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Highlights of my week: The IMF warned that market liquidity strains could signal increased risks to financial stability while CEPR put together an illustrious list of academics to propose how to make banking union come unstuck. ESMA really did withdraw its recognition of six Indian CCPs because the Indian authorities were not co-operating. ICMA published standard clauses for majority voting in bank loans to sovereigns – analogous to the EU’s collective action clauses. Ahead of COP27, the ECB commented harshly on banks’ climate plans and set a 2024 deadline while 600 investors (with €42 trillion of assets) called on governments to be radically ambitious. Brexit issues raised their prominence this week: my Federal Trust video highlighted ISDA’s advice to the Commission that could attract €100 trillion of euro clearing into the EU, while the political storm is growing about HMG’s post-Brexit plans to “take back control” of financial regulation from the elected Parliament and give it to the executive.

 Graham Bishop

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Articles from 29 October-3 November

 

Policy impacting Finance

 

Jacques Delors Centre: Wielding the Big Gun – What the ECB’s New Bond Purchasing Program Means for EU Governance : By linking bond purchases to member states following the EU’s economic governance framework, the central bank has potentially increased the size of the gun the Commission and the Council can wield to incentivize compliance. View Article

Bruegel's Zettelmeyer: European Union fiscal rules: is a better system feasible? : EU countries seem to be converging on a set of reform objectives. But can these be jointly satisfied? Two recent proposals offer some hope.  View Article

BIS: Triennial Central Bank Survey of foreign exchange and Over-the-counter (OTC) derivatives markets in 2022 : The results of the 2022 Triennial Survey are summarised in commentaries about foreign exchange turnover and interest rate turnover. Detailed analyses will be published in the December 2022 issue of the BIS Quarterly Review. View Article

IMF: Market Liquidity Strains Signal Heightened Global Financial Stability Risk : A deterioration in market liquidity has amplified price swings  View Article

LSE: What Giorgia Meloni’s maiden speech to parliament told us about Italy’s future : Italy’s new Prime Minister, Giorgia Meloni, gave her maiden speech to parliament on 25 October. James L. Newell assesses what the speech told us about Meloni’s priorities and the policy agenda of her government. View Article

 

Banking Union

 

Commissioner McGuinness at EU Sustainable Investment Summit 2022 ‘Be bold, take initiatives: financing the transition and accelerating innov : towards a sustainable and innovative Europe; The European Green Deal is our plan to address the climate crisis: it sets a target of climate neutrality by 2050.; But most of the technologies that will allow us to be net zero in 2050 are not there yet. View Article

GBIC comments on the EBA’s supervisory handbook on the validation of IRB rating systems : GBIC has commented on the EBA’s supervisory handbook which sets out expectations for the validation of rating systems that institutions use within the internal ratings based approach (IRBA) to determine their own funds requirements. View Article

CEPR: How to get the European Banking Union unstuck : A new CEPR Policy Insight asks why it got stuck and analyss what it would take to get it unstuck.  View Article

 

Capital Markets Union

 

ESMA to withdraw the recognition decisions of six Indian CCPs : After conducting its assessment, ESMA established that not all of the cumulative conditions under EMIR for the recognition of these six TC-CCPs are met... View Article

EIOPA issues its methodology for assessing value for money in the unit-linked market : The methodology outlines a common European approach on how to identify unit-linked products which may offer poor or no value for money and require a close monitoring by national competent authorities (NCAs) to ensure risks are sufficiently identified, monitored and mitigated.  View Article

Insurance Europe: EC should use Retail Investment Strategy to help consumers better understand retail investment products : The RIS aims to provide consumers with clear, concise and comparable information about retail investment and insurance-based investment products View Article

PCS responds to the EBA's consultation on the draft "homogeneity" RTS : We are especially in agreement with the idea of keeping a single definition of "homogeneity" for all types of STS transactions, whether true sale or synthetic. View Article

ICMA publishes new majority voting clauses for commercial loans to sovereign borrowers to facilitate sovereign debt restructuring : The working group, which included ICMA, elicited private sector input and designed the new terms for inclusion in sovereign loan agreements in order to facilitate more efficient and effective sovereign debt restructurings.  View Article

 

Environmental, Social, Governance (ESG)

 

ECB sets deadlines for banks to deal with climate risks : Despite improvements, banks still need to better identify and manage climate and environmental risks; ECB sets deadlines for banks to progressively meet all supervisory expectations by end of 2024; Good practices across banking sector show that swift progress is possible View Article

SSM's Elderson: Banks need to be climate change proof : As supervisors, our role is to ensure that banks remain prudentially sound, now and long into the future. For this to happen, banks must be able to identify, assess, control and mitigate the inevitable risks materialising from the climate and environmental crises. View Article

UN EP FI: 600-plus investors call on governments to radically raise their climate ambition at COP27 : The statement represents a unified investor call on governments to implement the policy actions needed to address the climate crisis and accelerate the transition to a net zero emissions economy. View Article

