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My highlights of the week: By a twist of fate, we mark the death of Valery Giscard d’Estaing by celebrating his contribution to European integration just as it becomes inevitable that the UK will leave the EU in the worst possible manner. Brexiteers will not recognise that the EU also has sovereignty: the right to decide on the standards of products sold to its citizens. However, it looks hopeful that the EU has surmounted another major challenge to its integration as Poland and Hungary seem ready to back down from vetoing the Budget and Next Generation deals – discovering that “the veto” is no longer as powerful a weapon as it used to appear. Banking problems are never far away as SSM highlighted that NPL standards are “all over the place”, and a conflict has surfaced between releasing capital buffers and MREL. EFAMA pointed out that Art 8 of the Taxonomy Regulation requires investors to report sustainable investments in the year before investee companies report the underlying data.
The grim realities of Brexit close in: problems of UK/EU data transfer, banking passport ceases, STS securitisations from the UK lose that status…
Graham Bishop
Articles from 4 -10 December, 2020
General Financial Policy
BBC Brexit: Trade deal now looking remote : That now seems the likely outcome of months of talks designed to create a smooth path for the country towards a different future - a deal that, in theory, would ease the junction from membership of a huge trading bloc to a world outside. View Article
Fondation Robert Schuman : Tribute to Valéry Giscard d'Estaing - a great European : Valéry Giscard d'Estaing was a great president and a great European, to whom the Robert Schuman Foundation was close, and with whom it often had the privilege to work. He honoured us with shared convictions. Europe owes him a lot. View Article
Bloomberg: Poland, Hungary Say Deal Struck on $2.2 Trillion EU Stimulus : Deputy premier in Warsaw says deal reached on spending plan; Germany says a deal still needs buy-in from all member states View Article
Federal Trust: Reflections on the future of Europe - Can the EU function as a democracy without forming a state? Jaap Hoeksma : Since its foundation in the middle of the previous century, the EU and its predecessors have been preoccupied with the question whether they should become a federal state or a confederal union of states. View Article
Bruegel: Thinking big: debt management considerations for the EU’s pandemic borrowing plan : If not handled correctly, the European Union’s transition to take on a new role as an issuer of public debt risks crowding out existing markets. Managing that transition correctly is almost as big a challenge as spending the money itself. View Article
Codogno/Galli: The reform of the ESM is not perfect, but for Italy, it can only have advantages : Almost two and a half years ago, we expressed on these columns some fears about the preparatory work for the reform of the ESM, and in particular on the Franco-German Meseberg declaration, which provided the reference framework for the reform then submitted to the Euro summit on June 28, 2018. View Article
Banking Union
ECB warns banks are ‘all over the place’ on bad loan preparations : Europe’s top banking supervisor worried region’s biggest lenders ill-prepared for pandemic fallout View Article
FT: Bank capital buffers aren’t working : Danmarks Nationalbank Governor: Regulators must rethink overlapping Basel III requirements before the next crisis. We must all review our regulations to make sure that the capital buffers can serve their purpose and genuinely allow banks to absorb losses when the next crisis hits. View Article
SSM: Bank boards and supervisory expectations : I welcome the FBF’s initiative to bring together professionals from the financial industry to exchange views on the challenges faced by bank boards and discuss how they can most effectively oversee the management of banks. View Article
Single Resolution Board publishes MREL dashboard : The Single Resolution Board (SRB) has today published an MREL dashboard which will be followed by regular quarterly reports. The dashboard is designed to give a comprehensive overview of the Minimum Requirement for Own Funds and Eligible Liabilities (MREL) across the banks under the SRB’s remit. View Article
EURACTIV: Commission eyes new proposal to unblock deposit insurance scheme : The European Commission is considering tabling a new proposal on the European Deposit Insurance Scheme (EDIS) in a bid to break the long-running deadlock and complete the banking union, a Commission official has said. View Article
Bruegel: Can the gap in the Europe’s internal market for banking services be bridged? : The European Union has made significant progress to a more unified banking market but frictions remain between euro and non-euro countries. Without a coordinated approach to remaining issues in completing banking union, the gap could widen. View Article
SRB publishes guidance on bank mergers and acquisitions : The Single Resolution Board today publishes a paper outlining its expectations for how banks engaging in mergers and acquisitions (M&As) can ensure resolvability. View Article
Council endorses new rules addressing cessation of financial benchmarks : As one of the first jurisdictions worldwide, the EU is putting in place a framework to ensure a smooth transition when financial benchmarks are terminated. View Article
BIS: Tools for managing banking distress: historical experience and lessons for today : We analyse the effectiveness of policy tools for large-scale banking distress and draw lessons for today. The depth of recessions following banking distress depends both on the speed with which tools were deployed and their type and on the macro-financial vulnerabilities. View Article
Capital Markets Union
AFME's Farkas: How Have Europe’s Capital Markets Evolved Since the Launch of the CMU Project? In October, AFME, in partnership with 10 other organisations, published a report that provides context and evidence on how Europe’s capital markets performed in the first half of 2020. Statistics used in this piece regularly reference this document. View Article
ECON: COVID-19 recovery deal: balance investor protection and firms’ compliance costs : Economic and Monetary Affairs Committee negotiators struck a deal so that EU companies can access a diverse range of funding and support the post-COVID-19 recovery. View Article
Targeted consultation on the review of Regulation on improving securities settlement in the European Union and on central securities deposit : The Commission is interested in the views of a wide range of stakeholders, in particular those participating in the settlement process (e.g. CSDs, issuers, participants in securities settlement systems, CCPs, fund managers, investors), ... View Article
