Today’s final European Council of 2022 seems unlikely to produce anything of specific interest to financial services, nor does that Swedish Presidency programme for the next six months. The ESAs gave their advice on reviewing the securitisation framework – greeted by much disappointment in the market. The EBA laid out its three-year roadmap for integrating ESG risks into the EU’s banking system and several professional associations banded together to state their worries about the Green Bond Regulation. Users were reminded that revisions to the widely-used GRI reporting standards come into force on 1st January. The EBA published its analysis of the consumer detriment caused by the level of fees/charges by some banks. Finally, Council reached agreement on applying the OECD minimum tax on large corporations after Hungary backed away from its veto. Chancellor Hunt proudly unveiled the post-Brexit “Edinburgh reforms” to UK financial regulation – to immediate concern expressed in the FT about `gold-plating’ capital standards. There may even be a deal on Northern Ireland in the next month or so.
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Articles from 9-15 December
Policy impacting Finance
Invitation letter by President Charles Michel to the members of the European Council : Our European Council on Thursday 15 December will be a one-day meeting. We will focus on strategic issues on which our unity will be key.
POLITICO: Sweden’s domestic divisions cloud presentation of EU presidency priorities : Kristersson presented Sweden’s priorities to the parliament in Stockholm under four headings — security, resilience, prosperity, and democratic values and the rule of law — and struck an optimistic tone about what could be achieved.
EPC's Petit: In EU Citizens' Panels, the institutions must not leave citizens behind : The Conference on the Future of Europe citizens’ feedback event reinforced the need for EU institutions to find a better way to speak to each other and communicate with citizens. . the citizens did not feel they had received satisfying answers during the event.
BCBS: Evaluation of the impact and efficacy of the Basel III reforms : This evaluation report assesses whether the implemented reforms have met their intended objectives, in particular of increasing bank resilience and reducing systemic risk. It also examines some potential unintended effects, notably on banks' lending and capital costs.
Bruegel's Bonfanti/Garicano: Do financial markets consider European common debt a safe asset? : The interest rate on European Union bonds is now almost as high as that of supposedly riskier Spanish bonds; this risks defeating their purpose.
EURACTIV: Nine EU countries need pension reform : Nine EU countries have not explicitly committed to pension reforms in their recovery and resilience plans despite Commission recommendations on the matter from the 2019 European Semester, according to Commission documents and declarations made to EURACTIV.
Project Syndicate's Gros: America’s Inward Turn on Trade : America’s efforts to use renewables subsidies to protect domestic manufacturing interests will not only bring higher costs. Because they flout World Trade Organization rules, they could also have significant political repercussions.
Banking Union
EBA consults on Guidelines on the overall recovery capacity in recovery planning : The objective of the ORC is to provide a summary of the overall capability of the institution to restore its financial position after a significant deterioration by implementing suitable recovery options.
SSM: LSI supervision report 2022 : Less Significant Institutions (LSIs) represent around 18% of total banking assets in Europe while the number of LSIs has declined by about 1,000 since the inception of the SSM.
BDB: Comments on the European Commission’s proposal for a regulation on instant credit transfers COM(2022) 546 final : The German Banking Industry Committee (GBIC) has commented on the European Commission’s proposal for a regulation amending Regulations (EU) No 260/2012 and (EU) 2021/1230 as regards instant credit transfers in euro.
BDB: Position paper on the digital euro: Setting the course that could fundamentally change Europe's payment system :
Insurers outline benefits of official registers for beneficial ownership; call for further improvements at member state and EU level : Insurance Europe has published its response to a consultation conducted by the Financial Action Task Force (FATF) on beneficial ownership, which is where property is owned under another name.
Capital Markets Union
ESAs publish joint advice to the EU Commission on the review of the securitisation prudential framework : The ESAs welcome the current review as an opportunity to assess the performance of the current framework and support the objective of reviving the EU securitisation market.
ICMA: Letter to the Joint Committee of the ESAs - Securitisation Regulation - Request for Guidance on Article 5(1)(e) : The promotion of well-functioning cross-border debt securities markets, without unnecessary fragmentation, is at the heart of ICMA’s mission and a priority for ICMA’s members.
PCS: Joint-Committee of the ESAs response to the Commission is published - expected disappointment has materialised : As they have just been published, we have yet to read the full conclusions. But the EBA announcement page gives some indication as to the proposals (or lack thereof) contained in the documents.
AFME disappointed by ESAs’ inaction on securitisation – EU legislators should provide leadership to address regulatory imbalances ? : “We are very disappointed on first reading of the report. There is a weight of evidence supporting recalibration of both the bank and insurance prudential frameworks, but the ESA’s recommendations conclude that no real change is needed at this stage..".
IAIS: Digital innovation in the insurance sector: two publications on trends related to FinTech and SupTech : An IAIS Report on FinTech developments in the insurance sector; Joint Note with the Access to Insurance Initiative (A2ii) and the Financial Stability Institute (FSI) of the Bank for International Settlements (BIS) on the role of supervisory technology (SupTech) in insurance supervision
No need to develop an extensive recovery and resolution framework for insurers : Insurance Europe has published a set of key messages on the European Commission’s proposal for an Insurance Recovery and Resolution Directive (IRRD).
Value for money approach: ESBG position : The European Commission circulated a Discussion Note on a “Value for Money” (VfM) approach to solicit views on how the retail investor protection framework might be enhanced through the development of an approach aimed at ensuring that products offered to retail investors offer value for money.