EURACTIV: Sustainability-linked bonds, the rising star of green finance : Sustainability-linked bonds come with specific targets – or key performance indicators (KPIs) – related to a company’s loan. If they meet their targets, the interest paid on their debt will be lower, which acts as an incentive for companies to go green. View Article

FBF: For each €1 invested in fossil fuels, €4 are invested in renewable energies and green and sustainable activities : For many years, French banks have stood out through their determination to exclude the most greenhouse gas-emitting energies. They have made strong commitments with clear results. View Article

ISSB confirms requirement to use climate-related scenario analysis : The ISSB also agreed to provide application support to preparers including making use of materials developed by the Task Force for Climate-Related Financial Disclosures (TCFD) to provide guidance to preparers on how to undertake scenario analysis. View Article

IFAC Calls on G20 Leaders to Cooperate to Solve Pressing Long-Term Issues; Pledges Ongoing Support from Accountancy Profession : Sustainability-Related Reporting Standards, Public Finance Management, Fighting Corruption, and Collaboration All Crucial to Achieving Sustainable Development Goals.  View Article

ICGN Viewpoint: De-carbonising the Global Economy: The Just Transition : The monumental shift to a de-carbonised energy system should happen in a way that shares the benefits of the transition while supporting those who will be negatively impacted. View Article

Net-Zero Insurance Alliance Launches Public Consultation on Version 1.0 of the Alliance’s Target-Setting Protocol : This inaugural Protocol outlines NZIA’s recommended approach to target-setting and reporting, as well as how the Protocol is expected evolve in the future. View Article

Four-in-five largest global companies report with GRI : A major stocktake on the state of sustainability reporting around the world has revealed that GRI provides the ‘first and foremost’ global standards, used by more large companies than ever before. View Article

 

Fin Tech Regulation

 

Digital Markets Act: rules for digital gatekeepers to ensure open markets enter into force : The new Regulation will put an end to unfair practices by companies that act as gatekeepers in the online platform economy. It was proposed by the Commission in December 2020 and agreed by the European Parliament and the Council in record-time, in March 2022.  View Article

Finextra: BIS and three central banks to test cross-border CBDCs using DeFi protocols : With a primary focus on the ability to settle foreign exchange trades, the project involves the Eurosystem, Singapore and Switzerland BIS Innovation Hub Centres together with the Bank of France, Monetary Authority of Singapore and Swiss National Bank. View Article

 

Broadening the International Role of the Euro

 ECB's Lane: Currency pegs: a euro area perspective : Danmarks Nationalbank conference marking the 40th anniversary of the Danish fixed exchange rate regime. View Article

 

Brexit and the City

 

Federal Trust's Bishop: VIDEO: Will the City Lose Its Euro Clearing Business? : In this Federal Trust video, the financial analyst Graham Bishop and the Chairman of the Trust, John Stevens, discuss the likelihood and the significance of the City of London losing its approximately €100 trillion Euro derivatives clearing business to the Eurozone by 2025. View Article

Government confirms regulatory ‘call in’ power amendment to be delayed : The Treasury Committee today criticises the Government’s “sub-optimal” approach to the scrutiny of major changes to financial regulation. View Article

Bloomberg: UK Lawmakers Slam Government for ‘Sub-Optimal’ City Reform Plan : Rishi Sunak’s new government has signaled it will introduce the controversial call-in power, but in a letter to the committee Monday said it would be added to the bill later View Article

Corporation of London: Lord Mayor stresses importance of delivering on Financial Services and Markets Bill : The Lord Mayor speaks alongside Sam Woods, Deputy Governor of the Bank of England and Chief Executive of the Prudential Regulation Authority, and Nikhil Rathi, Chief Executive of the Financial Conduct Authority. View Article

EURACTIV: Britain proposes regulation of all cryptoassets : Britain would have the power to regulate all cryptoassets under a proposal the UK financial services minister has added to a draft law before parliament that will almost certainly pass. View Article

Reuters' Jones: Britain to go it alone for now on reining in 'shadow banking' : G20 watchdog FSB to set out shadow bank measures Nov. 10; Bank of England updates on non-banks on Nov. 7; UK regulators eye domestic action on liquidity View Article

Bank of England: Comments on latest BIS survey of turnover in the markets for forex and OTC derivatives : The UK remains the single largest centre of foreign exchange activity with a share of 38.1% of global turnover, despite this being a decrease from the 43.2% in recorded in April 2019. View Article

UK Finance has today published its latest total tax contribution of the UK banking sector report, produced by PwC. : The report shows that the UK banking sector generated £38.8 billion in taxes in the financial year to the end of March 2022. This means that the sector accounted for 4.7 per cent of the government’s total tax receipts during that period. View Article

 

Brexit

 

Redfield and Wilton: Joining or Staying Out of the EU Referendum Voting Intention (19 October 2022) : Altogether, if a referendum on re-joining the European Union were to take place tomorrow, 57% say they would vote for the UK to join the EU, while 43% say they would vote for the UK to stay out of the EU. View Article

FT's Thomas: The rotten state of Brexit for the food industry : A 24/7 supply chain from Europe was always going to be at the sharp end of leaving the EU View Article

 

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