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My highlights of the week: Halfway through the von der Leyen Commission’s term - and Commissioner McGuinness has close to 20 active files under negotiation. It may be a far cry from the 44 files of Commissioner McCreevy after the Great Financial Crash, but the pressure will now be on to enact these in the remaining 18 months of effective time. The ECB is being forced once again to tackle the risk of euro area fragmentation. MEPs may debate the details of AMLA, but EBA is still filling in the details of the appointed board member on AML/CFT. The EU still struggles to revive securitisation – just 6% of the size of the US market down from 75% in pre-Crash times. BETTER FINANCE highlights some of the unsavoury practices of asset managers in securities lending `fee splits’. The ECB’s Panetta explained to ECON how a digital euro can help maintain the EU’s autonomy – while Apple announced its ‘Buy Now Pay Later’ loans direct to customers did not need a banking licence at all. Brexit tensions rose sharply as the UK actually announced its Bill to unilaterally alter the NI Protocol’s terms. Is it just a ploy for internal party-political purposes? Is it actually illegal? Questions multiply about every action of this government!
Graham Bishop
Articles from 10-16 June 2022
Policy impacting Finance
EPC: The von der Leyen European Commission at midterm: Same priorities, different reality : At the halfway point of the von der Leyen Commission’s term, and amid a tumultuous context, the EPC has conducted a thorough and broad analysis of its successes and failures so far. How have the pandemic and the war affected President von der Leyen’s initial promises? View Article
ECON: Opening remarks by Commissioner McGuinness at the ECON Committee Structured Dialogue : ...the number of files that are open - so we have close to 20 active files under negotiation - ranging from measures to develop capital markets union, anti-money laundering, and sustainable finance. View Article
Bruegel: Fragmentation risk in the euro area: no easy way out for the European Central Bank : The ECB should design a specific tool that will accompany interest rate hikes to neutralise the risk of fragmentation directly for countries facing it, staying within the bounds of the EU treaties and ensuring political legitimacy. View Article
Statement after the ad hoc meeting of the ECB Governing Council : the Governing Council decided that it will apply flexibility in reinvesting redemptions coming due in the PEPP portfolio...accelerate the completion of the design of a new anti-fragmentation instrument. View Article
LSE: Victorious centrists, vanishing radicals: German politics after May’s state elections : Elections were held in the German states of Schleswig-Holstein and North Rhine-Westphalia in May. Marco Bitschnau reflects on the results, which were particularly disappointing for the country’s social democrats. View Article
Project Syndicates' van Rompuy and Laffan: Adding Ambition to Europe’s Unity : The war in Ukraine has shown that only by acting together can the European Union hope to remain an effective player. At the June 23-24 EU summit, the European Council should agree to establish a “Wise Wo|men Group” tasked with identifying core policy priorities and governance reforms. View Article
Banking Union
MEPs present plans to crack down on dirty money with new Anti-Money Laundering Authority : The proposal to establish an Anti-Money Laundering Authority (AMLA) aims to improve coordination and information exchange between national Financial Intelligence Units (FIUs), which act as intermediaries between financial entities and law enforcement. View Article
EBA publishes Guidelines on role and responsibilities of the AML/CFT compliance officer : These Guidelines set clear expectations on the role, tasks and responsibilities of the AML/CFT compliance officer and the management body. They specify that credit or financial institutions should appoint one member of their management body .. responsible for implementation of the AML/CFT obligation View Article
EBA highlights main achievements in 2021 in its Annual Report : ..the reorganisation saw the creation of new Units to reflect the growing importance of topics such as digital finance, environmental, social and governance (ESG), reporting and transparency, and anti-money laundering (AML) View Article
SRB publishes updated guidance documents for bail-in operationalisation : Guidance enhanced based on bank feedback and experience gained in crisis simulations; Expands the guidance published in August 2020 View Article
Capital Markets Union
