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The “shock of the week” prize clearly goes to Boris Johnson for his unilateral decision to “overwrite” parts of the EU Withdrawal Treaty because – at his insistence – it was negotiated “at pace”. Much will be said and written about the implications of this breach of trust but – for financial services – the issue of trust in the UK’s equivalence regime will surface quickly. In the event of a crisis, can the EU rely on quiet UK promises to provide hugely expensive support to parts of the EU’s financial infrastructure located in the UK?
The appointment of MEP McGuinness as the new Commissioner for financial services may slow the rush to CMU as she seems to have no experience in the field. However, the ECB underlined the need for swift moves on CMU. The insurance industry and its supervisors are also grappling with the creation of a pandemic insurance system – at massive cost to “someone”!
Graham Bishop
(This e-mail provides the headers of a selection of the articles published this week. If you would like to upgrade to our Gold service and access all articles - with liive links to the underlying news - please click on the button)
Articles from 4 -10 September 2020
General Financial Policy
EURACTIV: Von der Leyen proposes McGuinness as financial services Commissioner : European Commission President Ursula von der Leyen proposed Ireland’s Mairead McGuinness to become financial services Commissioner, taking over from executive vice-president Valdis Dombrovskis, who will assume the trade portfolio vacated by Phil Hogan.
BIS: New correspondent banking data - the decline continues at a slower pace : - The number of active correspondent banks worldwide fell by about 3% in 2019 and about 22% between 2011 and 2019.- The volume and value of cross-border payments continued to grow over the last eight years, suggesting a higher concentration in payment flows.
Banking Union
BIS: Closing the loop: AML/CFT supervision of correspondent banking : Under the auspice of the Financial Stability Board's four point action plan, several international organisations have taken measures to address the decline in correspondent banking relationships.
CEPS: Responsible lending in times of crisis : Do EBA guidelines strike the right balance between economic growth, financial stability and consumer protection? Is the guidance on the creditworthiness assessment fit for purpose? What is the likely impact on both lenders and borrowers? What more is required to promote responsible lending?
SSM: Banks need better internal capital checks : Banks have improved their internal capital adequacy assessment processes (ICAAPs), but they need to do more. In particular, they need to improve data quality, better manage economic capital adequacy and improve stress testing practices. Sound ICAAPs are a key supervisory priority.
SR: Elke König: A sound framework to safeguard financial stability : The COVID-19 pandemic constitutes an unprecedented global shock. The latest economic forecasts point at the deepest recession since World War II and, at this stage, we do not yet know its full and final impact on the economy: it remains a very large ‘known-unknown’.
Capital Markets Union
ECB blog: Europe needs a fully fledged capital markets union – now more than ever : CMU is one of the cornerstones of the euro area’s financial architecture. But progress in developing it has been slow. Since the agreement on establishing CMU in 2015, many subprojects have been launched, and some completed, but European capital markets are still far from being fully integrated.
CRE: European insurers respond to European Commission’s Solvency II review : Europe’s insurers have largely supported the European Commission’s Solvency II inception impact assessment, but believe there are key omissions and refinements that are necessary to address the flaws in Solvency II.
OECD: Responding to the COVID-19 and pandemic protection gap in insurance : This note provides an overview of how business interruption insurance against pandemic risk could be provided with support from governments, and some of the challenges and considerations necessary for establishing such a programme.
Environmental, Social, Governance (ESG)
ICMA AMIC responds to ESAs' consultation on the Sustainable Finance Disclosure Regulation : The buy-side voice of ICMA highlighted several challenges with the implementation measures proposed by the three European authorities, including both firm and product disclosure requirements
Accountancy Europe: What COVID-19 made clear: corporate governance needs to focus on the right risks : Is corporate governance just a set of rules that we must reluctantly follow? Some seem to think so, focussing only on the burden and cost. They fail to see the added value of having proper governance in place.
Fin Tech Regulation
Design choices for central bank digital currency Vox EU: Design choices for central bank digital currency : Many central banks are considering, and some are even piloting, central bank digital currency. This column provides an overview of important considerations for central bank digital currency design.
Brexit
FT: UK bid to circumvent Brexit deal risks far-reaching consequences : Planned internal market bill will contradict obligations in withdrawal agreement on Northern Ireland and state aid
FT: Micheál Martin says controversial UK move risks forfeiting trust of EU : Micheál Martin says controversial UK move risks forfeiting trust of EU .Ireland has called on the UK to abandon moves to unpick parts of its Brexit treaty, warning that London risks forfeiting the EU’s trust as time runs out in talks on a free trade deal.
POLITICO: Pelosi: ‘Absolutely no’ US trade deal if UK breaks Brexit pact : There’s “absolutely no chance” a U.K. trade deal will pass the U.S. Congress if London breaks its Brexit pact with the EU over the Irish border, House Speaker Nancy Pelosi warned Wednesday.
European Policy Centre: Brexit: Endgame : The UK Government's recent statements make a deal between the EU and UK less likely, regardless of whether that is the intent or not...The Brexit negotiation are heading into the final phase, with Boris Johnson claiming that the United Kingdom (UK) will walk away if no deal is found by mid-October.
FT ECB supervisors turn the screw on banks’ Brexit plans : Ending up with overlapping operations in London and the eurozone is the last thing cost-cutting lenders want. Europe’s top financial supervisor is fed up with waiting for big banks to prepare for Brexit.