Welcome to our Gold Friends weekly e-mail.
My highlights of the week: How will Biden impact US regulatory policy? Will the UK try to use its G7 Presidency to shape global rules to suit “Global Britain”? IRSG launches its roadmap. CEPS launches a scathing attack on the failure to curb money laundering that is 2-5% of global GDP. Both EFAMA and Insurance Europe attack the flaws in the PRIIPS review. IFRS trustees may even announce a new sustainability standards board at COP26. Vox carries the first article to suggest that digital central bank currencies may be a “gigantic flop”. Brexit: the penny is finally dropping that an equivalence deal to preserve the City is not very likely.
Graham Bishop
Articles from 29 January - 4 February 2020
General Financial Policy
ECB: Isabel Schnabel: The sovereign-bank-corporate nexus – virtuous or vicious? : The policy response to the pandemic has visibly intensified the interdependencies between sovereigns, banks and firms. It has created a “sovereign-bank-corporate” nexus. View Article
IRSG: Financial services priorities for the UK’s G7 presidency : The International Regulatory Strategy Group (IRSG) has set out its key areas of focus in financial services for the UK’s presidency of the G7 this year. The recovery from the COVID-19 pandemic, climate change and digital agenda will all be central to the UK’s presidency. View Article
Oliver Wyman: US Financial Regulation Post-Inauguration : Prospects for legislation related to financial regulation remain slim, despite Democrats controlling both houses of Congress... partisan differences on financial regulation are strong and not easily bridged. This matters, since very little in financial regulation would be exempt from filibuster. View Article
Luxembourg financial centre proves resilient in 2020 despite pandemic headwinds : 5 new banks among 82 new entities licenced by Luxembourg’s financial regulators; Investment funds industry total AuM just shy of €5 trillion at end 2020; Luxembourg Green Exchange lists 407 new sustainable securities, totalling EUR 186 billion. View Article
Banking Union
ECB asks banks to address credit risk and improve efficiency : Overall SREP requirements and guidance stable as a result of pragmatic SREP approach; Banks show resilience, but vulnerabilities remain in several areas, particularly credit risk; Supervisory priorities for 2021: credit risk management; capital strength; business model sustainability; governance View Article
CEPS: Anti-Money Laundering in the EU -- Time to get serious : Between 2 and 5% of global GDP is thought to be laundered every year, whereas only 1.1% is recovered. Anti-money laundering encompasses combating tax avoidance, the financing of terrorism, human (and human organ) trafficking, state-sponsored and corporate bribery, and the proceeds from drug-trafficking and other illegal activities. View Article
ECON Brief: Banking Union: Postponed Basel III reforms : This briefing summarises the Basel Committee’s decision to postpone the implementation of the outstanding Basel III standards, their main content, and their estimated impact on banks’ capital needs. View Article
Capital Markets Union
Insurance Europe: Why ESA’s proposed changes to PRIIPs RTS won’t work : Insurance Europe has today issued a paper outlining the reasons why changes proposed by the European Supervisory Authorities (ESAs) to the regulatory technical standards (RTS) of the Packaged Retail and Insurance based Investment Products (PRIIPs) Regulation will not work or deliver benefits for consumers. View Article
EFAMA: PRIIPs – a further extension of the UCITS exemption has now become essential : A flawed review process not tackling the heart of the issue. EFAMA has always made it clear that a revision of the PRIIPs RTS falls short of conducting a proper Level 1 review. A review that is explicitly required by the Level 1 Regulation and is overdue for more than one year. View Article
Joint BETTER FINANCE and CFA Institute Statement on the overdue PRIIPs Regulation review and UCITS funds’ exemption : EU authorities should prioritise the long overdue full PRIIPs Regulation review, and the UCITS funds’ exemption should be extended until this review is completed, as intended by EU Law. View Article
ESMA finalises rules on standardised information to facilitate cross-border distribution of funds : The European Securities and Markets Authority (ESMA), the EU’s securities regulator, has today published a final report on implementing technical standards (ITS) under the Regulation on cross-border distribution of funds. View Article
Insurance Europe: IDD working well; improvements needed to reduce information overload and to reflect increased online sales : Insurance Europe has today published its response to a questionnaire by the European Insurance and Occupational Pensions Authority on the application of the Insurance Distribution Directive (IDD). Since the IDD entered into force in October 2018, the overall impact of the Directive has been positive for two main reasons. View Article
BETTER FINANCE Response to the EIOPA survey on the application of the Insurance Distribution Directive (IDD) : As a first step towards the preparation of its report on the application of the IDD, EIOPA launched an initial survey addressed to external stakeholders, such as consumer associations, academics, trade associations, insurance undertakings and insurance intermediaries. View Article
EFAMA’s response to the European Commission consultation for an AIFMD review : EFAMA members believe that the AIFMD is an effective and balanced regime for the regulation of AIF Managers. The framework has improved the monitoring of risk to the financial system and the cross-border raising of capital for investments in alternative assets. View Article
