Welcome to my Gold Friends weekly e-mail - back after the Easter break.

 Articles from 27 March 2020 - 16 April 2020

My weekly Comment: The only good news is that the Covid epidemic may be near its peak but we can now begin to reckon the economic damage.

The IMF has warned of the risk to financial stability and a glance at the 30-year STOXX chart of European bank shares underlines the scale of the likely damage: bank shares have halved as the crisis struck, sell at less than 30% of their book value and are one-tenth of their peak in 2007.

The FT has just published an article from the official who ran the US TARP programme in 2008/9. He calls for US banks to raise €200bn now from private investors to cover expected losses. Which external investors would supply such capital to European banks as their profits are unlikely to generate much? (See Schildbach's article below)

General Policy

 Eurogroup President Centeno interview on fiscal response and coronabonds : Interview of Mário Centeno with Süddeutsche Zeitung, Le Figaro, La Repubblica, El Pais and Volkskrant: "We are going to propose a new package measures to defend the euro area and European Union. We have been working in three new backstops: for sovereigns, for businesses and for workers." View Article

 FT: Coronavirus crisis prompts German rethink on eurobonds : A broader trend in Germany, as this crisis forces politicians, economists and academics to reassess some of their most cherished principles and throw overboard beliefs that once seemed sacrosanct. View Article

 Preventing a Euro Crisis on Top of the Coronavirus Ordeal - Lorenzo Codogno : Two issues must be addressed: how the public finance gap should be funded ? in plain words, who is going to pay ? and how to prevent a confidence crisis about the integrity of the euro area.  View Article

 Eurogroup report on the comprehensive economic policy response to the COVID-19 pandemic : The European Council, in its statement of 26 March, invited the Eurogroup to present proposals on the economic response to the COVID-19 pandemic within two weeks. This report takes stock of actions taken thus far and outlines a comprehensive and coordinated economic response. View Article

 FT: Neel Kashkari: Big US banks should raise $200bn in capital now : Biggest lenders must prepare for the worst to survive deep economic downturn, writes Fed official View Article

Banking Union

 Konig: An extraordinary challenge: SRB actions to support efforts to mitigate the economic impact of the COVID-19 outbreak : With this blog post, I will explain the SRB’s approach to the uncertainty and disruption caused to the Euro Area economy by the COVID-19 outbreak. View Article

 FT: Regulators free up $500bn capital for lenders to fight virus storm : Financial regulators have freed up about $500bn of capital for lenders around the world to help them absorb the impact of the Covid-19 pandemic, according to calculations by the Financial Times. View Article

 Jane Fuller - CSFI: On bank loan losses and ways to account for them : Last week we drew attention to the debate about the way banks should account for expected credit losses under relatively new accounting standards – and in the wholly new business-arresting context of COVID-19. View Article

 FAQs on ECB supervisory measures in reaction to the coronavirus :  View Article

 3 April update: FAQs on ECB supervisory measures in reaction to the coronavirus : Relief measures regarding asset quality deterioration and non-performing loans; operational aspects of supervision; capital and liquidity requirements; other. View Article

 ECB announces package of temporary collateral easing measures : ECB adopts an unprecedented set of collateral measures to mitigate the tightening of financial conditions across the euro areaTemporary increase in the Eurosystem’s risk tolerance in order to support credit to the economyECB eases the conditions for the use of credit claims as collateral View Article

 EBA issues updated Guidelines on equivalence of non-EU authorities for participation in supervisory colleges : It added the New York State Department of Financial Services (United States) to the current list of non-EU (third country) supervisory authorities whose confidentiality regimes can be regarded as equivalent.  View Article

 Commission consultation on a retail payments strategy for the EU : Consultation closes 26 June View Article

 European banks in the corona crisis: Schilbach - Deutsche Bank Research : The banking industry in Europe is entering the corona recession with strong capital levels and ample liquidity, though still only moderate profitability. Revenues will come under substantial presand net income will fall materially – many banks may well make losses View Article

Environmental, Social, Governance (ESG)

 Commission Cconsultation on the renewed sustainable finance strategy : Consultation deadline now extended to 15 July View Article

 Politico: EU to push green finance, rules-based trade at international talks : EU finance ministers pledged in a document approved today, seen by POLITICO, to raise the subjects of carbon and energy taxes in the international meetings as part of a “strategic long-term vision for a climate-neutral economy.” View Article

 GREEN RECOVERY REBOOT & REBOOST our economies for a sustainable future: Call for mobilisation : Signed by 180 ministers, MEPs, CEOs, NGOs and trade unions: After the crisis, the time will come to rebuild. This moment of recovery will be an opportunity to rethink our society and develop a new model of prosperity. This new model will have to answer to our needs and priorities. View Article

 UN Sustainable Development Goals – better assessment to deliver the decade of action, says ACCA : • Supreme Audit Institutions play a critical role in ‘transforming our world’ • New types of decision-making by governments are needed if SDG targets are to be met  View Article

 Bloomberg: ESG Is Increasingly Important in Credit Ratings, Moody’s Says : Moody’s is paying more attention to environmental and social issues when assessing companies’ risk as the financial impact becomes clearer. Climate and demographic change, as well as societal issues like income inequality, are increasingly highlighted, Moody’s analysts led by Robard Williams View Article

