Welcome to our Friends weekly e-mail.
We will be taking an Easter break next week so the `weekly’ will resume on 20 April.
My highlights of the week: EU bank regulators say that have all the tools they need but supervision must be more effective but…there is growing clamour to look again at liquidity rules: the one-decade old assumption that retail deposits are `sticky for 30 days’ has been completely – and irreversibly -undermined by the new payments systems when social media triggers panic. Moreover, flows out of bank deposits into money market funds suggest `retail’ has become cannier! ISDA stated that there is transparency in single-name CDS, but does that miss the point that illiquidity can trigger extreme price movements on minimal volume? IOSCO’s two-year work plan will focus on sustainability disclosures (aided by the new ISSB standards) and crypto-asset markets. SSM also wants to improve oversight of crypto assets while a BIS paper highlighted the sometimes very large carry of crypto futures. British voters are finally waking up to the magnitude of the Brexit hoodwink: 2:1 they realise Brexit was a mistake and now 45:35 want to re-join. Sadly, they will now have to learn that ill-considered votes have permanent consequences that even `nanny’ cannot magically reverse.
Graham Bishop
Articles from 31 March - 6 April 2023
Policy impacting Finance
SSM's Enria: A new stage for European banking supervision : With the implementation of the Basel Committee’s final package, which once again I hope will be as faithful to the international standards as possible in all G20 jurisdictions, we have all the tools we need. The focus of our debate should be much more on effective supervision. View Article
SRB's Laboureix on CNBC: EU regulators will ‘fully and entirely’ respect write-down hierarchy if another bank fails : Dominique Laboureix, chair of the European Union’s Single Resolution Board, said he wanted to send a clear message to investors that the regulator would uphold the legal framework for absorbing losses in the case of another bank failure. View Article
SSM: Helsingin Sanomat Interview with Anneli Tuominen, Member of the Supervisory Board of the ECB, : Social media posts may also lead to rumours spreading even more quickly. Some posts are not based on facts, some could qualify as manipulation and some may, in the worst case, even be part of hybrid influencing activities. View Article
Bloomberg: Credit Suisse’s Fatal Bank Run Points to Gaps in Liquidity Rules : Swiss officials emphasized sale to UBS staved off collapse; Banks’ preparedness to weather crisis now focus of regulators View Article
ISDA: Under Scrutiny – IQ April 2023 : Regulators and central banks have been looking closely at the issue for some time, with the aim of shoring up potential vulnerabilities and identifying a set of tools to prevent this type of liquidity crunch from snowballing into a financial stability issue. View Article
EBF views on Open Finance: towards a fit-for-market approach : Taking into account the current data-sharing landscape, data sharing under Open Finance should be voluntary between market actors, based on market needs and contractual arrangements. View Article
IMF blog - Pascual, Natalucci, Piontek: Nonbank Financial Sector Vulnerabilities Surface as Financial Conditions Tighten : NBFIs have emerged as key players in the financial sector, and global financial stability could hinge on their resilience as policy is tightened to tackle high inflation View Article
EFR Annual Report 2023: "Serving customers and the European economy" - inc CMU and securitisation : While important steps have been taken to establish the European single market, financial institutions are still facing fragmentation with regard to regulation and supervisory approaches within the single market. Furthermore, the CMU and the Banking Union are still far from being established in full. View Article
CEPR's Kotlikoff, Millar: Fixing banking for real : In this blog, Laurence Kotlikoff and Rick Miller argue that banking as we know it is dying. It’s time to arrange a smooth transition to limited purpose banking and end financial panics with their massive economic damage once and for all. View Article
Banking Union
EBA: Robust EU/EEA banking sector shows strong capital and liquidity ratios : Volatility in EU/EEA banks’ equity and debt has been strongly affected by Silicon Valley Bank (SVB) and Credit Suisse related events, although direct exposures of EU/EEA banks towards these banks were limited according to indications from supervisory reporting as of Q4 2022. Banks’ capital and liquidity ratios remain strong and profitability continues to increase. View Article
SUERF's Berg, Lind: Why there is no need to stray from the original ideas behind the Bank Recovery and Resolution Directive : The BRRD was revised in 2019 (BRRD2) and the Commission has announced that they are working on a new directive, the Crisis Management and Deposit Insurance Directive (CMDI). View Article
Delors Centre's Mack: Get your act together – The EU must push ahead with banking union to boost confidence in its banking system : To boost confidence in its banking system, it is therefore high time for the EU to push ahead with banking union. View Article
EPC's Goosse: State of play, challenges, perspectives for European payments - Interview with Etienne Goosse : The European payment landscape is going through a considerable transformation due to technological developments, entry by new actors and regulatory changes. We interviewed Etienne Goosse (about to retire from Director General of EPC) about his perspective on past, ongoing and future developments... View Article
Capital Markets Union
IOSCO publishes final measures for regulators to consider in addressing emerging retail market conduct issues : Servais “Safeguarding the interests of retail investors is a core objective for IOSCO and a pre-requisite to help sustain retail investors’ interest and trust in capital markets. .. View Article
IAIS publishes report assessing implementation of the Holistic Framework insurance standards in ten major markets : The in-depth targeted jurisdictional assessment (TJA) shows an overall consistent and strong implementation of the Holistic Framework standards, indicating enhanced macroprudential supervisory practices in the insurance sector. View Article
ICGN: EU listing Act comment letter : ICGN is concerned by the ‘race to the bottom’ by relaxation of past multiple voting rights limitations is regarded as justified to attract market listings. Stock exchanges, underwriting community and issuing companies may benefit. But at the expense of shareholder rights and investor protections. View Article
