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Highlights: The German Constitutional Court will (probably) not de-rail the Next Generation EU proposals but the Commission is already preparing the mechanics of raising the €800 billion anyway. Instant payments are already a reality via the banking system but the ECB reported on its digital euro consultation – finding privacy a key public need. Low-tax EU states may be privately quailing at the thought, but President Biden’s call for a global corporate tax rate has many attractions for states seeking tax revenues. The Brexit `TCA’ deal is still on the last lap of ratification as the European Parliament has not yet fixed a date for a plenary vote. Meanwhile, the demands for “equivalence” seem to be heading into the dustbin of history already.

Graham Bishop

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Articles from 2-15 April 2021

 General Financial Policy

EPC: Why the German Constitutional Court will (probably) not kill the €750 bn EU recovery fund : The German Constitutional Court’s postponing of its decision on two claims against the EU recovery fund does not (yet) mean that Next Generation EU will not happen. But there will be a delay and the court’s final decision might remain uncertain for some time. View Article

NextGenerationEU: Commission gets ready to raise up to €800 billion to fund the recovery : The Commission has today taken steps to ensure that borrowing under the temporary recovery instrument NextGenerationEU will be financed on the most advantageous terms for EU Member States and their citizens. The Commission will use a diversified funding strategy to raise up to around €800 billion in current prices until 2026.  View Article

Bloomberg: Europe Is Heading Toward a New Financial Crisis : Completing the EU’s banking union might be the only way to avoid the dreaded “doom loop.” View Article

EURACTIV: Regulators maintain call for prudence in bonuses and dividends payout : Regulators are urging banks and insurance companies to exercise caution in handing out dividend payments to shareholders and bonuses to employees, as Europe continues to struggle to cement its recovery from the COVID pandemic. View Article

Paul Goldschmidt: Is the European Union losing its way? : Barring a major effort, the EU is on track to being marginalized! View Article

ACCA: Largest increase in economic confidence in history of global economic survey in Q1 2021 : Global economic activity could return to pre-Covid level before end of this year. The global economy is bouncing back in terms of confidence, orders, employment and spending, according to the latest ACCA and IMA Global Economic Conditions Survey (GECS). View Article

Project Syndicate - Rogoff: The Dollar’s Fragile Hegemony : Today, it seems to be an article of faith among US policymakers and many economists that the world’s appetite for dollar debt is virtually insatiable. But a modernization of China’s exchange-rate arrangements could deal the dollar’s status a painful blow. View Article

Vox: Krugman on the Mundell difference : Nobel Laureate Robert Mundell passed away on 4 April 2021... Mundell highlighted the difficult tradeoffs in creating a currency area and cmae to be seen as the father of both supply-side economics and the euro.  View Article

Banking Union

Commissioner McGuiness: The EU resolution framework is an effective tool, but there's room to improve how it works and enhance depositor protection.  Commissioner McGuinness gave a (virtual) opening speech at the high-level conference on Strengthening the EU’s Bank Crisis Management and Deposit Insurance Framework, organised by the directorate-general for financial stability, financial services and capital markets union (DG FISMA). View Article

Commission’s Inception Impact Assessment on Instant Payments: EBF response : We highlight our support for efforts to increase the uptake of SCT Inst and the view that SCT Inst could facilitate stronger and more integrated homegrown pan-European payment solutions. It is necessary to carefully assess which actions by the public authorities could enable the further development of instant payments and which aspects would be best left to market developments, with the potential monitoring by the public authorities. View Article

EPC: Empowering European payments with SCT Inst : The instant payments space had been gaining significant traction in recent years, and access to immediate funds has become paramount for consumers and businesses in particular in the current pandemic.  View Article

ECB publishes supervisory banking statistics for the fourth quarter of 2020 : ECB publishes aggregated statistics on cost of risk and on loans subject to COVID-19-related measures for first time; Aggregate total capital ratio of significant institutions increased to 19.51% in fourth quarter of 2020 (from 19.04% in third quarter and 18.60% one year earlier) View Article

AFME: Priorities and industry recommendations for the CRR3/ CRD6 bank reform package : AFME is pleased to present its views and recommendations on key priority areas in the sixth Capital Requirements Directive and the third Capital Requirements Regulation (CRD6/CRR3). The legislative proposal is expected to be published by the European Commission in mid-2021 and will come at an important juncture when policymakers are dealing with the fallout from the Covid-19 crisis and the need to ensure a strong and sustained economic recovery.  View Article

FCA: The importance of purposeful anti-money laundering controls : Two of our biggest sanctions in the last 12 months related to failures to address financial crime and anti-money laundering (AML) risks.  View Article

Capital Markets Union

ISDA: Adoption of RFRs: Major Developments in 2021 : The transition from interbank offered rates (IBORs) to alternative reference rates remains high on the agenda of policy-makers and market participants. The UK Financial Conduct Authority announcement on March 5, 2021 on the timing for the cessation or loss of representativeness of all 35 LIBOR settings gave market participants a clear set of deadlines across all currencies and tenors.  View Article

FT: Stock clearing stalwarts face increasing threat from blockchain : Instinet and Credit Suisse skip main US clearing house and settle deals on digital ledger View Article

ICMA Quarterly Report Second Quarter 2021 : The Quarterly Assessment covers the post-Brexit impact on the international bond market, and there are separate features on the post-Brexit impact on the primary markets, the secondary and repo markets, and asset management, respectively.  View Article

