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Highlights of my fortnight: The debate on reforming fiscal rules is hotting up as time runs out to make a decision before the next European Parliament elections. Even optimists like Andrew Duff seem to have given up hope of a broad review of the EU Treaties, suggesting five “surgical strikes” instead. The Commission proposed reforms to crisis management and deposit insurance for smaller banks to minimise use of national procedures. The ECB was advised to be more intrusive on banks’ risk assessment and ECGI suggested that properly designed CoCo bonds should be encouraged as a capital source for banks. Trialogues are now underway on the MiFID review and the issue of the consolidated tape has appeared to become key. Insurers want to prioritise the Single Access Point for corporate information, especially on sustainability while the ESAs want to improve the sustainability disclosure framework. The arguments over a digital euro surfaced again as Commissioner McGuiness said it was just functionally similar to cash, but others see it as far more profound. CityUK sounded the alarm about the City slipping further behind New York – suggesting that remote, cross-border working might help. But UK exports are showing the strain from Brexit-related friction.
Graham Bishop
Articles from 7-20 April 2023
Policy impacting Finance
FSB to consider lessons learned from recent banking-sector turmoil : The letter notes that the financial stability outlook has become more challenging in recent weeks, as a consequence of turmoil in the banking sector. View Article
Bruegel's Blanchard/Zettlemeyer: Fixing Germany’s fixes of the European Commission’s fiscal governance proposal : Germany has valid concerns about Commission’s plan for reforming the fiscal rules. But there are better ways to address them. View Article
CER's Tordoir: Five proposals for enforceable EU fiscal rules : A big fight over the rules will take place after the Commission translates its proposals into a draft regulation. The Commission is now under time pressure to deliver reform .. Unless a deal is made in the coming weeks, the process will spill into next year, with European elections in May 2024. View Article
ECIPE's Bauer: What is Wrong with Europe’s Shattered Single Market? : – Lessons from Policy Fragmentation and Misdirected Approaches to EU Competition Policy... Europe’s underperformance is rooted in a legally fragmented internal market which is disincentivising business growth and innovation. View Article
Duff: Five Surgical Strikes on the Treaties of the European Union : If there is not to be a Convention to revise the Treaty of Lisbon, here is a proposal to amend some key articles in order to strengthen the democratic legitimacy of the EU, to make its decision making more agile, and to enhance its capacity to act. View Article
Banking Union
Banking Union: Commission proposes reform of bank crisis management and deposit insurance framework : However, experience has shown that many failing medium-sized and smaller banks have been managed with solutions outside the resolution framework. This sometimes involved using taxpayers' money instead of the bank's required internal resources or private, industry-funded safety nets.. View Article
Statement by the Eurogroup President, Paschal Donohoe, on the publication of the Commission proposal for a reform of the bank crisis management : It responds to the Eurogroup agreement of last June which identified strengthening the common on completing the Banking Union and outlined a number of broad elements which should underpin a strengthened CMDI framework. View Article
ECB and SRB welcome the European Commission’s legislative proposals for the bank crisis management and deposit insurance framework : The proposals contain many positive developments. For example, they clarify the scope of application of a resolution in relation to national liquidation procedures. View Article
SSM's McCaul: Rising to the challenge: the role of boards in effective bank governance : Effective governance has been a priority of our supervision for several years, and will continue to be in the years to come. As part of our work on this priority, we are carrying out an update of our supervisory expectations on governance View Article
ECB welcomes expert group recommendations on European banking supervision : Expert group finds supervisory practices now sufficiently mature to make processes leaner, recommends enhancing risk-based prioritisation View Article
Reuters' Rattay: ECB told not to take banks' word for it when assessing risk : It was the most notable recommendation in a report commissioned by the ECB to evaluate its work on the key task as the euro zone's top financial supervisor, namely to decide how much capital banks must have to absorb losses. View Article
CEPR's Takelo/Moreno: Bank transparency regulation and stress tests: What works and what does not : In theory, bank transparency regulation has some attractive features. Transparency involves providing information to market participants about a bank both before and after they provide funds to it. View Article
ECGI: Banks should issue more CoCos and their design needs to be further refined : View Article
EBA consults on guidance to assess knowledge and experience of the management or administrative organ of a credit servicer : EBA launched a public consultation on its draft Guidelines on the assessment of adequate knowledge and experience of the management or administrative organ of credit servicers, as a whole, under the Non-Performing Loans Directive. View Article
Stopping the flow of dirty money: Parliament ready for negotiations : The draft laws foresee new due diligence rules for businesses to verify customers’ identity, what they own and who controls them, and grant people with a legitimate interest ... access to beneficial ownership registers, among other provisions. View Article
Capital Markets Union