AIFMD review: ALFI response to European Commission consultation : The final response is in line with ALFI’s feedback on the Commission’s inception impact assessment, putting emphasis on the idea of a targeted review on the application and scope of the directive. Moreover, ALFI is of the view that the impact of the AIFMD on AIFs and AIFMs has been largely positive. View Article
ICMA AMIC responds to EC consultation on the review of the alternative investment fund managers directive (AIFMD) : ICMA's Asset Management and Investors Council has responded to the EC's consultation on the review of the Alternative Investment Fund Managers Directive (AIFMD). View Article
ESMA provides input to the Commission on improvements for ELTIF : ESMA highlights the key topics of the ELTIF review where we see the need to consider amendments to this framework. View Article
EIOPA publishes annual report on the use of capital add-ons under Solvency II : The objective of the capital add-on measure is ensure that the regulatory capital requirements reflect the risk profile of the undertaking or of the group. Therefore, it is important that it is used by national competent authorities (NCAs) when needed and it is also important to ensure a high degree of supervisory convergence. View Article
EFAMA's reply to EC's consultation on the Review of CSDR : The volume of failed trades has decreased substantially in recent years and therefore parts of the proposed disciplinary sanctions set in the regulation and implementing texts are no longer proportionate to the remaining risks, View Article
ICMA submits its response to the Targeted consultation on the review of CSDR : ICMA’s response focuses exclusively on the section relating to Settlement Discipline, in particular the provisions relating to mandatory buy-ins, which ICMA points out is market regulation, not post-trade regulation. View Article
Financial benchmarks: Council adopts new rules addressing LIBOR cessation : The Council today adopted amendments to the so-called Benchmark Regulation addressing the termination of financial benchmarks. The amendments have been made against the background of an expected phasing-out of the London Inter-Bank Offered Rate (LIBOR) by the end of 2021. View Article
The Investment Association: Investors call on companies to take urgent action and transition their LIBOR-linked bonds : With the deadline now fast-approaching, there remains a significant number of outstanding LIBOR-linked bonds which have not yet transitioned to a new rate. View Article
ESMA consults on appropriateness and execution-only under MiFID II : These requirements constitute an important element of investor protection in the provision of investment services other than investment advice or portfolio management. View Article
ESAs consult to amend technical standards on the mapping of ECAIs’ credit assessments : View Article
Environmental, Social, Governance (ESG)
IFRS Foundation Trustees announce next steps in response to broad demand for global sustainability standards: The Trustees have agreed to undertake further detailed analysis of feedback on the requirements for success and other conditions to be satisfied prior to consideration of whether to establish a new board. View Article
IPE: Possible IFRS sustainability standards board announcement at COP26 : The trustees of the IFRS Foundation have indicated a possible announcement on the establishment of a sustainability standards board on the occasion of the UN climate change conference later this year. View Article
IFAC Supports IFRS Trustees’ Action Toward an International Sustainability Standards Board : IFAC welcomes today’s announcement from the IFRS Foundation Trustees to take further, timely steps to assess the possibility of establishing a new Sustainability Standards Board (SSB). We concur that there is “broad demand for the IFRS Foundation to play a role.” View Article
BDB: Will EU taxonomy cause a cultural shift in the lending business? Initial application projects provide some clues : One of the key legislative activities here is the EU taxonomy. It defines what can be classified as a sustainable economic activity and is a key instrument in the EU’s action plan on financing sustainable growth. View Article
EBF: Management and supervision of ESG risks for credit institutions and investment firms: EBF response to EBA consultation : Management and supervision of ESG risks for credit institutions and investment firms: EBF response to EBA consultation View Article
ESMA calls for legislative action on ESG ratings and assessment tools : ESMA has written to the European Commission (EC) sharing its views on the main challenges in the area of ESG ratings and assessment tools. ESMA highlights the need to match the growth in demand for these products with appropriate regulatory requirements to ensure their quality and reliability. View Article
ECB's Lagarde:Climate change and central banking : Central banks are not the main actors when it comes to preventing global heating...are not responsible for climate policy and the most important tools that are needed lie outside of our mandate. But the fact that we are not in the driving seat does not mean that we can simply ignore climate change. View Article
ALFI: Sustainable finance and investment funds: what are the next steps? : ALFI is fully committed and supportive of the European Commission’s Green Deal which aims to channel private investment into the transition to a climate-neutral, climate-resilient, resource-efficient and just economy, as a complement to public money. View Article
