Welcome to our Friends weekly e-mail.
Highlights of my week: The dust seems to be settling on the sudden financial crisis so the inquests can start: With one bank twice the size of its economy, Switzerland suddenly restarted talks with the EU about closer co-operation; EU regulators seem to think they have all the tools they need but, but, but… the think-tankers are beginning to disagree. Digital runs of uninsured deposits can make a mockery of “30 days” stable funding ratios in hours. Both Council and Parliament moved forward on different files about AML and CFT, while the EBA consulted on bringing crypto-asset providers into the AML/CFT net. SUERF published on the hidden dangers of contagion flowing from shared membership of CCPs. The precision and granularity of climate change disclosures in corporate financial statements is now coming into focus. The EBF set out its members’ views on the digital money ecosystem while Bruegel analysed the implications of digital bank runs. The deterioration of the City of London’s competitive position as a result of Brexit has suddenly broken through into public discussion while the Federal Trust’s video on Switzerland’s position as a country too small for its financial system may have echoes in the UK. Public opinion about the rights and wrongs of Brexit become ever clearer that it was a major mistake.
Graham Bishop
Articles from 24-30 March 2023
Policy impacting Finance
EURACTIV: EU leaders to discuss banking turbulences : European governments seem cautiously relieved about how EU banks have dodged the financial turbulences – at least for now. View Article
SRB: Pay attention to market panic over banks — but not too much, top regulator warns : The EU shouldn’t ignore financial-market jitters over the health of the banking sector, the head of the European authority for managing bank failures said, as he warned a lack of trust could spiral despite the resilience of the sector. View Article
SSM's Enria: A new stage for European banking supervision : I would like to say upfront that restarting the debate on regulatory reforms would not be productive. With the implementation of the Basel Committee’s final package,...we have all the tools we need. The focus of our debate should be much more on effective supervision. View Article
CEPR's Danielsson/Goodhart: What Silicon Valley Bank and Credit Suisse tell us about financial regulations : This column argues that the problems we now see in the system have arisen because the financial authorities have been trying to do the impossible: maintain growth while keeping inflation under control and financial stability high. The best way forward would be to focus on shock absorption and moral hazard, not the current approach of buffers and risk measurements. View Article
CEPS's Lanoo, Lastra, Ayadi: Another unexpected banking crisis, yet another opportunity to fix a still-broken banking system : This unexpected crisis has underscored the need for detailed prudential rules, well-aligned across the globe, and the importance of high supervisory vigilance. But it also showed that some of the work done on bail-ins after the last crisis was put aside, and there was a deviation from the accepted understanding concerning resolution. View Article
FSB Plenary statement on recent market developments : Members agreed to review the lessons to be learned from the recent actions by authorities to resolve financial institutions for the operation of the international resolution framework. View Article
EURACTIV: Switzerland eyes return to EU talks : Switzerland on Wednesday (29 March) signalled readiness to resume talks with the EU towards a cooperation agreement, after shocking its largest trading partner in 2021 by suddenly cutting short years of negotiations. View Article
Banking Union
Council adopts negotiating mandate on EU law on criminal finances : The Council proposes going beyond the terms of the Commission’s draft and requiring that financial institutions share transaction records (i.e. bank statements) in a harmonised format when they are sharing them as part of an investigation. View Article
ECON: New EU measures against money laundering and terrorist financing : Consistent application of rules and sanctions;Verified information about beneficial owners;Journalists, civil society will have access to beneficial owners’ registers; New European Anti-Money Laundering Authority to enforce rules View Article
EBA consults on amendments to Guidelines on risk-based AML/CFT supervision to include crypto-asset service providers. : By its nature, the provision of crypto-asset services is a cross-border activity. That is why it is important that the same standards apply wherever CASPs operate in the single market. To achieve this, the EBA is proposing to amend its Guidelines on Risk-Based AML/CFT Supervision to clarify how they apply to AML/CFT supervisors of CASPs. View Article
CPMI: Facilitating increased adoption of payment versus payment (PvP) – final report : It analyses the causes of non-PvP settlement, takes stock of existing and proposed new PvP solutions and suggests roles for the private and public sectors to facilitate increased adoption of PvP. View Article
CEPS: A study on the application and impact of Directive (EU) 2015/2366 on Payment Services (PSD2) : In such a fast-paced market, there is a clear need to periodically update and introduce new rules governing the sector. The revised Payment Services Directive (PSD2) came into force in 2016 (with a transposition deadline of 2018). View Article
EBA consults on standards for supervisors assessing the new market risk internal models under the Fundamental Review of the Trading Book : These RTS are part of the phase 4 deliverables of the EBA roadmap for the new market and counterparty credit risk approaches. View Article
AFME's Adelaja: Firms Need a License to Innovate: Artificial Intelligence and Machine Learning in Financial Crime Compliance : AI/ML could prove especially transformative in the prevention and detection of financial crime, including anti-money laundering and combatting the financing of terrorism (AML-CFT). View Article
Capital Markets Union
SUERF's Veraart, Aldosoro: CCPs United: the hidden dangers of shared clearing membership : Joint clearing members can play an important role in loss transmission and contagion. Therefore it is important to incorporate these features into current CCP stress-testing practice. Our analysis can serve as a tool to select stress scenarios in markets with multiple central counterparties. View Article
EU Listing Act – GBIC comments : In general, GBIC welcomes the proposed amendments to the Prospectus Regulation ((EU) 2017/1129, PR) and to the Market Abuse Regulation ((EU) No 596/2014, MAR) to reduce administrative burdens for all issuers (not only for SMEs). However, to promote the European public market and increase its attractiveness further improvements are necessary in the context of the Capital Markets Union. View Article
CEPS' Lanoo, Thomadakis: Unleashing retail investors’ potential : The key ingredient for enhancing the EU's investment funds and capital markets View Article
