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Despite the Ukraine war, CER argues that Russia still needs the euro. Is it a surprise from the SRB: the more a bank is prepared for resolution and the higher its MREL, the less likely it is to go into resolution! In an outbreak of post-Brexit co-operation, the SSM and BOE jointly point out the risks of leveraged lending. The Basel III transition continues to stir opposition, as does the Commission’s thoughts on what is appropriate/suitable for retail investors. Both banks and insurers are heavily critical. ESMA was busy: recognising 25 CCPs in a dozen jurisdictions whilst also finding that actively managed funds tend to underperform their benchmarks. The ECB gave ECON a positive progress report on its studies of what users may want from a digital euro. Brexit turned out not to cause such a big exodus of jobs from the City, whilst Chancellor Sunak had to agree with the OBR that Brexit may well have weakened the UK’s overseas trade – not quite the `global Britain’ effect trumpeted to citizens during the referendum!
Graham Bishop
Articles from 25-31 March 2022
General Financial Policy
CER: Russia may ditch the dollar – but it needs the euro : Naysayers claim Western financial sanctions will speed Russia and China’s drift away from Western currencies and finance. But the West’s predominance in the global financial system is enduring. View Article
LSE: A Hamiltonian moment for Europe? Demystifying Next Generation EU and the EU’s recovery funds : The Next Generation EU (NGEU) programme represents a crucial first step towards fiscal mutuality against common shocks in the EU, changing the way the Union finances itself. View Article
Future of Europe: first debate on Conference proposals wraps up : The Conference on the Future of Europe is in its final phase, following last weekend’s exchanges on preliminary draft proposals on all themes. View Article
Banking Union
SRB Chair, Elke König speech at the SRB Annual Press Breakfast : As our experience has shown, we see that the better a bank is prepared for resolution, the more MREL it has built up and so on, the less likely it is they will go into resolution. View Article
SSM/Bank of England: Financial leverage and banks’ risk controls : Opinion piece by Andrea Enria, Chair of the Supervisory Board of the ECB, and Sam Woods, Deputy Governor for Prudential Regulation and Chief Executive Officer of the Prudential Regulation Authority, published on Bloomberg on 30 March 2022 View Article
Finance Watch: Prudential regulation should not be instrumentalised to distort the banking competitive landscape : France’s move to make Basel III transitional arrangements permanent will not defend EU banks against US ones but only protect the vested interests of European megabanks, vis-à-vis their smaller European competitors View Article
Finance Watch: Basel III finalisation comes undone: A proposal that lets down citizens and backtracks on global agreements : Finance Watch regrets that the so-called “draft Banking Package 2021” (finalising the implementation of the Basel III prudential framework for banks in Europe) leaves European banks insufficiently capitalised, and taxpayers exposed. View Article
GBIC-comments on the EU-COM proposal on the banking package 2021 regarding the implementation of final Basel III rules : The German Banking Industry Committee (GBIC) has submitted its comments on the banking package 2021 (CRR, CRD) in the context of the European Commission's "Have your say". View Article
Capital Markets Union
ESMA updates on third-country CCP recognition decisions - in 12 jurisdictions : On 22 March 2022, ESMA completed the tiering and review of the recognition decisions of 25 TC-CCPs recognised by ESMA prior to September 2020, under Article 89(3c) of EMIR and in accordance with Article 25 of EMIR. View Article
EBF Position on EC Consultation on options to enhance the suitability and appropriateness assessments : The proposals could hinder innovation and competitiveness and have the potential to ultimately lead to dangerous concentration of risks. View Article
InsuranceEurope:EC must totally rethink its unworkable suitability and appropriateness proposals.. : which would create significant problems for insurance customers. The proposals would be completely unworkable for insurers ... View Article
Better Finance: ESMA study confirms that actively managed funds underperform benchmarks, also in times of market stress : As stated by ESMA “the COVID-19 crisis offers the opportunity to test the hypothesis [often claimed by the industry] that active equity UCITS outperform their benchmarks during stressed market conditions”. View Article
AIMA: ESRB publishes letter to European Parliament on AIFMD review : While largely welcoming the Commission's proposals, in particular as they pertain to increased availability of liquidity management tools for fund managers, the ESRB has suggested amendments. View Article
ESMA and NCAs find room for improvement in funds’ liquidity stress testing : The exercise focused on liquidity risk in corporate debt and real estate funds, with the results showing that the funds included in the scope of the analysis do not pose any substantial risk for financial stability. View Article
Environmental, Social, Governance (ESG)
