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Is a full-blown banking crisis coming over the horizon? Not from Silicon Valley Bank – though the US authorities may have awkward questions to answer about the non-application of Basle rules to smaller US banks. On the published information so far, Credit Suisse and its `college of regulators’ may also have awkward questions about which of them missed “material weaknesses” in its controls. But EU politicians have been clear `nothing to see here’, though POLITICO reported on `who knifed banking union (again)?’ The Global Federation of Insurance Associations (GFIA) reported three annual protection gaps of around €1 trillion annually. Bruegel analysed a leaked draft of the EU’s Net Zero Industry Act and said it is `deeply worrisome’. Eurogroup’s Donohoe wrote about the digital euro – in terms of not `if’ but `when’. Ecofin agreed its `orientation’ for fiscal reform but seemed to stop short of actually agreeing them. On Brexit, the Windsor Framework continued to undergo analysis and was welcomed by the European Parliament but questions continue to multiply about what exactly the “Stormont Brake” can achieve and the Unionists have yet to sign off on it.
Graham Bishop
Articles from 10-16 March 2023
Policy impacting Finance
FT: Credit Suisse to borrow up to $54bn from Swiss central bank : Move comes after troubled lender’s shares fall as much as 30% View Article
Opening remarks by Commissioner McGuinness at the European Parliament plenary debate on 'Failure of the Silicon Valley Bank and the implicat : The direct impact on the European Union seems to be limited. But we should reflect on whether there are lessons to be learned for the European Union's banking sector. View Article
Reuters's Jones: EU says Silicon Valley Bank collapse has 'limited' impact on bloc : Silicon Valley Bank had only a limited presence in the European Union, but its collapse shows why lightly regulated foreign lenders need to meet stricter rules inside the EU, the bloc's financial services chief said on Wednesday. View Article
POLITICO : Nothing to see here: EU shrugs off Silicon Valley Bank collapse : EU politicians and regulators lined up to look as chilled out by the whole thing as they possibly could. View Article
US justice department probes Silicon Valley Bank’s collapse : US prosecutors are investigating the collapse of Silicon Valley Bank after a dramatic outflow of customer deposits from the Californian tech lender led to the biggest US bank failure since the global financial crisis, according to a person familiar with the matter. View Article
Economic and Financial Affairs Council, 14 March 2023 : ECOFIN discussed the RRF, Economic Governance, Fiscal policy guidance, Economic and financial impact of Russia, International meetings G20/IMF, EU budget, financial services legislation transposition and the Macroeconomic dialogue View Article
Remarks by Paschal Donohoe following the Eurogroup meeting of 13 March 2023 : ..We then concluded our planned agenda items with a strategic discussion on the digital euro....Finally, we discussed the collapse of the Silicon Valley Bank in the United States, a situation that we continue to monitor carefully. View Article
ECB - Five Presidents: Channelling Europe's savings into growth : Europe must speed up its green and digital transition. For that, we need to complete the Capital Markets Union to provide effective financing. This is the plea made by the five Presidents of the ECB, EIB, European Council, European Commission and Eurogroup in a joint post. View Article
EURACTIV: EU’s Breton: Joint debt for green transition no longer a priority : Joint borrowing is currently not an option to help member states finance the green transition, Internal Market Commissioner Thierry Breton said, marking a shift from his previous calls for ‘mutualised tools’ at the European level. View Article
MEPs outline their 2023 economic and social priorities : MEPs endorsed their economic, employment and social priorities for the year ahead, focusing on the reform of economic governance rules and improved social protection for EU workers. View Article
Business Europe: A call for action to boost competitiveness and create regulatory breathing space : The risk of de-industrialisation in Europe is real. Many companies are partially or totally relocatingtheir production outside Europe. However, the gravity of the situation is not yet fully acknowledgedby policy-makers across the continent. View Article
ECA: Special report 07/2023: Design of the Commission’s control system for the RRF : We found that, in a relatively short time, the Commission has designed a control system that provides for an extensive process for verifying the fulfilment of milestones and targets. However, an assurance and accountability gap remains at EU level in protecting the financial interest of the Union. View Article
Banking Union
EBA publishes annual assessment of banks’ internal approaches for the calculation of capital requirements : These exercises aim at monitoring the consistency of risk weighted assets (RWAs) across all EU institutions authorised to use internal approaches for the calculation of capital requirements. View Article
POLITICO: A Brussels murder mystery: Who knifed the banking union (again)? : The collapse of Silicon Valley Bank means questions are again being asked about why the EU can’t tighten its rules. View Article
Capital Markets Union
IAIS finalises criteria that will be used to assess whether the Aggregation Method provides comparable outcomes to the Insurance Capital Standard : The IAIS is developing the Insurance Capital Standard (ICS) as a consolidated group-wide capital standard for Internationally Active Insurance Groups (IAIGs). It will provide a common language for supervisory discussions about IAIGs and enhance global convergence among group capital standards. View Article
GFIA: New report identifies trillion-dollar global protection gaps : A new report by GFIA has identified and quantified the most significant — and growing — annual global protection gaps: US$1trn for pensions; US$0.9trn for cyber; US$0.8trn for health and US$0.1trn for natural catastrophes. View Article
ICMA releases Bond Data Taxonomy : As the digital transformation of primary bond markets continues to accelerate, ICMA and its primary market constituents have built consensus to represent key bond information. View Article
AEIP and PensionsEurope position paper on EIOPA 2022 IORP Stress Test : In general, we support a climate stress test with a focus on transition risks. Climate change is perceived as the most material environmental risk and for transition risks more data is available than for physical (climate change) risks. Next to that, the transition risk seems more urgent. View Article
