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My highlights of the week: Poland and Hungary are attempting to veto the EU budget and the Next Generation recovery plan – Are they too late? Can they be circumvented? In a major step towards the reality of the Single Market for citizens, the Parliament approved rules for "collective redress" against “mass harm”. The ECB published its latest Financial Stability Review with much to review! EFAMA produced the evidence to rebut suggestions that EU Money Market Funds were “bailed out” by the central bank.

ESMA has drawn together some of the mass of new regulatory reporting to produce its first, annual survey of EU capital markets – with fascinating insights for geeks like me including data that shows EU capital markets are not nearly as beholden to the UK as Brexiteers claim. On that inevitable topic, ESMA has also declined to extend the Derivative Trading Obligation (DTO) beyond the end of the transition as it seems that key liquidity providers have already set up on the mainland. However, with just 36 days to go, uncertainty reigns supreme.

Graham Bishop

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Articles from 20-26 November 2020

General Financial Policy

MEPs call on EU leaders to end MFF deadlock without giving in on rule of law : EP group leaders and the Commission advise Hungary and Poland to take the EU to Court on rule of law, instead of penalising EU citizens by blocking the budget.

Project Syndicate - Soros: Europe Must Stand Up to Hungary and Poland : The EU cannot afford to compromise on the rule-of-law provisions it applies to the funds it allocates...How the EU responds to the challenge to those provisions now posed by Hungary and Poland will determine whether it survives as an open society true to the values upon which it was founded.

EP: EU consumers will soon be able to defend their rights collectively : Consumers to be better protected against domestic and cross-border “mass harm” ; Safeguards against abusive lawsuits by using “loser pays principle”; Designated consumer organisations to launch actions on behalf of consumers.

ECB review sees increased medium-term vulnerabilities for corporates and banks : Dispersed economic and financial market impact on countries and sectors could lead to concentration of risks in some areas; ...Bank profitability prospects remain weak with losses potentially materialising with a lag relative to the recovery

Banking Union

EBA: Banks report a significant use of COVID-19 moratoria and public guarantees : It is expected that upon expiry of EBA-compliant moratoria there might be increases in forborne loans and non-performing loans and therefore institutions and supervisors should monitor closely this effect.Public guarantee schemes (PGS) have supported mainly loans to non-financial corporations (NFC) and were material in a few countries.

SUERF/Deutsche bank: Surge in corporate insolvencies hitting German banks : Nonetheless, corporate insolvencies will rise as a result of the deep recession. Because the government has temporarily waived the obligation to file for bankruptcy, insolvency numbers have continued to fall until now but this may change soon.

EBA publishes Report on benchmarking of national insolvency frameworks across the EU : The Report introduces for the first time a set of benchmarks for bank loan recovery and identifies areas where the divergence in the national insolvency regimes is wider. In addition, the Report provides an overview of the characteristics of insolvency regimes that help explain the differences across the EU.

Joint Trade Associations Paper Requesting an Extension of the Third-country Benchmarks Transition Period : ISDA and 13 other trade associations have published a paper expressing concern that the EU Benchmarks Regulation (BMR) third-country benchmarks regime transition period should be extended to end-2025. 

 

Capital Markets Union

IOSCO Annual Meeting addresses the impact of COVID 19 and other critical matters on securities markets : The committees discussed the progress made on IOSCO priority work on sustainable finance, financial stability risks, market fragmentation, asset management and retail market conduct. 

CEPS: Europe’s Capital Markets puzzle : Creating an attractive framework for more market financing in Europe is proving to be an increasingly complex puzzle. The EU and other European states are battling on several fronts, but without the unity and vision that is needed to move forward.

ESMA: EU securities markets - ESMA Annual Statistical Report : ESMA presents its first statistical report on European securities markets.. using new regulatory data sources to provide for the first time a comprehensive overview of the EEA markets, including the number, characteristics and volumes traded of the instruments offered to trade by EEA trading venues.

ESMA sets out its final view on the derivatives trading obligation (DTO) : The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has released a public statement that clarifies the application of the European Union’s (EU) trading obligation for derivatives (DTO) following the end of the UK’s transition from the EU on 31 December 2020.

EBA calls on the European Commission to harmonise the significant risk transfer assessment in securitisation : The European Banking Authority (EBA) publishes today a Report on significant risk transfer (SRT) in securitisation transactions, which includes a set of detailed recommendations to the European Commission on the harmonisation of practices and processes applicable to the SRT assessment.

EFAMA report invalidates notion that central bank interventions ‘bailed-out’ MMFs : EFAMA published a report entitled ‘European MMFs in the Covid-19 market turmoil: Evidence, experience and tentative considerations around eventual future reforms’.

Environmental, Social, Governance (ESG)

EFAMA publishes report on the level and nature of sustainable investment by the European asset management industry : EFAMA collaborated with its member associations and strategy consultants at INDEFI to estimate the level and nature of ESG investment by European asset managers at the end of 2019...

Investment managers place stewardship at the heart of sustainable growth : The HM Treasury-led Asset Management Taskforce has today outlined a series of twenty recommendations to place stewardship at the heart of an agenda to ‘build back better’ post-coronavirus. 

IIRC and SASB announce intent to merge in major step towards simplifying the corporate reporting system : Creating a unified organization, the Value Reporting Foundation, that provides investors and corporates with a comprehensive corporate reporting framework across the full range of enterprise value drivers and standards to drive global sustainability performance.

 

Protecting Customers

Invest Europe: Europe needs a new deal on investor protection : The Agreement for the Termination of IntraEU Bilateral Investment Treaties (BITs) was signed by 23 EU Member States. This far-reaching piece of EU legislation may well come back to haunt private equity firms:

Friends' Standard Services

168th Brussels 4 Breakfast : Brexit talks, 'equivalence', the Recovery Fund, CMU and payments... View Article

Brexit

FT: Europe’s finance sector hits ‘peak uncertainty’ over Brexit : City firms and regulators in the dark over future market access as talks stall. Europe’s financial sector has reached “peak uncertainty” as regulators and banks rush to stave off the harshest effects of the UK leaving the single market with just 36 days left before the end of the Brexit transition 

Federal Trust: Brexit, the City and equivalence : As discussions on an EU/UK trade deal post transition are now nearing the end, the City of London continues to worry about where it will be left from 1st January 2021. Financial services are not part of the main FTA agreement as had been hoped.

Federal Trust: Johnson’s Brexit Dilemma: No good outcome in sight : Shortly after the EU referendum of 2016, a “former Conservative minister” supposedly remarked that Brexit would force the Conservative Party to choose between destroying the country and destroying itself.

 

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