Insurance Europe: EIOPA "nat cat" dashboard must reflect reality across member states and better emphasize role of prevention measures : While EIOPA’s aim of providing transparent information on natural catastrophe protection gaps is welcome, its proposals require amendments to properly account for individual circumstances across member states.  View Article

BIS: Redefining insurance supervision for the new normal : Lessons learnt from the Covid-19 crisis will be critical to future-proof insurance supervision. Streamlined and agile supervisory processes backed by resilient digital infrastructure and closer engagement with insurers and other regulatory agencies will be critical to help insurance supervisors cope with future unexpected disruptions. View Article

Environmental, Social, Governance (ESG)

Sven Giegold: Sustainable Finance: Von der Leyen and Timmermans must save the credibility of the Green Deal: This week, the EU Commission is finalising the first delegated act to shape the rules for Sustainable Finance. These “taxonomy rules” will determine which financial products and investments can be labelled as green and sustainable and which cannot. Will the rules be softened? View Article

Basel Committee publishes analytical reports on climate-related financial risks : The two reports discuss transmission channels of climate-related risks to the banking system, and the measurement methodologies of climate-related financial risks. View Article

GRI and SASB reporting ‘complement each other’ : Joint research from the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) explores the experiences of companies that use the two sets of standards together to fulfil their reporting needs. View Article

Accountancy Europe. In-depth: what is at stake in EU plans for sustainable corporate governance? : Many aspects of the EU’s plans to legislate for sustainable corporate governance remain the subject of heated debate, particularly the prospect of binding due diligence on supply chains and linking directors’ pay to green performance View Article

IPE: Accounting roundup: Full-scale IAS 19 review option; new IOSCO group : The IFRS Foundation has launched its 2021 consultation on the shape of its future work programme, with one of the discussion points being a full-scale review of the International Accounting Standards Board’s pensions rule-book, International Accounting Standard 19, Employee Benefits (IAS 19). View Article

EU Sustainability Reporting Standards : Euroepan Commission ask the European Financial Reporting Advisory Group (EFRAG) to explore what these standards might look like and to propose a roadmap for their development. View Article

Fin Tech Regulation

ECB: Report on the public consultation on a digital euro : The possible advantages of a digital euro and the rapid changes in the retail payment landscape imply that the Eurosystem needs to be equipped to issue it.. A digital euro could support the Eurosystem’s objectives by providing citizens with access to a safe form of money... View Article

FT: Europeans raise privacy concerns over digital currency : ECB’s work on monetary innovation should ensure spending cannot be tracked, consultation shows View Article

Banque de France: Denis Beau: Navigating the digital transition, maintaining a stable payment system : The health crisis that we have all been living through for a year now has affected people's day-to-day habits, changing not only how we consume but also how we like to pay. This has sped up the transition towards more digital approaches. View Article

Economic Policies Impacting EU Finance

The Guardian: Biden's plans for a global corporate tax rate could make the world a fairer place. : More than a decade has passed without any progress in bringing the global tax system into the modern age. But less than three months after taking office, President Joe Biden has raised hopes of a breakthrough, with proposals that could kill tax havens dead and force multinationals to pay a fairer share of tax. View Article

FT: Europe’s low-tax nations braced for struggle over US corporate tax plan : Agreement at OECD would save Brussels from having to push through its own proposal View Article

OECD releases new peer review results on the prevention of tax treaty shopping under the BEPS Action 6 minimum standard : Progress continues with the implementation of the BEPS package to tackle international tax avoidance, as the OECD releases the latest peer review report assessing jurisdictions' efforts to prevent tax treaty shopping and other forms of treaty abuse under Action 6 of the OECD/G20 BEPS Project. View Article

SUERF: EMU deepening and sovereign debt spreads: using political space to achieve policy space : We build a comprehensive narrative of policy decisions to deepen the European Monetary Union (EMU), by classifying documents and press releases issued by the Council of the EU and the European Council during the period January 2010 to March 2020.  View Article

Brexit

EP: EU-UK trade agreement: committees to vote on Thursday : The Foreign Affairs and International Trade Committees will vote on whether to give their consent to the trade and cooperation agreement between the EU and the UK on Thursday. View Article

Reuters: EU Parliament partly clears path to UK trade deal vote : The European Parliament gave the go-ahead on Tuesday for two key committees to vote this week on the EU-UK trade deal, but deferred a decision on whether the full parliament will give its assent later this month. View Article

CEPS: UK financial services should shift focus away from equivalence : ...Despite their strategic importance for the UK economy, financial services were not dealt with to any extent in the negotiations, and the agreement itself lacks anything substantive on them. It is fair to say that the City has ended up with a ‘no deal’ in terms of financial services.  View Article

FT: Forget equivalence, the City of London needs a post-Brexit plan : Latest ‘deal’ between EU and UK offers little in the way of progress View Article

FCA: Regulating the UK as a global financial centre : We are fully committed to maintaining open and fair UK markets – and we will continue to regulate in the interests of consumers, competition and market integrity. View Article

City Corporation urges support for UK membership of Lugano Convention : "It is deeply disappointing that the European Commission has decided not to support the UK‘s application to join the Lugano Convention...." View Article

City AM: Brexit: Paperwork and bureaucracy have created barriers at the border as tough as tariffs : In the months since the Brexit transition period ended, trade flows at British borders have plummeted and border checks have been deemed so unworkable that their implementation has been pushed back by a year. View Article