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Highlights of my week: The ECB’s Financial Stability Review made chilling reading about the risks lurking in financial markets as pandemic support recedes. Almost as if queued up, the price of Bitcoin et al demonstrated what happens in illiquid markets with `poor fundamentals’ – to be diplomatic - when sentiment changes and the mania subsides even a bit. Maybe bank-based instant payments have some attractions after all…Bank supervisors/resolvers reviewed the tools now available to SSM and the crisis management framework. Securitisation should be another component of post-pandemic finance and both ECB and ESAs are reviewing how to implement the new Regulation. But market participants seem most exercised by the practical details of the “Taxonomy”: much criticism of over-lapping/inconsistent rules and too-short timetables for implementation. But perhaps these are just the teething troubles to be expected from such a global trail-blazing project.
The Brexit post-mortem of the City may suggest its Golden Age is firmly over but new casualties of the Brexit Ayatollahs are now appearing – musicians and foreign students.
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 13 - 20 May 2021
General Financial Policy
Conference on the Future of Europe: make your voice heard : Their exchanges will be structured thematically around recommendations from the Citizens’ Panels and input gathered from the Multilingual Digital Platform. The Platform is the single place where input from all Conference-related events will be collected, analysed and published.
EURACTIV: Pressure mounts on member states to ensure successful roll-out of recovery fund : As the EU recovery fund slowly nears its implementation phase, member states’ absorption capacity and control mechanisms are considered among of the main challenges for its successful roll-out.
ECB review sees elevated financial stability risks due to uneven impact of pandemic : Uneven economic impact of pandemic implies risks concentrated in specific sectors and countries; Banks’ asset quality holding up, but profitability weak and potential for credit risk to worsen;
Banking Union
SSM blog: Fostering a compliance culture in the European banking system : The establishment of the Single Supervisory Mechanism (SSM) introduced many tools for effectively supervising banks at the European level. One of those tools, which is possibly not always highlighted enough, allows the ECB to impose sanctions on supervised banks that fail to comply with prudential requirements.
SRB publishes blueprint for the crisis management and deposit insurance (CMDI) framework review : The SRB published key considerations on the crisis management and deposit insurance (CMDI) framework review.
SSM's Elderson:“We can’t afford to drag our heels when it comes to risk” : Frank Elderson, Vice-Chair of the ECB’s Supervisory Board, talks about monitoring credit risks during the pandemic, addressing current and future climate change risks, and the suitability and diversity of banks’ boards.
SRB issues bi-annual reporting note to the Eurogroup : The Chair of the Single Resolution Board, Elke König will inform on Friday 21 May 2021 the Eurogroup ministers about ongoing activities of the SRB, focusing on progress regarding resolution planning, resolvability and minimum requirement for own funds and eligible liabilities (MREL).
Capital Markets Union
ECB Banking Supervision to supervise securitisation requirements for banks : ECB supervisors to look at requirements related to risk retention, transparency and ban on resecuritisation for significant banks; ECB to operationalise these supervisory tasks over coming months
ESAs’ report on the implementation and functioning of the securitisation regulation : The Report is meant to provide guidance to the European Commission in the context of its review of the functioning of the SECR. It also provides initial inputs to the ongoing discussion on the efficiency of the securitisation framework given the role that securitisation could play in the recovery post the Covid-19 pandemic.
Environmental, Social, Governance (ESG)
Commissioner McGuiness: Opening remarks at the joint ECON-ENVI Meeting on the first Delegated Act for the EU Taxonomy : Because without finance and a financial system re-oriented towards sustainability - we cannot achieve our objectives... Now to the Taxonomy. This really underpins our entire sustainable finance agenda. It is ground-breaking and a world first.
SMSG advice to the ESA’s Joint Consultation Paper on Taxonomy-related sustainability disclosures : By introducing the Taxonomy Regulation’s Environmentally Sustainable Activities into the Sustainable Fi-nance Disclosure Regulation, another piece of the puzzle is completed.
ESAs Joint Consultation paper on Taxonomy-related sustainability disclosures (SFDR RTS): EBF response : Lack of comparable, reliable and standardized data (including from external data providers) and information necessary both for a complete and correct due diligence and classification of the financial products’ sustainability degree remain a critical issue. Companies will only begin to report their taxonomy alignment in 2022.
Insurance Europe: Workable, clear and consistent disclosures are needed for taxonomy-related information : Insurance Europe has published its response to a consultation conducted by the European Supervisory Authorities (ESAs) on a single template for product disclosures under the Taxonomy Regulation.
EFAMA calls for consistency of taxonomy KPI metrics in EU sustainable finance regime : EFAMA has published its response to the joint European Supervisory Authorities (ESAs) consultation on taxonomy-related sustainability disclosures in the Sustainable Finance Disclosure Regulation (SFDR).
CFA Institute Publishes Exposure Draft of ESG Disclosure Standards for Investment Products : New Standards seek to provide transparency and comparability of investment products with ESG-related features
ICMA publishes overview of ‘taxonomies’ for sustainable finance and recommends success criteria : There have been both market and official sector initiatives to develop ‘taxonomies’ (classification systems) in an effort to provide clear guidance on which activities, assets and/or projects qualify for sustainable finance, and more widely in some cases as sustainable for regulatory or prudential purposes.
Fin Tech Regulation
ECB's Panetta: At the edge of tomorrow: preparing the future of European retail payments : Digitalisation has indisputably come a long way in reshaping the European retail payments landscape. So it is natural for digitalisation to be one of the starting points of our retail payments strategy
Bloomberg:Musk Sends Bitcoin Tumbling With Shock U-Turn on Payments : EV maker cites concerns on cryptocurrency mining energy use, Tesla’s endorsement of Bitcoin in February powered rally
Bruegel: Crypto… mania : Cryptocurrencies are here to stay but are unlikely to be considered a credible alternative to money anytime soon.
FT: Bitcoin gyrates on fears of regulatory crackdown : Digital asset market under intense pressure after China warns on use of cryptocurrencies.Cryptocurrency markets swung in chaotic trading and related stocks were hit after Chinese regulators signalled a crackdown on the use of digital coins, which have soared in price this year.
Economic Policies Impacting EU Finance
Remarks by Executive Vice-President Dombrovskis at the press conference on the Communication on Business Taxation 21 : Today's tax bases are changing. Our existing tax environment is no longer in line with our broader objectives and ambitions. It does not reflect long-term priorities such as the green and digital transitions.
Remarks by Commissioner Gentiloni at the press conference on the Communication on Business Taxation 21 : EU States are losing tens of billions each year to tax fraud, evasion and avoidance: an estimated €50 billion per year to cross-border VAT fraud; €46 billion to international tax evasion by individuals; ans between €35 and €70 billion as a result of corporate tax avoidance in the EU.
Brexit
Project Syndicate's Davies: A Brexit Post-Mortem for the City : Almost five years after the Brexit referendum, and five months after Britain's exit from the European Union, the future of London as a global financial center seems secure. But although the City will remain Europe’s largest financial marketplace, its Golden Age as Europe’s financial capital is over.
ISM: The impact of the Brexit Trade Deal on music businesses: the first 100 days : New ISM survey reveals how the Brexit Trade Deal has been a disaster for music businesses.
Vox: Brexit deterred international students from applying to UK universities : Attracting international students is critical for public universities in the UK increasingly facing funding cuts and a diminishing domestic youth population. This column discusses how Brexit may have affected students’ willingness to study in the UK... factors likely driving the students’ choices.
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