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Highlights of my week: The shocking events in the UK’s Gilt market highlighted the risks that may emerge from a reversal of QE as markets no longer seem used to providing their own liquidity. But risks do not stop there: the ECB published its analytical toolkit on real estate and financial stability just as the EBA reported on downside risks to residential real estate. There were several responses to ESMA’s guidelines on MiFID II product governance. The Commission’s review of the Securitisation Regulation did not have any suggestions on how to stimulate that market. The TCFD published a paper on the steady increase of climate-related financial disclosures in recent years while the Commission’s `Platform’ made recommendation on the Taxonomy’s usability just as Austria launched a legal action against the inclusion of nuclear and gas. The UK’s Treasury Committees is going to scrutinise the major, post-Brexit changes in UK financial regulation.
Graham Bishop
Articles from 7-13 October 2022
Policy impacting Finance
POLITICO: Germany keeps door open to using EU loans amid energy crisis : Berlin says it does not want to openly debate a new SURE mechanism just now, but also doesn’t rule it out. View Article
EURACTIV: Brussels eyes multi-year fiscal plans that include investment, reform : The ongoing reform of EU fiscal rules could give governments more leeway in plans that combine debt cuts with investment and reforms, in exchange for greater accountability, the EU’s Economic Commissioner Paolo Gentiloni said View Article
Project Syndicate: Where Has All the Liquidity Gone? : After two years of quantitative easing, central banks have begun to shrink their balance sheets, and liquidity seems to have vanished in the space of just a few months – revealing acute financial-system vulnerabilities. Monetary-policy normalization will be exceedingly difficult, fraught with risk. View Article
ECB's Glockler and Mee: A plain-speaking central bank: contradiction in terms? : Communication is a tool that helps central banks in preserving price stability. But are central banks clear enough and properly understood? On International Plain Language Day, we look at where the ECB stands in its efforts to communicate clearly and accessibly. View Article
Banking Union
Banks exposed to downside risks as residential real estate markets get overheated, EBA Report finds : House prices across the EU have increased substantially during 2021. This has raised concerns about overheating and the potential for significant price declines in residential real estate markets. View Article
EBA clarifies the status of several disclosure guidelines, and ensures continuous transparency of credit quality of exposure : The EBA is repealing three outdated disclosure guidelines and amending the scope of application of the Guidelines on disclosure of non-performing and forborne exposures; the EBA is ensuring a sufficient level of transparency on the credit quality of the exposures held by all institutions. View Article
CEPR's Maddalena and Vacca: Capital requirements and lending: Basel III has something to teach us : The long-run benefits of bank capital strength are undisputed, but the short-term impacts on lending of stricter capital requirements are less obvious. This column shows that after Basel III was enforced in Italy in 2014, low-capitalised banks slowed down credit to firms and raised interest rates, compared to capital-strong lenders. View Article
EBA updates on the monitoring of total loss-absorbing capacity and minimum requirement for own funds and eligible liabilities instruments : It has identified the need for a few new notable provisions to be recommended and for some others to be avoided. View Article
SRB: Margin for redemptions of eligible liabilities : To redeem eligible liabilities institutions need to demonstrate that they would meet their Minimum Requirement for Own Funds and Eligible Liabilities (MREL) and the Combined Buffer Requirement plus a margin after the transaction has been performed. View Article
ECB: Real estate and financial stability : The analytical toolkit for the assessment of residential real estate vulnerabilities; The analytical toolkit for the assessment of residential real estate vulnerabilities;Are risk weight policies similar to capital buffers? ... View Article
UK Finance: Making the most of ISO 20022 to help tackle financial crime compliance : ISO 20022 will introduce standardisation, structure, and greater richness in payments data, and become the de facto international standard for payments messaging and reporting. View Article
Capital Markets Union
EBF Response to ESMA Consultation on Product Governance : The EBF submitted its response to the ESMA Consultation on the review of the Guidelines on MiFID II product governance requirements: timing; Avoid additional complexity; more flexibility; clustering approach View Article
BEUC: ESMA guidelines on MiFID II product governance requirements : BEUC largely agrees with ESMA’s proposals for changes to the product governance guidelines. While we are suggesting improvements in a few sections, the changes overall contribute to a more consumer friendly interpretation of the MiFID II framework. View Article
BDB: Comments - Review of the Guidelines on MIFID II product governance requirements : ESMA has now consulted the market on its reviewed guidelines View Article
AFME: New EU sovereign bond trading data underlines need for careful post-trade deferrals calibration : AFME and FINBOURNE Technology published a report which analyses EU sovereign and public bond trading data consolidated from numerous sources for the period of March to December 2021. This report follows an earlier April 2022 report which focused on the corporate bond trading landscape. View Article
Bruegel's Lehmann: Volatile energy markets expose the fragility of Europe’s capital market infrastructure : Reform of the EU central clearing framework is an essential part of capital markets union, but reform should not be driven by current energy turmoil. View Article
IOSCO issues regulatory measures to address increasing risks and challenges from digitalisation of retail marketing and distribution : The measures outlined in the Final Report on Retail Distribution and Digitalisation aim to assist IOSCO members in adapting their regulatory and enforcement approaches, consistent with their legal and regulatory frameworks, to meet the growing challenges posed by rapidly evolving digitalisation and online activities. View Article
