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My highlights of the week: Phew! the German Constitutional Court did not find it necessary to damage Europe’s economic recovery by holding up the `Next Generation EU’ plan. Pezzulli gives us the remarkable story beneath the dry prose of press releases on how Italy fended off the `pillaging’ of its financial infrastructure. Even more powerfully and urgently, a trio of leading commentators in Vox critiques the critical deficiencies in the implementation of banking union. Meanwhile, the Commission is to push ahead on convergence of insolvency rules – again!
Climate change was at the forefront this week: the co-legislators agreed a Climate Law for a 55% Co2 reduction by 2030 and then climate neutral by 2050. The Commission published its key steps on the Taxonomy – with avowed intention of making the EU a global leader in the field. The Petersen Institute put a pin in some of the hype around China’s dash for digital currency leadership. Brexiteers were on the back foot this week as it looks as though the use of English law for securities may meet its “Waterloo” at Lugano - Watch my video “Brexit and the City of London: April 2021 Update”
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 live links to the underlying news - please click on the button)
Articles from 16 - 22 April 2021
General Financial Policy
POLITICO: German court rejects bid to block EU recovery fund : The court will still assess the complaint’s merits, but the decision means the German president can now ratify the Own Resources Decision.
Remarks by Commissioner Gentiloni at the Eurogroup press conference : "This reflects the request from the Euro Summit last December for the Eurogroup to prepare “a stepwise and time-bound work plan on all outstanding elements needed to complete the Banking Union”.
Remarks by Executive Vice-President Dombrovskis at the informal ECOFIN press conference : We are entering the final stage in preparing the national recovery and resilience plans.
EURACTIV: EU pushes for convergence of insolvency rules to support recovery : The European Commission is preparing a series of proposals to drive the capital markets union to facilitate the recovery from the COVID-19 pandemic. One of the most difficult battles will be reducing the differences between national insolvency frameworks.
Long Finance Pezzulli: Italy Narrowly Fended Off The Pillaging Of Its Financial Markets Infrastructure. The question Is, For How long? : Milan Italy's Financial Powerhouse - Since 2007, Borsa Italiana, the operator of the Milan Stock Exchange, had been wholly-owned by the London Stock Exchange Group (LSEG)
Banking Union
ECB’s large-scale review boosts reliability and comparability of banks’ internal models : Review resulted in €275 billion increase in RWAs over the last three years and more than 5,000 findings for banks to remediate
Vox: Urgent reform of the EU resolution framework is needed : The existing European resolution framework, an essential part of the European banking union, is still largely deficient. National resolution authorities often bypass the European framework, with the result that, since its creation in 2015, the SRB has adopted only one resolution decision.
Capital Markets Union
ESMA highlights need for increased efforts on EMIR and SFTR data quality : The Report is the first review of data quality since the introduction of the EMIR and SFTR reporting regimes. It also reviews the quality of data reported by trade repositories and gives an overview of actions taken by both ESMA and the NCAs to improve data quality.
Environmental, Social, Governance (ESG)
European climate law: Council and Parliament reach provisional agreement : The Council's and the European Parliament's negotiators reached a provisional political agreement setting into law the objective of a climate-neutral EU by 2050, and a collective, net greenhouse gas emissions reduction target (emissions after deduction of removals) of at least 55% by 2030 compared to 1990.
MEPs reach deal with Council on obligation for EU to be climate neutral by 2050 : Independent EU scientific body to be set up to monitor progress; Greenhouse gas budget must guide 2040 target; Deal reached in time for US President Biden’s Leaders’ Summit on Climate
Sustainable Finance and EU Taxonomy: Commission takes further steps to channel money towards sustainable activities : By enabling investors to re-orient investments towards more sustainable technologies and businesses, today's measures will be instrumental in making Europe climate neutral by 2050. They will make the EU a global leader in setting standards for sustainable finance.
ACCA welcomes the publication of the European Commission’s package on Directing finance towards the European Green Deal : As a practical and globally consistent outcome will better serve preparers, auditors and users of financial and non-financial information, ACCA urges policy-makers to work together with all actors, and in particular the other standard-setters across the globe. View Article
AFME welcomes EC legislative proposal on sustainability disclosures but emphasises the need for appropriate sequencing of regulatory measure : The proposal marks a significant milestone towards enhancing the availability and reliability of ESG information and introduces a range of crucial provisions. View Article
ESG Disclosure Landscape for Banks and Capital Markets in Europe : AFME is a strong supporter of the EU’s aim to be a leader in driving the development of a more sustainable financial system, including via the implementation of its Sustainable Finance Action Plan and the European Green Deal. View Article
Insurance Europe: Insurers call for improvements to EIOPA advice to EC on Taxonomy KPIs : While agreeing with EIOPA that the KPI for insurers’ investment activities should be based on a ratio of assets and the KPI for underwriting activities based on a ratio of premiums, the industry also has some important concerns about the technical details of EIOPA’s advice.
EFAMA calls for prompt adoption of ambitious mandatory sustainability disclosures under the Corporate Sustainability Reporting Directive : Insufficient availability of meaningful, comparable, reliable and public ESG data is a key impediment to realising the full potential of the EU's sustainable finance regulatory framework. EFAMA, therefore, encourages the co-legislators to maintain the ambition of this proposal.
Fin Tech Regulation
PIIE: China’s pursuit of leadership in digital currency : Hype has far outpaced the reality in digital currencies, CBDCs, and China's digital RMB in particular. Cryptocurrencies like bitcoin are booming, but these are mostly for speculation, as they are ill-suited to large volumes of payment transactions View Article
Economic Policies Impacting EU Finance
Der Spiegel: Joe Biden Declares War on Tax Havens – in Europe, Too : U.S. President Joe Biden is calling for a minimum corporate tax rate of 21 percent for companies. But countries like Ireland and Luxembourg have established a lucrative revenue stream through big breaks for multinationals. A number of EU countries could soon feel the pinch.
Brexit
City AM: City needs EU equivalence deal to function properly, warns asset management chief : The UK government should step up efforts to secure an equivalence deal for financial services as such an agreement is “very important” for the Square Mile, the CEO of one of the world’s largest asset managers has said.
FT letters: The reason euro swaps clearing is in London : The whole legal system in the jurisdiction in which the clearing system is located must be robust.
City AM: Enforcement of judgments: Brussels opposes UK entry to the Lugano Convention legal pact : The UK applied to join the Lugano Convention in order to maintain stability on previous legal judgements on cross-border disputes.
Simmons & Simmmons: Cross-border disputes: no Lugano Convention, so what next? : The EU-UK Trade and Cooperation Agreement contains nothing to replace the previous civil justice framework. What does this mean for cross-border disputes?
New Financial: Brexit & The City: The Impact So Far : More than 440 firms in banking and finance have moved or are moving part of their business, staff, assets or legal entities from the UK to the EU. While this is higher than previous estimates, it underestimates the real picture – and the potential longer-term impact.
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