SSM's Elizabeth McCaul at Global ABS Confererence: Supervisory priorities and securitisation : After almost two years of pandemic and lockdown measures, the outlook for the European banking system was quite bright at the end of last year. Capital and liquidity positions were strong, and banks’ asset quality and profitability improved over the course of 2021. View Article
EIOPA consults on the advice on the review of the securitisation prudential framework in Solvency II : ..assess the recent performance of the rules on capital requirements (for banks and (re)insurance undertakings) ..contributing to the sound revival of the EU securitisation market on a prudent basis. View Article
ESMA reviews its 2021 contribution to the EU’s green and digital capital markets : The Annual Report also highlights the most significant elements of ESMA’s work in 2021, particularly the development of the regulatory framework for sustainable finance and the risks and opportunities arising from the digitalisation of markets especially for retail investors. View Article
EIOPA reacts to stakeholder views on open insurance : ..As part of its forward-looking approach to innovation, in its discussion paper, EIOPA had reflected upon the definition of open insurance, analysed existing use cases.. View Article
ESMA Report Confirms BETTER FINANCE Findings of Investor Detriment through “Fixed Fee Splits” in Securities Lending : Three years after its first report, BETTER FINANCE expanded on its research into securities lending[2] to once more find that fund managers’ “fee split” arrangements, particularly with in-house agents, vary considerably and may be contrary to ESMA’s Guidelines. View Article
InsuranceEurope: European insurers set out key positions on Holistic Framework and ICS ahead of IAIS Global Seminar : “The industry looks forward to seeing the outcome of discussions on the Insurance Capital Standard (ICS) . European insurers support the development of global standards, as they are an important element in ensuring global financial stability and consumer protection. .." View Article
Environmental, Social, Governance (ESG)
ESMA's Ross: Greening the financial markets: challenges and opportunities at the current juncture : .. to consider how the current context provides us with an opportunity for further greening financial markets.. View Article
EuropeanIssuers in favour of a stronger, more comprehensive, and coherent framework of ESG ratings : EuropeanIssuers overall observed that ESG rating agencies do not have a sufficient level of maturity and comparability, presenting several issues with regards to transparency, methodological choices, comparability, and quality, thus leading to uncertainty and confusion about ESG in general, and ESG performance of specific companies in particular. View Article
GRI: Lobbying, influence and accountability : Transparency on lobbying can ensure companies uphold their sustainability commitments...From net-zero emissions to fair pay, climate change mitigation to diversity, commitments to sustainability by organizations are on the rise. View Article
IPE: MEPs adopt objection to EC plan for nuclear, gas in green taxonomy : In a joint meeting yesterday, MEPs in the Economic and Monetary Affairs Committee and the Environment, Public Health and Food Safety Committee voted 76 to 62, with four abstentions, to adopt an objection to the Commission’s proposal. View Article
ACC publishes letter on sustainability requirements in ELTIFs : The letter emphasises that the ACC does not believe it is appropriate to introduce specific ESG-related product requirements, labels or additional rules beyond those already required by the Sustainable Finance Disclosure Regulation (SFDR) in the context of the ELTIF. View Article
OECD: ESG RATINGS AND CLIMATE TRANSITION : An assessment of the alignment of E pillar scores and metrics View Article
BCBS: Principles for the effective management and supervision of climate-related financial risks : The principles seek to improve banks' risk management and supervisors' practices related to climate-related financial risks...The publication of the principles is part of the Committee's holistic approach to addressing climate-related financial risks to the global banking system. View Article
Fin Tech Regulation
ECB's Panetta at ECON: The digital euro and the evolution of the financial system : ..a digital euro would contribute to our strategic autonomy and economic efficiency by offering a European means of payment that could be used for any digital payment, would meet Europe’s societal objectives and would be based on a European infrastructure. View Article