Accountancy Europe: IAASB’s discussion paper on fraud and going concern : Recent fraud cases and corporate failures, as well as the potential impact of the ongoing COVID-19 pandemic indicate the need for reconsidering the functioning of today’s financial reporting ecosystem. View Article
Protecting Customers
CRE: European data regulators considering €50m fine against WhatsApp : Ireland’s Data Protection Commission is currently consulting on the size of the fine with other European data regulators, according to a report from Politico, which says the fine is likely to fall between €30m and €50m. View Article
Fin Tech Regulation
Digital sovereignty is central to European strategic autonomy - Speech by President Charles Michel at "Masters of digital 2021" online event : View Article
BIS: Fintech regulation: how to achieve a level playing field : How regulation should evolve to encourage fair competition between traditional banks and new fintech and big tech players is now being debated. Some advocate moving from an entity-based to an activity-based regulatory approach under the principle "same activity, same regulation". View Article
European Commission: Request to EBA, EIOPA and ESMA for technical advice on digital finance and related issues : Digitalisation is transforming society, the economy and the financial sector. This transformation, and the application of innovative technologies in the EU financial sector, has the potential to benefit people and companies View Article
European Commission’s consultation on the Data Governance Act: EBF Response : The European Banking Federation (EBF) welcomes the opportunity to respond to the European Commission’s consultation on its published Data Governance Act and recognizes that its different pillars will contribute to establishing a Single Market for Data in the EU. View Article
SSM: Digitalisation disrupts traditional banking? : Digital technology has been challenging traditional banking value chains for quite some time and the pandemic is speeding up this process. View Article
Vox:Central bank digital currencies risk becoming a gigantic flop : Central bank digital currencies are increasingly being discussed in relation to monetary policy and financial stability, but with less focus on their fundamentals. View Article
Economic Policies Impacting EU Finance
ECON: EU tax haven blacklist is not catching the worst offenders : Criterion to judge if a country’s tax system is fair or not needs to be widened; Countries should not be removed from the blacklist if they only make symbolic tweaks; A 0% tax rate policy should automatically lead to being placed on the blacklist... View Article
Broadening the International Role of the Euro
EPC: Money talks: EU strategic autonomy requires a strong euro : The EU’s recent proposals to strengthen its economic sovereignty and the international role of the euro are a step in the right direction but must be followed up by concerted action from member states to expand the eurozone economy as a whole, and its trading reach. View Article
Paul Goldschmidt: The Euro as an instrument of Power? Commentary on the Communication from the European Commission (COM (2021) 32) : There is no doubt that the Commission’s analysis lists a series of real problems; however, the 15 proposed key measures, as necessary as they may be, are far from providing an adequate response to the structural weaknesses identified. Once again, as was the case with the proposals to create a “European Capital Markets Union”, the Commission fails to address the preconditions needed to reach its goals, as we will try to demonstrate hereinafter. View Article
Brexit
EU-UK deal: next steps in Parliament’s scrutiny : The Foreign Affairs and International Trade committees will be assessing the EU-UK Trade and Cooperation Agreement on Thursday. View Article
Bloomberg: The City of London Is Now at the Mercy of Brexit’s Tug of War : Britain’s divorce deal barely touches banking and trading, and Europe is eager to develop its own financial center.In the beginning was the Big Bang. It was 1986, and the moribund British economy appeared stuck in an unbreakable cycle of postindustrial decline. Then came the jolt that opened up U.K. financial markets to the world and turned the City of London into the nation’s dynamo. View Article
FCA sets out its approach to international firms : The publication explains how the FCA will assess international firms when they apply for authorisation to operate in the UK market. View Article
FT: Boutique London fund managers hit early Brexit turbulence : Further disruption for smaller investment managers as Société Générale closes services for UK funds. London’s boutique investment managers are struggling to negotiate new post-Brexit rules and trading arrangements in order to continue serving their European clients. View Article
Bloomberg: London Bankers Face Location Limbo as ECB Targets Brexit Moves : EU regulators flexible but want to see progress on staff moves; Banks keep options open as talks for EU access continue View Article
City AM: City of London lobby urges EU to grant UK financial services firms widespread access to its markets : The UK-EU Brexit trade deal does not include an EU-wide arrangement for financial services, with UK firms instead having to negotiate a patchwork of individual EU nations’ regulations. View Article
FT: An equivalence ‘deal’ for the City and EU is doomed to fail : A binding treaty on financial services is needed instead if Europe and the UK are to prosper post-Brexit View Article
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