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Highlights of my week: After many7 months of thought, the Commission finally unveiled its thoughts about reform of the EU’s fiscal rules – but this is only the beginning of the real debate. The FSB also began the process of dealing with strains in the non-bank financial sector – after recent commodity and bond shocks. Full Basel III implementation in the EU moved closer as Council agreed its position while the securitisation industry called for targeted measure to get the market going properly again. COP27 dominated ESG comments this week – with the insurance industry taking a leading role But `fintech’ is about to be dominated by the probable collapse of the FTX exchange and investors remember the strong warnings from regulators about possibly losing all their money. The Brexit fiasco looms ever larger as the message sinks in that the EU has not stood still while Skidelsky cite Keynes’ writings that the UK may now be “too poor for war”.
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 4-10 November 2022
Policy impacting Finance
Remarks by Executive Vice-President Dombrovskis at the press conference on the economic governance review : The orientations we are presenting today to reform the EU's system of economic governance address these new realities and challenges. We are aiming for a simpler system of fiscal rules, with greater country ownership and more latitude for debt reduction – but combined with stronger enforcement.
Remarks by Commissioner Gentiloni at the press conference on the economic governance review : Member States should ensure that their fiscal trajectories respect a common EU framework that has sustainable growth and risks to debt sustainability as a common basis. This common EU framework would ensure transparency and equal treatment between Member States.
CEPR's Buti ,Friis, Torre:How to make the EU fiscal framework fit for the challenges of this decade : After the Covid crisis and the economic fallout of Russia’s war of aggression, the EU fiscal rules will have to allow member states to rein in the burgeoning public debt, foster incentives to increase the quality of public finances, and tackle the pro-cyclical bias of fiscal behaviour.
Questions and answers: Building an economic governance framework fit for the challenges ahead : What is the Commission presenting today? The Communication outlines the Commission's orientations for a reform of the economic governance framework, addressing challenges prevailing now and over the foreseeable future.
Remarks by Executive Vice-President Dombrovskis at the ECOFIN Press conference : We all share the same objective of making banks more resilient to future economic shocks by implementing Basel III faithfully. .., it is important that we take specific features of Europe's banking sector into account to avoid a significant overall increase in capital requirements for EU banks
Remarks by Paschal Donohoe following the Eurogroup meeting of 7 November 2022 : The Commission forecasted growth of 2.7% for 2023 before Russia began its awful war on Ukraine. The latest figure for growth for the euro area in October is now 0.5%. We will get further details on growth expectations from the Commission when they publish their forecast at the end of the week.
FSB sets out policy proposals to address systemic risk in non-bank financial intermediation : Recent strains in commodities and bond markets underscore the importance of this topic.
CEPS's Gros, Shamfakhr: The real fiscal cost of central bank bond buying : The large bond holdings accumulated by the Eurosystem over the last eight years have represented a massive fiscal bet that interest rates would stay low forever. This bet has now gone spectacularly wrong and has come home to roost. As a result, euro area taxpayers are likely to lose around EUR 700 billion over the coming decade.
Banking Union
Banking sector: Council agrees its position on the implementation of Basel III reforms : The EU is about to boost the resilience of banks operating in the Union and strengthen their supervision and risk management by finalising the implementation of the globally agreed Basel III regulatory reforms. Today, the Council reached its position (general approach) on the proposals amending the capital requirements directive and the capital requirements regulation.
Bloomberg's Valero/Comfort : EU Set to Water Down Plan for New Bank Capital Standards : European Union countries are close to agreeing on a watered-down version of new capital rules for banks after the industry warned that a strict approach would risk choking off the supply of credit to the bloc’s economies.
SSM's Enria: Written overview ahead of the exchange of views of the Chair of the Supervisory Board of the ECB with the Eurogroup on 7 Novemb : The latest available prudential statistics portray a euro area banking sectorwhich is strong from both a capital and a liquidity perspective and whichcontinues to reduce legacy non-performing loans (NPLs) and to benefit fromthe ongoing normalisation of interest rates, with profitability levels not seensince European banking supervision began.
Capital Markets Union
PCS: Stakeholders' letter to European policy makers: "Securitisation cannot play its vital role for the European economy without reform" : PCS has added its name to a securitisation market stakeholders' letter to European policy makers.
AFME: Joint industry letter warns absence of EU securitisation market is a strategic loss for Europe ? : A group of nine organisations representing key participants in the European securitisation market have written a public letter to EU policymakers, calling on them to take urgent targeted measures to ensure that securitisation can support the European economy during a testing period marked by macroeconomic uncertainty.
FT: Fund managers sound alarm over fragmenting regulation : Deglobalisation strains regulation and investment choices, fund executives say
Environmental, Social, Governance (ESG)
COP27: ‘Zero tolerance for greenwashing’, Guterres says as new report cracks down on empty net-zero pledges : While a growing number of governments and non-State actors are pledging to be carbon-free, the criteria for net-zero commitments can have loopholes wide enough to “drive a diesel truck through”, the UN Secretary-General decried as his expert group on the matter published its first report on Tuesday.
GFIA calls for collective action to prevent loss of life and reduce economic losses : The Global Federation of Insurance Associations (GFIA) calls on the parties at COP27 to prioritise adaptation and the building of resilience to the impacts of climate change. GFIA reaffirms its commitment to fostering international dialogue and action to address climate change and its impacts.