ESMA issues its 2021 Corporate Reporting Enforcement and Regulatory Report : The Report, with the aim of promoting investor protection, provides transparency and accountability to the market with an overview of the activities carried out by ESMA and enforcers on financial and non-financial information. View Article
ESMA publishes its Final Report on the EU Carbon Market : The Report’s analysis did not find any current major deficiencies in the functioning ofthe EU carbon market based on the data available. However, ESMA’s analysis of the markethas led it to put forward a number of policy recommendations to improve market transparencyand monitoring. View Article
Finance Watch: Climate risk: strong Pillar II prudential measures are needed but not enough : A detailed look at ongoing prudential initiatives under Pillar II shows that they are needed, but reveals their intrinsic limitations and suggests the need for stronger prudential measures. View Article
The Platform: Environmental Taxonomy: Final Report on Taxonomy extension options supporting a sustainable transition : The Taxonomy focuses on the performance levels of activities that are making a substantial contribution (SC) to the EU’s environmental objectives while doing no significant harm (DNSH) to any of those objectives and meeting minimum social safeguards. View Article
EFRAG issues its Due Process Procedures for Sustainability Reporting Standard Setting : The provisions contained in the DPP apply to the preparation of draft EU sustainability reporting standards by EFRAG. View Article
UNEP - FI: Investor Climate Action Plans & net zero targets: Opportunities for progress in 2022 : This blog highlights the need for high-level climate pledges to be accompanied by net zero targets and detailed climate action plans and suggests ways for investors to turn bold pledges into action in 2022. View Article
IFRS Foundation and GRI to align capital market and multi-stakeholder standards : Agreement to create an interconnected approach for sustainability disclosures View Article
ESAs issue updated supervisory statement on the application of the Sustainable Finance Disclosure Regulation : The supervisory statement aims to promote an effective and consistent application and national supervision of the SFDR, thus creating a level playing field and protecting investors. View Article
Protecting Customers
EFAMA: More must be done to improve European citizens' financial literacy : The European Fund and Asset Management Association (EFAMA) has today published a report entitled, “The European Asset Management Industry’s Engagement in Financial Education Initiatives”. View Article
Fin Tech Regulation
ECB's Panetta: A digital euro that serves the needs of the public: striking the right balance : Introductory statement by Fabio Panetta, Member of the Executive Board of the ECB, at the Committee on Economic and Monetary Affairs of the European Parliament View Article
ECB: Study on New Digital Payment Methods : This study seeks to provide the European Central Bank (ECB) with a thorough understanding of the current payment habits of citizens of euro area countries and specifically their attitudes towardsdigital payment methods. View Article
Digital Markets Act: Commission welcomes political agreement on rules to ensure fair and open digital markets : The regulation, agreed in slightly more than a year after it was proposed, is among the first initiatives of its kind to comprehensively regulate the gatekeeper power of the largest digital companies. View Article
ECA: Cybersecurity of EU institutions, bodies and agencies : Level of preparedness overall not commensurate with the threats : The number of cyberattacks on EU institutions, bodies and agencies (EUIBAs) is increasing sharply. As EUIBAs are strongly interconnected, weaknesses in one can expose others to security threats. View Article
Economic Policies Impacting EU Finance
GRI: How taxes demonstrate impact and accountability : New edition of The GRI Perspective explores tax as a sustainability topic: What does taxation say about how much companies contribute in the communities and societies where they operate? And why is momentum towards full tax transparency gathering pace, in markets around the world? View Article
Brexit and the City
Bloomberg: More Bankers Stayed in Brexit London Than Expected, EY Says : Job relocations drop to 7,000, a fraction of some estimates; Public announcements of plans to shift capital have dried up View Article
FCA confirms PRIIPs regulations : We have confirmed changes to the Packaged Retail and Insurance-based Investment Products (PRIIPs) regulation to address the areas that post the most harm to investors. View Article
Brexit
FT: Sunak admits UK’s dismal recent trade ‘might’ be linked to Brexit : Chancellor tells MPs it was ‘always inevitable’ if you change nature of EU ties there would be an impact View Article
OBR: The latest evidence on the impact of Brexit on UK trade : In the year following the end of the transition period, overall UK trade volumes fell, although with some surprising compositional effects. View Article
Federal Trust: VIDEO: Getting Brexit Undone: In small steps or with a Big Bang? : Political leaders who want to rejoin the EU should demonstrate leadership by making the unambiguous case for doing so. View Article
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