PCS: A new ESAs statement and Brexit – Chronicles of a Death Foretold : The Joint Committee of the ESAs has issued a statement clarifying the impact of Brexit on STS. It just confirms what we knew: existing STS transactions with a UK originator or sponsor or special purpose vehicle will cease to be STS in the hands of European Union investors. View Article
DTCC: Understanding the Impact of CSDR : DTCC recently surveyed over 400 financial market participants to analyze key strategic and operational issues as firms prepare for the implementation of the Central Securities Depositories Regulation’s (CSDR) Settlement Discipline Regime (SDR). View Article
Insurance Europe: ICS treatment of infrastructure and strategic equity investments should better reflect risk posed to insurers : Insurance Europe has published its response to a questionnaire conducted by the International Association of Insurance Supervisors (IAIS) on infrastructure and strategic equity investments. View Article
IAIS AGM and 27th Annual Conference reflect on response to Covid-19 and set direction for future activities : .. the impact of Covid-19, progress on the global Insurance Capital Standard (ICS) and Holistic Framework for the Assessment and Mitigation of Systemic Risk in the Insurance Sector (Holistic Framework), a focus on climate risk and sustainability issues and adoption of the IAIS’ environmental policy. View Article
EIOPA’s pilot dashboard addresses the natural catastrophe protection gap - consultation : Today, the European Insurance and Occupational Pensions Authority (EIOPA) launched its first pilot dashboard, which depicts the insurance protection gap for natural catastrophes. View Article
OECD: COVID-19 crisis adds pressure to private and public pensions systems : The COVID-19 crisis has compounded the challenges facing retirement savings and old-age pension arrangements and added new ones, according to a new OECD report View Article
Environmental, Social, Governance (ESG)
ESMA: The three (apparent) paradoxes of sustainability reporting and how to address them : Steve Maijoor: A new standard for a new capitalism: accelerating corporate responsibility through non-financial information View Article
Commission welcomes political agreement on InvestEU : The Commission welcomes the political agreement reached between the European Parliament and EU Member States in the Council on the InvestEU Regulation. View Article
ICMA: Green & Social Bond Principles launch new guidelines on climate transition finance : Major economies are now striving to meet the objectives enshrined in the Paris Agreement, limiting the global temperature increase this century to lower than 2°C above pre-industrial levels by cutting greenhouse gas emissions. Capital markets play a critical role in this climate transition process.. View Article
ICMA AMIC responds to ESMA's public consultation on Article 8 of the Taxonomy regulation : ICMA AMIC submitted its response to ESMA's public consultation on Article 8 of the Taxonomy regulation which requires companies in the scope of NFRD (i.e. large listed companies ) to disclose their level of taxonomy alignment (turnover, capex, opex) in their non-financial statement. View Article
EFAMA reply to ESMA's CP on the draft advice to EU Commission under Article 8 of the Taxonomy Regulation : EFAMA strongly supports the development and implementation of the Taxonomy Regulation. We believe that reporting on the level of alignment with the Taxonomy by non-financial and financial undertakings is essential to strengthening market integrity around sustainability issues. View Article
ALFI responds to ESMA consultation on article 8 of the Taxonomy Regulation : Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088 (the “Taxonomy Regulation”). View Article
GFIA paper examines insurers’ role as investors in sustainable finance : GFIA has today published a paper entitled: Advancing the sustainable agenda: Perspectives on insurers’ capacity as sustainable investors. View Article
Accountancy Europe/ACCA: Supporting SMEs’ access to COVID support funding via professional advice : Six associations call on European Institutions and national governments to ensure better access for small and medium-sized entities (SMEs) to advisory services to support them in these critical times...recommend use of upcoming National Recovery and Resilience Plans or other European programmes. View Article
Protecting Customers
CRE: Transferring personal data between the EEA and the UK post-Brexit : The continued flow of customers’ and employees’ personal data is vital to many businesses, supply chains and public authorities to ensure effective functioning. View Article
Fin Tech Regulation
Data governance act: Video conference of telecommunications ministers : At their informal video conference, telecommunications ministers held a policy debate on the proposal for a data governance act, presented by the Commission on 25 November as the first legislative initiative under the 2020 European data strategy. View Article
IRSG: How the trend towards data localisation is impacting the financial services sector : The financial services sector is currently witnessing and responding to increasingly protectionist behaviours across the world in the form of data localisation. View Article
IMF: Cyber Risk is the New Threat to Financial Stability : Taking for granted the ability to withdraw money from our bank account, wire it to family in another country, and pay bills online.... But what if a cyberattack takes the bank down and a remittance doesn’t go through? View Article
Brexit
ESAs HIGHLIGHT THE CHANGE IN THE STATUS OF SIMPLE, TRANSPARENT AND STANDARDISED (STS) SECURITISATION TRANSACTIONS AT THE END OF THE UK TRANS : The Joint Committee of the European Supervisory Authorities (ESAs) – ESMA, EBA and EIOPA – wish to highlight the impact in the change of status of ‘Simple, Transparent and Standardised’ (STS) securitisation transactions after the end of the Transition Period on 31 December 2020. View Article
EBA informs customers of UK financial institutions about the end of the Brexit transition period : EU law will stop to apply in the UK as of 1 January 2021, and from that date onwards, UK financial institutions not holding a valid authorisation from the supervisory authorities in the EU will lose the right to provide financial services in the EU. View Article
Federal Trust: Brexit and the decline of democracy : “The fabric of democracy is always fragile everywhere because it depends on the will of citizens to protect it, and when they become scared, when it becomes dangerous for them to defend it, it can go very quickly.” (Margaret Atwood) View Article
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