Fin Tech Regulation

 FSB consultation: Addressing the regulatory, supervisory and oversight challenges raised by “global stablecoin” arrangements : This consultation sets out 10 high-level recommendations to address the regulatory, supervisory and oversight challenges raised by “global stablecoin” arrangements. View Article

 CSFI/Birch: The Digital Currency Revolution : This paper sets out what a digital currency is (and how it differs from cryptocurrency), explains why there is a focus on digital currency right now, and explores the implications of the launch of digital currencies – whether by Bitcoin entrepreneurs or by the Fed. View Article

 Politico: Coronavirus knocks fintech, payments down Commission priorities : The coronavirus pandemic may knock financial technology and electronic payments along with some other finance files down the Brussels priority list, according to an internal document. View Article

 Commission consultation on a new digital finance strategy for Europe / FinTech action plan : It is crucial that Europe grasps all the potential of digital age across the economy, including in the financial sector so the Commission is interested in hearing the views of a wide range of stakeholders. Consultation closes 26 June. View Article

 Commission consultation on a new digital finance strategy for Europe / FinTech action plan : Consultation closes 26 June View Article

Friends' Standard Services

 Notes on 161st Brussels 4 Breakfast : Organised by the Centre for the Study of Financial Innovation (CSFI) via Zoom and YouTube with fellow speaker David Henig (UKTO).Topics: Brexit; EU policy response; Banking Regulation – relief, but the start of a slippery slope? View Article

Economic Policies Impacting EU Finance

 Euractiv: EU ministers to agree virus rescue plan, not ‘coronabonds’ : EU countries are nearing an economic rescue plan for European countries worst hit by the coronavirus outbreak but not at the level of ambition called for by Italy and Spain.The EU’s 27 finance ministers are to meet for a videoconference on Tuesday.  View Article

 Reuters: EU could finance 1.5 trillion euro recovery fund with bonds: Dombrovskis : The European Union could finance a recovery fund worth up to 1.5 trillion euros ($1.64 trillion) with bonds guaranteed by member states, European Commission Vice President Valdis Dombrovskis told German newspaper Handelsblatt.  View Article

 IMF Global Financial Stability Report: coronavirus poses 'serious threat' to financial stability : The coronavirus (COVID-19) pandemic poses unprecedented health, economic, and financial stability challenges View Article

 Q&A: Commission proposes SURE, a new temporary instrument worth up to €100 billion to help protect jobs and people in work : The new instrument is for temporary Support to mitigate Unemployment Risks in an Emergency (SURE) is designed to help protect jobs and workers . It will provide financial assistance, in the form of loans granted on favourable terms from the EU to Member States, of up to €100 billion in total.  View Article

 FT: Eurogroup fails to land deal on coronavirus economic response : EU ministers to meet again on Thursady (10 April)after they failed to break an impasse between Rome and The Hague over the issue of coronabonds and how to construct loans from the bloc's bailout fund during an all-night teleconference that ended on Wednesday morning. View Article

 DG ECFIN policy round-up: Coronavirus - SURE proposal and mobilising all resources : SURE - €100 bn; EIF - €8 bn for SMEs; Overview of national measures by Member State; EU global response to fight the pandemic; Investment Plan: EIB approves €700 million in financing to support private investment across the EU; Real Economy: financing the response to the economic fallout. View Article

 MEPs Iratxe Garcia and Paul Tang: Coronabonds for a Europe of solidarity, not charity : Today, the European Union is being hit by a symmetrical shock caused by COVID-19. This renders the instruments developed to address the 2008 financial crisis as unfit for purpose, write Iratxe García and Paul Tang for EURACTIV. View Article

 EURACTIV: Spain and EU Commissioners call for common European debt instruments : Europe needs debt mutualisation and a common Marshall plan to recover from the coronavirus pandemic, Spanish Prime Minister Pedro Sánchez told German newspaper Frankfurter Allgemeine Zeitung. View Article

 Vox: Monetisation: Do not panic : Olivier Blanchard, Jean Pisani-Ferry The extraordinary operations that are under way in most countries in response to the COVID-19 shock have raised fears that large-scale monetisation will result in a major inflation episode.  View Article

Broadening the International Role of the Euro

 Reuters: Bulgaria to apply to join euro zone's 'waiting room' by end April : Bulgaria will speed up its plans to join the euro zone and apply for membership by the end of April in a process that should help the Balkan country recover from the coronavirus pandemic, Prime Minister Boyko Borissov said View Article

 Andrew Duff: From lockdown to takeoff: The case for a federal eurobond : He makes the case for the bold launch of a federal eurobond secured against the EU budget.  View Article

EU27 Politics

 European Commission - coordinating a common European response : The Commission, in cooperation with the President of the European Council, has put forward a European roadmap to phase-out the containment measures due to the coronavirus outbreak View Article

 Politico: The Brussels effect as global companies globalise EU rules : Anu Bradford, a professor at Columbia Law School, wrote the book on EU influence — literally. In January, she published “The Brussels Effect: How the European Union Rules the World.” It details how the European Union manages to unilaterally regulate the global market. View Article

 President Charles Michel at the press conference on the EU response to the coronavirus crisis : We will have next week, again, a European Council via video conference. It will be the fourth one in a few weeks.Our goal is to open a strategic discussion in order to see how it is possible to deal together to take some very strong decisions. View Article

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