Summary of FSB Technical Workshop: Resolution planning for insurers : Participants discussed different sources of funding in resolution as well as industry approaches to, and challenges associated with, mapping and assessing internal financial and operational interconnectedness, and their impact on operational continuity in resolution. View Article
Environmental, Social, Governance (ESG)
Connectivity in practice: the IASB’s new project on Climate-related Risks in the Financial Statements : At its March 2023 meeting, the International Accounting Standards Board (IASB) started a project to explore whether and how companies’ financial statements can provide better information about climate-related risks. View Article
UK Finance: TCFD and IFRS S2: helping companies find granular data for financial reporting : The importance of granular data: the framework has certainly pushed companies to make more TCFD-aligned disclosures, there is still room for improvement. Only four percent of companies reported climate-related financial information in line with the framework’s 11 disclosure recommendations in 2021. View Article
SSM's Elderson: Urgent and vitally important: 2023 as a key milestone in stepping up the management of climate and environmental risks : Climate-related and environmental (C&E) financial risks might thus not seem the most obvious topic for a keynote speech at this moment. However, exactly one week ago the Intergovernmental Panel on Climate Change (IPCC) published its Synthesis Report, according to which temperatures have already risen to 1.1 degrees Celsius above pre-industrial levels. View Article
SUERF's Walther: Climate stress tests: Are banks fit for the green transition? : So far, climate stress tests are declared learning exercises with no direct implications for capital requirements. However, supervisors are urging banks to set up a comprehensive climate risk management. View Article
EIOPA explores nature-related risks and their impact on insurers in staff paper : EIOPA believes it is important to gain a better understanding of how nature-related risks can affect (re)insurers and to examine ways in which the insurance sector can meaningfully contribute to the conservation and restoration of nature through investments and underwriting activity. View Article
Bruegel's Lehmann, Martins: The potential of sovereign sustainability-linked bonds in the drive for net-zero : Sovereign SLBs could help incentivise climate policies in EU countries, and accelerate emission reductions. View Article
Climate Risks in the Real Estate Sector : Designed for banks, investors, insurers and their clients, this brief provides a baseline understanding of the key physical and transition climate-related risks faced by the real estate sector. View Article
GRI: Bridging corporate reporting and due diligence : New analysis published by GRI explores the relationship between due diligence and sustainability reporting, offering insights on the current state-of-play within the global policy landscape. View Article
IPE: Draft of TNFD’s whole framework finally set out, including disclosure metrics : The international team of company leaders working to draw up a definitive framework for organisations to quantify, manage and report their impact on the natural world today released the final stage of its work in progress, ahead of the actual recommendations due out in September. View Article
Invest Europe publishes ground-breaking ESG KPI report, tracking European private equity, venture capital progress : Invest Europe releases inaugural report tracking industry progress on themes including environmental impact, female participation and combating corruption; 659 firms, 2,100 funds and 5,895 companies captured; 77% of surveyed firms had ESG processes, View Article
Protecting Customers
EBA publishes new set of indicators to identify potential causes of consumer harm : They aim at identifying detriment to consumers arising from the misconduct of financial institutions offering retail banking products in the EU. View Article
BEUC's recommendations on harmonising cross-border procedural matters in the GDPR : BEUC therefore recommends the European Commission to build on best practices amongst EU countries’ national procedural rules that allow data subjects, and the organisations representing them, the effective exercise of data protection rights. View Article
Fin Tech Regulation
EBF: European banking industry sets out a vision for digital euro : The EBF sets forth its perspective on the digital money ecosystem of the future, where a retail digital euro, a wholesale CBDC and bank-issued money tokens could all play a role in enabling innovation, supporting customer needs and ensuring that Europe stays at the forefront of digital finance and the digital economy. View Article
Bruegel's Merler: Fast and furious: how digital bank runs challenge the banking-crisis rulebook : The speed of recent bank failures has shown the need for more systemic protection of the financial system. View Article
Brexit and the City
POLITICO: UK pitches for financial services cooperation with the EU : The U.K. is pushing to work with the EU on financial services regulation now that an agreement on post-Brexit trade with Northern Ireland has been struck, Andrew Griffith, Economic Secretary to the Treasury, told the POLITICO Finance Summit in Paris. View Article
Bloomberg: City of London Stumbles In Its Own Ranking of Finance Centers : There are plenty of worries in the City of London that other financial centers are catching up. Now its own league table appears to confirm those fears. View Article
Federal Trust's Stevens and Donnelly - video: Brexit, the City and Switzerland : They conclude that the collapse of CS makes the British government’s deregulation agenda for the City even less viable than before; and highlights the difficulty of offering global financial services with the resources of small or medium-sized national economies. View Article
City UK: Key facts about UK-based financial and related professional services 2023 : This report highlights the strong contribution that the financial and related professional services industry continues to make to the domestic economy. View Article
CITY AM: FCA boss pledges to review listing rules to avoid another Arm snub : Nikhil Rathi, the head of the FCA, said the City watchdog would consult on replacing the current standard and premium listing segments for shares in commercial companies with a single listing category with one set of requirements. View Article
Brexit
In hindsight, do you think Britain was right or wrong to vote to leave the EU? : 22 March 2023: Right 38%, Wrong 62% View Article
UK in a Changing Europe is launching a quarterly UK-EU relations tracker to assess relations between the UK and EU, as well as relationships : Cleo Davies and Sophie Stowers outline the contents of the first edition, which covers January to March 2023, highlighting the thawing in relations between the UK and the EU that has taken place over the period. View Article
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