Welcome to our weekly e-mail                                                                    Follow us on  

Highlights of my week: Commission proposes a trusted and secure Digital Identity for all Europeans – great idea for citizens or hackers? Key step to beefing up NPL secondary market – agreement on rules for selling them to third parties. ESMA’s risk dashboard still highlights chances of sudden risk re-assessment. ESMA also launched the fourth CCP Stress Test – providing the detailed basis to assess the risks to the EU of third-country CCPS flowing from Brexit? Insurance sector and German banks see no general need for expanding ESA’s powers. Continuing broad welcome for the Commission’s drive to improve sustainable corporate governance but concerns remain on fine print of Taxonomy Article 8. Nonetheless, SFDR is becoming the “common language” of sustainable investment in Europe. The UK has just set up its own group of experts to classify green assets – second mover disadvantage? G7 corporate tax deal is welcomed all round as historic breakthrough but the G7 host – UK Chancellor Sunak – immediately lobbies for loopholes to protect post-Brexit Britain’s tax revenues.

 Graham Bishop

---

Articles from 4-10 June 2021

General Financial Policy

Der Spiegel: German Conservatives Back on Track as General Election Approaches : With just a few months to go before the German general election, the conservatives took a big step in the right direction by winning the state vote in Saxony-Anhalt on Sunday. The right-wing populist AfD failed to live up to expectations. 

Commission proposes a trusted and secure Digital Identity for all Europeans: The Commission today proposed a framework for a European Digital Identity which will be available to all EU citizens, residents, and businesses in the EU. Citizens will be able to prove their identity and share electronic documents from their European Digital Identity wallets with the click of a button on their phone. 

Bruegel: Quo vadis, Swiss-European Union relations? : Switzerland’s decision to abandon talks on a framework agreement with the European Union will have far reaching consequences. The outline of future relations now depends both on the EU’s response and on domestic developments.

Banking Union

European Parliament: Non-performing loans: deal struck on EU rules for selling NPLs to third parties : EP negotiators agreed with the Council on common EU standards regulating the transfer of bad loans from banks to secondary buyers while protecting borrowers’ rights.

European Commission: Non-Performing Loans (NPLs): Co-legislators agree on new rules in order to improve market transparency : The Commission welcomes the political agreement between the European Parliament and the Council on the proposal for a Directive on credit servicers and credit purchasers.

CEPS: Why finalising Basel III is good for the European banking sector : Finalising the 2017 agreement will contribute to a banking system that is more resilient and in a better shape to support the real economy. It is possibly the final milestone in the post-crisis reform agenda, and represents a crucial step towards a level playing field for banks internationally.

Capital Markets Union

 

ESMA launches 2021 Central Counterparties Stress Test : ESMA published the framework for its fourth Stress Test for CCPs. ESMA, as required by EMIR, initiates and coordinates this exercise to assess the resilience and safety of recognised EU and Tier 2 Third Country CCPs (TC-CCPs) to adverse market developments and to identify any potential shortcomings.

ESMA Risk Dashboard No. 1 2021 : The RD highlights that the main risk for EU financial markets remains that posed by a sudden risk reassessment, amid the general decoupling of securities prices from economic fundamentals, and it maintains its risk assessment at a very high level.

Insurance Europe: No need for new initiatives regarding further powers for EIOPA : Insurance Europe has published its response to a consultation by the European Commission on supervisory convergence and the single rulebook. 

GBIC comments on the European Commission's consultation on supervisory convergence and the single rulebook (ESA review 2021) : The GBIC is of the opinion that the current system of financial supervision, which comprises the ESAs and the national competent authorities (NCAs), should generally remain in place, as it best suits the different market structures of the Member States. 

DG FISMA: Staff working document – Monitoring progress towards a capital markets union: a toolkit of indicators : The Commission announced in the 2020 Capital Markets Union (CMU) action plan2 that it will complement its regular reporting of progress on legislative and non-legislative action with monitoring of how EU capital markets are evolving towards the CMU, based on a set of targeted indicators.