Environmental, Social, Governance (ESG)
ECB and the ESAs call for enhanced climate-related disclosure for structured finance products : The Statement encourages the development of disclosure standards for securitised assets through harmonised climate-related data requirements. View Article
Bank of England report on climate-related risks and the regulatory capital frameworks : This report sets out the Bank's latest thinking on climate-related risks and regulatory capital frameworks. The report includes updates on: capability and regime gaps; capitalisation timelines; and areas for future research and analysis. View Article
Bruegel: The EU Net Zero Industry Act and the risk of reviving past failures : How the EU might respond to clean teach subsidies, in the form of a leaked draft law entitled the Net Zero Industry Act (NZIA), is deeply worrisome. View Article
ACCA: Professional accountants must help drive the migration to sustainable economies and businesses by becoming experts in green finance - : - according to the latest report from ACCA ‘Green finance skills: the guide’ View Article
CER's Cornargo/Springford: Europe needs both fiscal and energy solidarity : The EU should establish a climate fund to speed the energy transition, and finance it with joint borrowing, building upon the success of the NextGenerationEU fund. View Article
Protecting Customers
UK Finance: Has compliance lost touch with what we’re trying to achieve? : The importance of protecting customers from the threat of fraud and financial crime has never been starker than it is today. View Article
Fin Tech Regulation
POLITICO - Donohoe: The possibility of the digital euro : What makes this project any different, or better, than other innovative digital solutions already available? The answer lies in ‘central bank money.’ View Article
ECB's Panetta: The Quick and the Dead: building up cyber resilience in the financial sector : Euro Cyber Resilience Board for pan-European Financial Infrastructures: The Euro Cyber Resilience Board for pan-European Financial Infrastructures (ECRB) has played a key role in protecting the security and integrity of the financial system from these threats. View Article
ESMA's Ross at CONSOB, Rome: Digital finance and capital markets – securing the frontier : Today I will start by discussing some key technological developments and the benefits and risks they bring. One overarching risk – and an inescapable feature of the digital age – is cyber risk. View Article
SSM's McCaul at CONSOB, Rome: Supervising the future of banking: navigating the digital transformation : .. it is plain to see that the digital transformation of our societies and economies is accelerating. The banking sector is no exception, and this has profound implications for the business of banking and for us as supervisors... View Article
Commission's FISMA DG Berrigan: Speech at Consob conference "The new frontiers of digital finance" : The Digital Finance Agenda is one of the key elements on the Commission’s financial services agenda. And it fits into a much broader Commission policy on digital transition alongside the green transition. View Article
Economic Policies Impacting EU Finance
Eurogroup statement on the fiscal guidance for 2024 : We agree that over 2023-24, prudent fiscal policies should aim at ensuring medium-term debt sustainability, while raising potential growth in a sustainable manner and addressing the green and digital transitions and resilience objectives through investment and reforms. View Article
Economic governance framework: Council agrees its orientations for a reform : Acknowledges the call from the European Council to the Commission and the Council for swiftly advancing the work on the economic governance review, taking into account the European Council February 2023 Conclusions. Recognises that a review of the existing framework could increase its effectiveness. View Article
AccountancyEurope: VAT in the digital age – modernising the European VAT system : This factsheet summarises the main changes from the European Commission’s proposals to modernise the European VAT systems. View Article
EFRAG’s Final Comment Letter on the IASB’s ED International Tax Reform – Pillar Two Model Rules : ?The ED, which was issued on 9 January 2023, proposes to introduce a mandatory temporary exception to the requirements in IAS 12 Income Taxes to recognise and disclose information about deferred tax assets and liabilities arising from the OECD’s Pillar Two Model Rules. View Article
Brexit and the City
Reuters' Jones: Britain to bolster the City after Silicon Valley Bank collapse : Hunt said he would make a statement in the autumn on how the UK financial system would be strengthened. View Article
Brexit
EU-UK relations: Parliament assesses Windsor Framework and citizens’ rights : MEPs welcome the deal on the Protocol on Northern Ireland and raise concerns about citizens’ rights, including “pre-settled status” for EU citizens. View Article
Carnegie Europe's Kellner: Trust and Compromise Return to EU-UK Relations : Sunak’s decision to break with his predecessors’ confrontational strategy has paved the way for an agreement over Northern Ireland. This means new opportunities for cooperation between London and Brussels. View Article
LSE's Martini/Walter: How Brexit has weakened the narratives of nationalist parties across the EU : The UK’s vote to leave the EU raised concerns about other states following Britain through the exit door. But has Brexit helped or hindered Eurosceptic and nationalist movements elsewhere in the EU? This report demonstrates perceptions of Brexit affect nationalist discourses across Europe. View Article
UKandEU: The Franco-British Summit: a reset in relations and an opportunity for UK-EU cooperation : Gesine Weber reflects on last week’s summit between the UK and France, suggesting that improved Franco-British relations could open the door to closer cooperation with Europe. View Article
Institute for Government: Stormont Brake: The Windsor Framework : What is the Stormont Brake and why has it been agreed? View Article
UK TPO: The challenges facing UK firms: trade and supply chains : Significant issues for firms working with the new TCA trading arrangements with the EU: red tape, bureaucracy, shipping/transport issues and delays, increased costs, and customs and border controls. The least significant issue, in the context of the TCA, would appear to be labour and skill issues. View Article
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