COP27: European insurers and reinsurers reaffirm commitment to international climate goals : Europe’s insurers and reinsurers wish to reiterate their willingness to continue playing their important role in climate change mitigation and adaptation in support of the goals of the UN Paris Agreement and the European Green Deal.
IOSCO outlines regulatory priorities for sustainability disclosures, mitigating greenwashing and promoting integrity in carbon markets : The International Organization for Securities Commissions (IOSCO) today at COP 27 has outlined the actions it undertakes to protect investors by mitigating greenwashing in financial markets, to contribute to sustainability disclosure standards benefitting issuers and investors, and to promote well-functioning carbon markets.
ECB's Elderson: Delivering on the Glasgow Declaration: actions by the ECB on the road through Sharm El-Sheikh to a Paris-compatible path : Elderson at the Euro-Mediterranean Economists Association COP27 side event on “Investing in and financing the acceleration of sustainable development in a net zero scenario” in Sharm El-Sheikh
IOSCO consults on the development of sound and well-functioning carbon markets : The Board of the International Organization of Securities Commissions (IOSCO) today has launched a 90-day public consultation on recommendations for establishing sound Compliance Carbon Markets (CCMs) and on key considerations for enhancing the resilience and integrity of Voluntary Carbon Markets (VCMs).
ICMA publishes new climate resilient debt clauses to facilitate sovereign debt relief and financial stability : The working group, which included ICMA, developed new terms that provide for deferral of sovereign debt repayments to private creditors for a pre-agreed period and that can apply to a wide set of natural disasters and geographies...
European Parliament: Fit for 55: Deal on stricter rules for member states’ greenhouse gas emissions : All EU countries must reduce greenhouse gas emissions in line with a stricter trajectory; Fewer possibilities to transfer, borrow and bank emission allowances; More transparency: information on national actions to be made public
CEPS' Gargantini, Siri: Information Intermediaries and Sustainability : ESG ratings and benchmarks in the European Union. The relatively new world of ESG indicators displays many similarities with the original markets for ratings and benchmarks but it also has some distinguishing features.
Opening remarks by Commissioner McGuinness at the European Parliament plenary debate on the Corporate Sustainability Reporting Directive : This debate on the Corporate Sustainability Reporting Directive in my view represents a very important achievement in our collective efforts towards a more sustainable economy and society.
Fin Tech Regulation
Finextra: Binance pulls out of FTX takeover : "In the beginning, our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help," says Binance in a series of tweets.
Bloomberg: FTX Warns of Bankruptcy Without Rescue for $8 Billion Shortfall : Bankman-Fried said his firm faced up to $8 billion shortfall; Binance bailed on FTX takeover, citing finances and probes ECB's Lagarde: Digital euro: a common European project : Video address by Christine Lagarde, President of the ECB, to the “High level conference: Towards a legislative framework enabling a digital euro for citizens and businesses”
ECB's Panetta: Demystifying wholesale central bank digital currency : Wholesale CBDC refers to central bank money that is used to settle interbank transfers and related wholesale transactions. It has already been available for decades.
Project Syndicate's Eichengreen: The Trilemma of Central Bank Digital Currencies : Countries have a variety of rationales for seeking to modernize their payments technologies. Ultimately, however, central banks weighing whether to launch a digital currency must recognize that if they do, they can have confidentiality of transactions or financial stability, but not both
Commissioner McGuinness at the high level conference, 'Towards a legislative framework enabling a digital euro for citizens and businesses' :
Economic Policies Impacting EU Finance
Taxation: Finance ministers agree to strengthen the code of conduct used to identify and curb harmful tax measures of member states : The EU continues to promote fair tax competition and address harmful tax practices, both within the EU and worldwide.
Council adopted conclusions on statistics : The Council has reviewed the progress related to information requirements in EMU, statistics for the EDP, surveillance of macroeconomic imbalances and structural statistics.
Brexit
Uk and Eu's Wyatt: Should the UK join a more federal EU or be its ally and trading-partner? : Derrick Wyatt highlights the European Union’s federal direction of travel and analyses the implications of this for the UK post-Brexit. The EU has not stood still since the Brexit referendum. An historic development was its decision in 2020 to issue bonds on behalf of all Member States to fund a 750 billion euro post-pandemic Recovery Plan.
Project Syndicate's Skidelsky/Pilkington: Too Poor for War : Decades of deindustrialization have hollowed out the UK economy and made it woefully ill-prepared for wartime disruptions. As the financial speculators who funded its current-account deficits turn against the pound, policymakers should consider Keynesian taxes and increasing public investment.
Federal Trust's Martin: Stalemate in Northern Ireland : In this video, the former head of the European Commission office in Belfast, Geoff Martin, discusses recent developments in Northern Ireland with our Chairman John Stevens.
Opening remarks by Vice-President Šefcovic at the EU-UK Parliamentary Partnership Assembly :
EURACTIV: EU imposes meeting ban on UK officials : EU officials have been told not to hold meetings with UK counterparts unless they are strictly related to the war in Ukraine or are ‘legally mandatory’, in the latest indication of frosty relations between Brussels and London.
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