Highlights of the week: The onset of Easter has lightened the news flow but some serious issues have surfaced: the German Constitutional Court has put a probably-temporary road-block in the way of the RRF; the ESAs have warned of the risks ahead to both banks’ asset quality and the liquidity of investment funds; the Commission is consulting on its plans to remove blockages to instant payments.
However, the extraordinary speed and magnitude of Archegos’ collapse underline the risks that the financial system must be able to withstand. That may typify the moment when `regulatory co-operation’ may have to be tested in earnest: whose judgement call? Who will pay if it turns out to be the wrong call? Can they be trusted to pay? These are the deeply-buried issues at the heart of the Brexit debate on derivatives regulation and the agreed (but unpublished) MoU probably does not allay all such fears.
Graham Bishop
(We will now take a short break over Easter and publish the next Newsletter on 14th April)
(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 26 March - 1 April 2021
General Financial Policy
Work begins on the Conference on the Future of Europe : The work on the Conference on the Future of Europe has officially started with the constitutive meeting of the Executive Board held on 24 March.
ESAs: EU financial regulators warn of an expected deterioration of asset quality : They highlights a number of vulnerabilities in the financial markets and warn of possible further market corrections.
FT: Germany’s highest court blocks ratification of EU recovery fund : Law challenged by Eurosceptic group over fears of European fiscal union
IMF: How European Banks Can Support the Recovery : A robust post-COVID-19 recovery will depend on banks having sufficient capital to provide credit. While most European banks entered the pandemic with strong capital levels, they are highly exposed to economic sectors hit hard by the pandemic.
EU-US Financial Regulatory Forum – Joint statement – 29 March 2021 : U.S. and EU participants in the U.S.-EU Joint Financial Regulatory Forum (“the Forum”) met virtually to exchange views on topics of mutual interest as part of their ongoing financial regulatory dialogue.
Banking Union
European Commission: Targeted consultation on instant payments : This targeted consultation will inform the Commission on remaining obstacles as well as possible enabling actions that it could take to ensure a wide availability and use of instant payments in the EU.
Capital Markets Union
FT: Archegos debacle reveals hidden risk of banks’ lucrative swaps business : Derivatives that blew up Hwang family office were growing source of revenue for Wall Street
PCS: European Parliament votes the new securitisation rules : Yesterday, in their plenary session, the European Parliament passed long anticipated amendments to the existing STS Regulation and concomitant changes to the Capital Requirement Regulation (CRR).
ICMA updates repo best practices to support post-trade efficiency : The targeted updates published today were prepared jointly by the ERCC Operations Group and the ERCC’s Guide Working Group and specifically aim at improving processes related to intraday liquidity management and settlement efficiency.
Environmental, Social, Governance (ESG)
IOSCO Technical Expert Group to undertake an assessment of the technical recommendations to be developed as part of the IFRS Foundation’s su : IOSCO welcomes the press release issued by the Trustees of the IFRS Foundationannouncing the formation of a working group chaired by the IFRS Foundation to undertake technical preparation for a potential international Sustainability Standards Board (SSB) under the governance of the IFRS Foundation.
Protecting Customers
European Supervisory Authorities issue a report on the application of their Guidelines on complaints-handling : The Report concludes that the Guidelines have contributed to a consistent approach to complaints-handling across the banking, insurance and securities sectors and have resulted in better outcomes for consumers.
Fin Tech Regulation
Project Syndicate: All Eyes on Digital Payments : There is justifiable excitement surrounding digital payments, given the potential of the technology to support a wide range of financial services for businesses and consumers alike. But the rise of powerful new platforms and means of exchange raises public policy concerns that cannot be ignored.
BIS: Central bank digital currencies: putting a big idea into practice : Central bank digital currencies (CBDCs) are an opportunity for central banks to offer a technologically advanced representation of central bank money for the digital economy.
Brexit
Bloomberg: Seven Charts Show How Brexit Has Already Changed the City of London : Here’s how Europe’s financial capital is holding up after the U.K.’s departure from the EU.
FT: UK and EU begin diverging on financial regulation after Brexit : Prospects for supervisory ‘equivalence’ fade as each side pursues differing rules
Reuters: Britain and EU strike financial services cooperation pact : Britain and the European Union agreed a new post-Brexit financial services pact on Friday that will allow them to co-operate on regulation but does little to improve the City of London’s access to the bloc.
FT: Brussels squares up to UK in fight over euro swaps clearing : EU is increasingly worried about London’s dominance over the €81tn industry