Capital Markets Union: The Commission publishes its report on the review of the Securitisation Regulation : The report concludes that the market seems to work soundly, even though dynamic market growth has not yet materialised. View Article
ESMA announces strategic priorities for the next five years : ESMA will focus on strengthening supervision, enhancing the protection of retail investors, fostering effective markets and financial stability, enabling sustainable finance, as well as facilitating technological innovation and effective use of data. View Article
ICMA Quarterly Report for the Fourth Quarter of 2022 : The Quarterly Report includes international capital market practice and regulatory updates on the primary markets, secondary markets, repo and collateral markets, sustainable finance, and FinTech and digitalisation. View Article
BETTER FINANCE: Background: "EU Pensions seem doomed with ‘Financial Repression’ as the only game in town" : View Article
EIOPA evaluates progress on supervising the propriety of (re)insurers’ administrative, management and supervisory body members and qualifyin : EIOPA has found that the supervision of AMSB members’ and qualifying shareholders’ propriety assessment has improved during the last two years even though the development of supervisory practices is still in progress in a number of countries. View Article
InsuranceEurope: Insurers urge caution on potential supervisory overreach on pricing : EIOPA’s decision to publish specific measures targeting pricing and commercial decision making would be unprecedented and must be treated sensitively to avoid calling on national insurance supervisors to overstep their specified mandates. View Article
Environmental, Social, Governance (ESG)
FSB publishes recommendations for supervisory and regulatory approaches to climate-related risks and calls for continued progress on disclosu : The reports have been delivered to G20 Finance Ministers and Central Bank Governors for their 12-13 October 2022 meeting. View Article
TCFD Report Finds Steady Increase in Climate-Related Financial Disclosures Since 2017 : The percent of companies disclosing TCFD-aligned information steadily increased each year since 2017 as did the amount of information disclosed View Article
EFAMA: The market for ESG ratings should be transparent and competitive | Market Insights : EFAMA has released a new issue of its Market Insights series titled “ESG ratings of Article 8 and 9 funds: assessing the current market and policy recommendations for the future”. View Article
BEUC: MiFID II Sustainability Requirements : On the path to a greener and more sustainable economy, consumers face an additional challenge: the risk of greenwashing when their investments are directed to activities that are not aligned with their interests and values. View Article
IPE: Austria files lawsuit against taxonomy with European Court of Justice : Austria, alongside other environmental organisations, has criticised the decision of the European Commission to list nuclear and gas as sustainable activities. View Article
IFAC: Significant Improvements in Climate-Related Information Key to Plugging Net-Zero Information Gap : The quality of sustainability-related data and reporting processes must be improved to meet the demands of investors, regulators, and policy makers and the urgency of the climate crisis itself. View Article
Platform Recommendations on Data and Usability of the EU Taxonomy : The attached summary of recommendations has been prioritised high, medium, low based on the urgency with which they are addressed to support upcoming and implemented Sustainable Finance reporting obligations. View Article
Protecting Customers
Giving consumers control of their data: BEUC position paper on the Data Act proposal : Putting consumers in control, by empowering them to decide who to share their data with, can deliver greater and better product functionalities and services to consumers, thereby favouring innovation that benefits consumers. View Article
UK Finance' Miles: Reputation risk and integrity: Conduct regulators now look to punish 'ethical misfires' : Briefing with the Financial Conduct Authority (FCA)’s leaders in the Conduct and Culture space, I’m bound to reflect on what practical steps we all need to take; how best to translate the regulator’s latest initiatives on Consumer Duty, Diversity, and Vulnerability into new reporting practices View Article
Fin Tech Regulation
ESBG keeps a close eye on prudential treatment of crypto assets : ESBG responded to the second public consultation of the Basel Committee on Banking Supervision (BCBS) on the prudential treatment of banks' crypto asset exposures, which is built on the proposals in the first consultation issued in June 2021. View Article
SUERF's Kosse and Mattei: The potential of central bank digital currencies for cross-border payments : This Policy Brief presents the key findings of a survey of central banks about their engagement in central bank digital currency (CBDC) and it discusses these findings in the context of cross-border payments. Nine out of 10 central banks are exploring CBDCs and more than half consider it likely or possible they will issue a CBDC in the foreseeable future. View Article
Brexit and the City
Treasury Committee to scrutinise major changes to financial services legislation : In a session with the new Financial Secretary to the Treasury and City Minister, Andrew Griffith, the Committee will explore the content of the legislation, which proposes wide-ranging changes to the regulation of the financial services industry in the UK. View Article
UKandEU: Where next for financial services under Kwasi Kwarteng? : Sarah Hall looks at how the new Chancellor has approached the financial services industry so far and sets out what the implications of a more deregulatory agenda in this area might be. View Article
Brexit
UKandEU: The Northern Ireland Protocol Bill: context and consequences : This report explains some of the context to the Bill, the conditions in which it has emerged and its potential ramifications for Northern Ireland, the UK, the EU, and UK-EU relations. View Article
CER video: Conservative party conference fringe event on 'Britain and the EU: what kind of relationship do they need?’ : View Article
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