01 August 2022

IRSG Narrative - EU Strategic Autonomy

With this narrative we wish to make the following observations: Following the pandemic, and in the context of an uncertain geopolitical environment, we fully understand the rationale to consider the resilience and self-sufficiency of the EU economy. We also recognise that the UK departure from the EU creates a new context in which both the EU and UK will develop their own financial regulatory policy that is tailored to each jurisdiction’s specific needs.

1. However, we are strong advocates of the benefits of open and integrated markets not least for EU and UK corporates, savers and investors, but also as regards the role of international finance to support the pandemic recovery and the twin transitions (climate and digital).
2. The industry in the UK remains open to further our reciprocal sharing of expertise and knowledge on the matter. There are numerous instances in which learning from mutual experiences have proven to be advantageous.
3. Cross-border risks to financial stability and investor protection need to be managed and controlled, but this should, and can, be done in such a way as to safeguard the economic benefits of integrated markets. 
4. We recognise that the pursuit of unilateral interests can undermine effective multilateral cooperation. To ensure investor and consumer protection amongst others, supervisory cooperation is a key element that can safeguard both sides and in so doing limit concerns about spillover effects from crisis situations.
5. Recommendation 1 of the European Commission’s Communication on strategic autonomy places its emphasis on the completion of the Capital Market and Banking Union initiatives. The IRSG continues to support these endeavours, which constitute the best approach to bolstering internal market competitiveness.
6. A CMU that is open and accessible to foreign risk management, capital and global liquidity will be better suited to delivering on the EU’s policy objectives. If fully developed in the EU and open to (equivalent, highly regulated) third countries, it would support jobs and growth. An open approach, ensuring that Europe maintains its access to pools of global liquidity and financing, would go a long way towards realising the ambition of building thriving EU capital markets. This is entirely compatible with the EU increasing its competitiveness.
7. We support an end-state balance in which risks associated with interdependence are managed by strong risk management tools, cooperation and supervision, but where we avoid any decoupling of EU firms that would interrupt real economy financing and challenge long-standing and effective global norms associated with: outsourcing, consolidated risk management, portfolio management, data sharing, cross-border lending, trading and clearing.
8. If at a simple level strategic autonomy is about ensuring the EU has the financial and capital markets necessary to drive its economy and twin transitions, then central to success will be ensuring resilience and that it benefits from openness and access to global markets.

full paper

IRSG

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