU ambassadors warn Barnier not to give too much away in talks; Negotiating teams trying to complete deal within next few days View Article
Federal Trust: Starmer stymied? Labour and the future of UK-EU relations : The Parliamentary Labour Party is currently agonising on whether it will vote in support of the future relationship agreement that the UK Government is negotiating with the EU.... Labour is being forced to confront Brexit issues which it has sought to dodge under the leadership of Keir Starmer. View Article
LSE: A peculiar definition of sovereignty is the root cause of a failed Brexit : As we enter the last weeks of negotiation between Britain and the EU, things are not looking good. All the possible outcomes look both painful and expensive for the UK. How did we get here? At the root of the problem is the British government’s definition of sovereignty... View Article
Bloomberg: London ‘Thrown to the Lions’ as Brexit Finance Deal Unlikely : Growing signs of trading, assets and people moving to Europe; London’s long-standing advantages may help soften Brexit. The golden age of the City of London began with a big bang. It’s ending with a whimper. View Article
FT: Friction hampers EU drive to switch clearing from the UK : Eurozone sovereign debt and repo market work has shifted but other targets have met resistance. Since the Brexit referendum four years ago, politicians and policymakers in Europe have worried that responsibility for market stability of the eurozone would lie outside the bloc. View Article
Bloomberg: The City of London's Supremacy Goes Very Deep : The risk for Europe’s post-Brexit trading infrastructure is that liquidity is dispersed in several small national pools rather than matching London’s depth. View Article
NatWest's Green: A note on the implications of Brexit for the delivery of financial services to corporates across Europe : Most of the analysis of the impact of Brexit on financial services has focussed on the consequences for the providers of financial services rather than the end-users, the customers. View Article
Accountancy Europe: Brexit, VAT and customs duty – prepare now : Accountants are instrumental in helping their clien.. so it is important that accountancy bodies make their members aware of the fundamental changes in the manner in which trade will take place..This Q&A provides practical information on the main changes known so far. View Article
1 month to go: FCA reminds firms to be ready for end of transition period : When the transition period ends at 11pm on 31 December, firms will need to be prepared for a number of changes to the regulatory environment in which they operate. View Article
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