EuropeanIssuers’ comments on the European Commission’s proposals to further develop the EU’s Capital Markets Union : EuropeanIssuers commented on the European Commission’s proposal for a Regulation amending the Prospectus Regulation (PR), the Market Abuse Regulation (MAR) and the Markets in Financial Instruments Regulation (MiFIR) and the European Commission’s proposal for a Directive on Multiple-Vote Share Structures. View Article
ISDA's O'Malia: Transparency in CDS : Following the 2008 crisis, reforms were put in place to ensure that all over-the-counter (OTC) derivatives – including single-name CDS – are reported to regulators via trade repositories, alongside increased clearing of standardized derivatives. View Article
EIOPA’s year-end 2021 study on market and credit risk modelling reveals continuing dispersion : The overall results show moderate to significant dispersion in some asset model outputs. View Article
Environmental, Social, Governance (ESG)
IOSCO Commits to Deliver on Sustainability Disclosures and Crypto Exchanges in 2023 - IOSCO publishes Work Program for 2023-2024 : IOSCO will address emerging risks from sustainable and digital finance... will review standards developed by the ISSB to determine whether they can be endorsed as a global framework for sustainability related corporate disclosures. IOSCO will also move on crypto-asset markets and activities. View Article
IFRS Foundation publishes 2022 Annual Report : The report discusses the consolidation of the IFRS Foundation, the Climate Disclosure Standards Board and the Value Reporting Foundation; the inaugural work of the ISSB, including publication of its first two draft Standards... View Article
CEPR's Brandon, Krueger: Institutional investors and responsible investing : ...including what motivates responsible investing, the effectiveness of specific responsible strategies, and whether investors who promise to invest responsibly actually ‘walk the ESG talk’. View Article
UNEP FI: Net-Zero Asset Owner Alliance outlines four key principles for evaluating asset managers’ climate policy engagement : One of the most impactful ways for asset owners to enact policy advocacy is to engage with their most important strategic partners – their asset managers. View Article
GRI: Technology has key role in the evolution of impact reporting : Number of GRI Licensed Software partners doubles in one year View Article
Fin Tech Regulation
Blog post by SSM's McCaul: Mind the gap: we need better oversight of crypto activities : ..events again underscore the crucial role that sound regulation and effective supervision play in maintaining financial stability, and highlighted three principles to keep in mind when shaping crypto-asset regulations. View Article
Finextra: European savings banks ask: "What is the business case for a digital euro?" : European savings and retail banks have questioned the business case for a digital euro, raising concerns about the unintended consequences for balance sheet deposits and the roll out of competing instant payments products. View Article
Breugel's Demertzis, Martins: Decentralised finance: good technology, bad finance : Given the importance of digitalisation, it is fair to ask whether these digital decentralised services will become established and normalised. View Article
BIS's Schrimpf: Crypto carry : ..the carry of crypto futures (difference between futures and spot prices) can become very large (up to 60% p.a.) and varies strongly over time...The interplay between these two forces, and involved high leverage, may help explain why severe market crashes are a frequent feature of crypto markets. View Article
Brexit and the City
City AM: ‘Come to London’: FCA eyes up capital markets reform with 12 month plan to woo world listings back to the City : The Financial Conduct Authority (FCA) has laid out plans to “make the UK a more attractive place for business” today after a flurry of firms have ditched the UK in favour of foreign markets in recent months. View Article
City of London Corporation: The UK bounces back from pandemic with record amount of foreign investment in financial services : New figures published today 4 April by the City of London Corporation, show that in 2022 the UK attracted 263 financial and professional services (FPS) projects valued at £2bn, the highest amount of investment in four years and more than any other country in Europe. View Article
Brexit
Election maps: EU Referendum Voting Intention - 31 March : Rejoin : 45.4% Stay out 35.8% View Article
In hindsight, do you think Britain was right or wrong to vote to leave the EU? : Right to leave: 37% Wrong to leave: 63% View Article
UK TPO's Jaeger: Joining CPTPP – The UK’s big dive into the Indo-Pacific : UK announced an agreement in principle to become a member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Politically - positive step... But what is the real value of joining the CPTPP, and what are the key issues to examine? View Article
UK EU: Why can only member states participate in EU decision making? : Marja-Liisa Öberg unpacks the logic behind EU ‘decision-making autonomy’ – where only member states can participate in making EU decisions – suggesting that treating third countries as outsiders is not a flaw in the system but a fundamental policy choice that is unlikely to change any time soon. View Article
CER's Spisak: Will the Retained EU Law Bill undermine Sunak's Windsor deal? : In its current form the Retained EU Law Bill is incompatible with the Windsor Framework. Rishi Sunak should make big changes to the REUL bill or scrap it altogether. View Article
CER's Grant: A British strategy for Europe? : After nearly seven years of acrimony, the UK and the EU are talking sweetly to each other. The Ukraine war reminded them how much they have in common...Does all this presage a profound shift in UK-EU relations? The short answer is no... View Article
ECIPE's Henig: Building a Mature UK Trade Policy : Global Britain has not delivered according to the hopes expressed by supporters of leaving the EU. Trade with the rest of the world has not grown to make up for leaving a bloc with seamless trade, View Article
EURACTIV: UK to introduce new customs rules on EU goods from November : After more than two years of post-Brexit delays, the UK has promised to introduce a light-touch set of customs rules on goods from the EU later this year. View Article
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