Contact points of national supervisory authorities for communication in the MiFID II framework on supervisory cooperation, authorisation, ac : This document provides information on contact points of national competent authorities(NCAs) to facilitate communication on the topics of:
EFAMA Asset Management Report 2022 : EFAMA's latest edition of its 'Asset Management in Europe' report provides an in-depth analysis of recent trends, focusing on where investments funds and discretionary mandates are managed in Europe.
Environmental, Social, Governance (ESG)
The EBA publishes its roadmap on sustainable finance : The roadmap explains the EBA’s sequenced and comprehensive approach over the next three years to integrate ESG risks considerations in the banking framework and support the EU’s efforts to achieve the transition to a more sustainable economy.
ISSB describes the concept of sustainability and its articulation with financial value creation, and announces plans to advance work : ISSB is meeting in Montreal to advance the IFRS Sustainability Disclosure Standards ahead of their publication in 2023 and made progress on several topics relevant for the work of COP15 on Biodiversity, simultaneously taking place in Montreal, Canada.
IFC, CDP, SSE launch new report on environmental disclosure policies : The report (developed in consultation with UN SSE initiative) also highlights practical examples for developing high-quality regulation that addresses market needs and investor demands, helping to mobilize private capital flows towards sustainable solutions.
Get ready for enhanced sustainability reporting with GRI : Revised Universal Standards come into effect from 1 January
EIOPA’s first IORPs climate stress test shows material exposure to transition risks : In the first climate stress test of the sector, EIOPA set out to assess the resilience of IORPs against a climate change scenario that simulates a sudden, disorderly transition to a green economy as a consequence of the delayed implementation of policy measures.
PensionsEurope: Pension funds manage transition to green economy in stress test : The results show that a severe climate change scenario will impact the assets of IORPs. From the perspective of being able to pay out pensions, PensionsEurope is glad to see that the results show that the impact on the funding ratios of DB schemes is limited with declines of a few percentage points.
Joint statement from EuropeanIssuers, FESE and ICMA on the European Green Bonds Regulation : We are especially worried about some proposals that would introduce a mandatory regime for the issuance of all bonds labelled as ‘green’
ISDA Launches Standard Definitions for the Voluntary Carbon Market : ISDA has published new industry documentation for the trading of verified carbon credits (VCCs), as part of a broad effort to support the transition to a green economy by developing robust legal and risk management standards for markets related to ESG activities.
ECA: The EU Recovery and Resilience Facility: a jump to a resilient Europe? : The ECA's Journal with a series of essays on the working of the RRF
Expanding Roles in Sustainability and Digital Transformation Priorities for Professional Accountants in Business and the Public Sector : New IFAC report explores how professional accountants in business and the public sector are stepping up to support their organizations through chaotic times
Protecting Customers
EBA publishes its first thematic review on the transparency and level of fees and charges for retail banking products in the EU, observing : Despite the improvements in consumer protection brought about by several EU sectoral directives introduced in the past decade to regulate the banking retail products, market practices for fees and charges are causing significant detriment to consumers.
Economic Policies Impacting EU Finance
International taxation: Council reaches agreement on a minimum level of taxation for largest corporations : The ambassadors of EU member states decided to advise the Council to adopt the Pillar 2 directive, and a written procedure for the formal adoption will be launched. The Committee of Permanent Representatives reached the required unanimous support today.
Fair Taxation: Commission welcomes agreement on minimum taxation of multinationals : The Council Directive, to be formally adopted by Council written procedure, includes a common set of rules on how to calculate the 15% effective minimum tax rate– so that this is properly and consistently applied across the EU. The minimum tax rate of 15% has been agreed at global level by 137 countries.
EURACTIV: Orbán backs down: EU agrees on Ukraine aid and minimum tax : In a deal that will see €6.3 billion in EU funds for Hungary frozen, EU member state negotiators agreed on Monday (12 December) on an €18 billion macro-financial aid package for Ukraine and a directive to implement a minimum corporate tax of 15% on large multinational companies.
Brexit and the City
Edinburgh Reforms hail next chapter for UK Financial Services : Chancellor of the Exchequer Jeremy Hunt today unveiled the “Edinburgh Reforms” of UK financial services – over 30 regulatory reforms to unlock investment and turbocharge growth in towns and cities across the UK.
UK Finance responds to the Edinburgh Reforms : The comprehensive package of reforms the Chancellor has announced today, coupled with the landmark Financial Services and Markets Bill, form a major step in ensuring the sector remains strong and internationally competitiv
City Corporation responds to Government financial services regulation reforms : The Chancellor has today (9 December) outlined a series of reforms to financial services regulation in Edinburgh.
FT: UK bank capital plans at odds with post Brexit vision : Executives say gold-plating of capital standards could lead to ‘entrenched benefit’ for EU competitors
PCS: UK publishes proposed amendments to the Securitisation Regulation : Although overlooked by most commentators, the announcement contained detailed proposals to revise the Securitisation Regulation inherited from the EU. These proposals may be found in a draft statutory instrument.
FCA sets out ideas to improve information provided to retail investors : The standards for the information disclosed to potential investors are included in rules known as the Packaged Retail Investments and Insurance Products (PRIIPs) regime and the Undertaking of Collective Investment in Transferable Securities rules, which were created while the UK was in the EU.
IRSG Report – Financial Services Priorities for the Japanese G7 and Indian G20 Presidencies : The International Regulatory Strategy Group (IRSG) strongly supports the commitment by the Japanese G7 and Indian G20 presidencies to co-ordinate global action to tackle the current global macroeconomic and geopolitical challenges.
Brexit
CITY AM: Brexit: UK and EU eye Northern Ireland Protocol deal by February : Talks over a deal have intensified over the past month, after relations have thawed between London and Brussels during Rishi Sunak’s premiership.