GBIC comments on the targeted consultation on the digital euro : It is important to note, that EU citizens already have access to efficient and secure digital means of payment. View Article
UK Finance: Baking in interoperability for a UK Central Bank Digital Currency – what are the ingredients? : Digital networks already connect financial institutions, merchants and customers in a way that could accelerate the acceptance of a UK Central Bank Digital Currency (CBDC). View Article
Finextra: Apple cuts out banks to offer BNPL loans directly : The tech giant has set up a wholly-owned subsidiary, Apple Financing, to offer loans directly for the Apple Pay Later service. Apple had net cash of $73 billion at the end of March. View Article
Finextra: Money 20/20 EU: How ‘web2.5’ and DLT are propelling financial services forward : In conversation: Mariana Gomez de la Villa (centre expertise lead, distributed ledger technology, ING) on the key trends dominating the DeFi world, from one of the industry’s leading voices. Here are Gomez de la Villa’s key insights shared direct from the floor of Money20/20 in Amsterdam View Article
Economic Policies Impacting EU Finance
POLITICO: EU primed for minimum tax rate deal on Friday : Poland’s change of heart comes after its government settled a rule-of-law dispute with the Commission. View Article
Project Syndicate's Fuest: Don’t Raise the Eurozone’s Public-Debt Limit : In view of already-high levels of national debt and rising inflation in the eurozone, giving governments more debt leeway is the wrong way to go. Fiscal policy coordination should instead focus more on reallocating public expenditure and thus on increasing its quality rather than its quantity. View Article
PensionsEurope input to EC on withholding taxes : ..Strongly agrees with the EC that there is a need for EU action to make WHT refund/relief procedures more efficient. The high added value of an action at EU level would be that there would be an EU wide harmonized framework in place and no more fragmented WHT systems across the EU; View Article
Brexit and the City
Reuters's Jones: UK lawmakers urge caution with post-Brexit financial reform : Brexit is no reason to radically alter British financial regulation and regulators should not be forced to water down rules to boost London's competitiveness, or stray from global standards, a UK parliamentary committee report said on Thursday. View Article
Brexit
Serious breach of international law: MEPs call on UK not to adopt new bill : The UK Contact Group co-Chairs David McAllister, Bernd Lange and Nathalie Loiseau issued the following statement on Tuesday after a meeting with Commission Vice-President Maroš Šefcovic. View Article
Institute for Government: The Northern Ireland Protocol Bill: legal (and perhaps illegal) goings on : In a guest blog for the IfG, Sir Jonathan Jones QC, the former head of the Government Legal Department, assesses how the government received legal advice on the Northern Ireland protocol – and finds its published legal position far from persuasive View Article
UK TPO: Northern Ireland Protocol Bill: is it all just a ploy? : The UK Government has published its bill on the Northern Ireland Protocol (NIP), making a clear move to try to force changes in the arrangements disciplining the economic regime applying to the portion of the UK that has remained in the EU Single Market post-Brexit. View Article
Federal Trust video: Is Johnson finished and what about Brexit? : In this video, our Chairman Johns Stevens and Director Brendan Donnelly discuss Boris Johnson’s chances of survival as Prime Minister. They also consider the implications of his current weakened position for Brexit and in particular for the Northern Ireland Protocol. View Article
CER: What can we know about the cost of Brexit so far? : Disentangling the economic effects of Brexit and Covid-19 is difficult. But now that most advanced economies have surpassed their pre-pandemic level of output, we have a basis of comparison for the UK economy.As with my earlier modelling exercises, I construct ‘doppelgängers’ – each of them a basket of countries whose economic performance closely matches the UK’s before the Brexit referendum and the end of the transition period. They provide a counterfactual UK that did not leave the EU. I estimate doppelgängers for GDP, investment (gross fixed capital formation), total services trade (exports plus imports) and total goods trade (ditto). View Article
FT: Brexit trade friction caused 15% fall in UK-EU exports in first half of 2021 : Standards for food and chemical products and technical specifications for machinery have led to problems, study shows View Article
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