Environmental, Social, Governance (ESG)

EURACTIV: G7 agree on ‘historic steps’ to make climate reporting mandatory : G7 finance ministers made a commitment at the meeting to make it mandatory for corporates to report climate impacts and investment decisions, alongside new measures to strengthen central company beneficial ownership registries to crackdown on environmental crime. 

CDSB, ACCA, Accountancy Europe: 10 stakeholders issue a joint statement on EU sustainable corporate governance : ACCA, Accountancy Europe, CDSB, Eurosif, Frank Bold, PGGM, WWF, Schroders, WBA, and ShareAction welcome the European Commission’s initiative to improve the regulatory framework on corporate governance and stress several areas that should be addressed in the reform. 

EFAMA welcomes proposed transitional period under Art. 8 of the taxonomy and calls for its alignment with SFDR taxonomy-related product disc : “Consistent, comparable and well-sequenced taxonomy alignment reporting at entity and product level is essential to the proper functioning of the EU´s sustainable finance regime..."

Insurance Europe: Proposals for Taxonomy KPIs welcome, but refinements needed to ensure disclosures are meaningful for users : Insurance Europe has published its response to a consultation by the European Commission (EC) on the draft delegated regulation on Article 8 of the Taxonomy Regulation on entity level disclosures.

ISDA/AFME Respond to EC Consultation on Taxonomy Disclosures : ISDA and the Association for Financial Markets in Europe submitted a response to a European Commission (EC) consultation on the Delegated Act on Article 8 taxonomy disclosures. 

IPE: Eurosif expects new EU sustainable finance strategy at the start of July : “If I look at every single country in Europe, it is obvious that the SFDR is rapidly becoming a common language for the European sustainable investment market,”

Bloomberg: Bankers Face a Dirty New Temptation : Keeping derivatives out of “green asset ratio” calculations may just encourage lenders to use more of them on climate-unfriendly financing deals. 

 

IRSG: Accelerating the S in ESG: a roadmap for global progress on social standards : A lack of consistency and comparability in approaches risks impeding the drive towards more sustainable investments. 

Protecting Customers

IOSCO: Progress to Implement Recommendations to Strengthen the International Audit and Ethics Standard-Setting System : The MG is responsible for the overall governance of the international audit and ethics standard-setting system including conducting periodic effectiveness reviews. 

Economic Policies Impacting EU Finance

 

IMF: The Benefits of Setting a Lower Limit on Corporate Taxation : It also highlights the role minimum taxes can play at the global level to help reverse nearly four decades of falling global corporate tax rates and reduce the incentives for large multinational firms to shift profits to low-tax jurisdictions to reduce their worldwide tax liability.

Project Syndicate: The G7 Tax Clampdown and the End of Hyper-Globalization : The G7 agreement on taxation of global corporations still needs formal approval from a wider set of countries, and there remain many details to be worked out for it to be effective. Nonetheless, it would not be farfetched to describe the deal as historic.

POLITICO: The main hurdle in getting a global tax deal is Europe : The bloc’s countries disagree on what companies should have to pay, and that could scupper efforts to revamp the international system.

Brexit and the City

Financial Services Club/ZYen video with Alderman Mainelli and Graham Bishop: Brexit: Ending the City's Dominance of European Finance? How might this play out by say 2024? Could the divergence cause the end of the City’s dominance of European finance? It might well do. View Article

Brexit

Bloomberg: Brexit Britain’s Bank Tax Pushback Is a Bad Look : Tax loopholes favoring Big Tech need to be closed, but not at the cost of opening new ones. Global tax reform is bringing the conflicted incentives of post-Brexit Britain out into the open.

Reuters: Britain takes step to classifying 'green' investments : Britain has set up a group of experts to help it classify climate-friendly assets and stop "greenwashing" of investments that don't live up to their sustainable credentials.