EFAMA European asset managers express full support for the European Parliament’s proposal on Equities Consolidated Tape (MiFIR Review) : In a letter to policymakers, they state that only an Equities/ETFs tape that delivers data in real-time and that includes pre-trade data in the form of 5 layers of best bid and offer, will meet with the necessary market demand to make the Equities/ETFs Consolidated Tape commercially viable. View Article
FESE: Realising the Capital Markets Union ambition : Improving European capital markets requires a holistic look at legislation to ensure they have the lowest cost of capital accompanied with the highest depth of liquidity. View Article
FT's Asgari: EU faces last-ditch challenge from exchanges over trading reforms : Bourses warn consolidated tape plan could harm smaller European markets View Article
AFME's Hansford: MiFIR Review outcome could risk holding back EU equity markets : As EU trilogues on the MiFIR Review begin this week, the AFME has issued a warning on the state of equity market liquidity in Europe and is calling on the negotiators to consider the impact of this important financial markets regulation on the attractiveness of Europe’s capital markets. View Article
ESMA finds data quality significantly improves under new monitoring approach : The report highlights the increased use of transaction data by EU financial regulatory authorities in their day-to-day supervision and identifies significant quality improvements following a new approach to data monitoring. View Article
ICMA Quarterly Report Second Quarter 2023 : Cessation of panel bank US dollar LIBOR; implications for bonds under English law; Building resilience in the global bond markets; ICMA’s drive to support industry innovation through FinTech and Digitalisation; View Article
Insurers call for appropriate governance, funding, prioritisation and scope for European Single Access Point : The European insurance industry strongly supports the establishment of the ESAP as an EU data hub, as it has the potential to play a key role in helping to close the current data gap, in particular regarding sustainability information. View Article
Environmental, Social, Governance (ESG)
ESAs propose amendments to extend and simplify sustainability disclosures : The ESAs are proposing changes to the disclosure framework to address issues that have emerged since the introduction of SFDR. View Article
Delors Centre's Mack: Get your priorities right – Europe must not underestimate the role of banks for the green transition : View Article
BEUC: Better names for ESG and sustainable investment funds : BEUC’s views of ESMA’s proposal for name-related requirements for investment funds View Article
ESBG revises its position paper on the CSDDD in accordance with the recent negotiations : Given the developments of the recent political negotiations, ESBG has decided to update its position paper on the Corporate Sustainability Due Diligence Directive (CSDDD) with five main recommendations to be considered. View Article
Fin Tech Regulation
Opening remarks by Commissioner McGuinness at the European Parliament plenary debate on digital euro : A digital euro would play a similar function to cash – providing us with access to central bank money in a digital world. View Article
Project Syndicate's Buiter: The Overwhelming Case for CBDCs : There is growing evidence to suggest that, in the coming years, the US Federal Reserve and other central banks will find themselves back where they were before the pandemic, with their primary policy instrument constrained by the natural real interest rate. Fortunately, this old problem now has a prudent technological solution. View Article
SUERF's Bofinger/Haas: The Digital Euro (CBDC) as a Monetary Anchor of the Financial System : First, as an anchor for commercial bank deposits, guaranteeing their convertibility into central bank money. Second, as an anchor to maintain the national currency as a unit of account. Third, as an anchor for maintaining the central bank’s control over the financial system. View Article
Finextra: Banking associations want payments removed from EU digital identity plan : The European Digital Identity (eIDAS 2.0) proposal will see the creation of digital identity wallet is a secure app that will allow citizens across the continent to verify their ID, access public and private services and store sensitive digital documents in one place. View Article
Opening remarks by Commissioner McGuinness at the European Parliament plenary joint debate on crypto-assets : MiCA will bring crypto markets into the regulated space by addressing risks related to consumer protection, market integrity, and financial stability. View Article
FSB sets out a comprehensive approach to achieve greater convergence in cyber incident reporting : Cyber incidents are rapidly growing in frequency and sophistication. The interconnectedness of the global financial system makes it possible that a cyber incident at one financial institution (or an incident at one of its third-party service providers) could have spill-over effects across borders and sectors. View Article
BIS's Garrat /Shin: Stablecoins versus tokenised deposits: implications for the singleness of money : Private tokenised monies that circulate as bearer instruments, like stablecoins, may entail departures in their relative exchange values away from par in violation of the "singleness of money". View Article
EPC's Riekeles: AI has escaped the 'sandbox' — can it still be regulated? : The stakes for the human race in current AI developments could not be higher. This is no time to cut ethical corners regarding research, regulation, or lobbying. View Article
Brexit and the City
Reuters' Jones: Cross-border remote working could boost London financial centre, says report : Britain must make it easier for staff based overseas to work remotely in London as the UK capital falls further behind New York on the global financial services ranking list, sector lobby group TheCityUK said. View Article
Brexit
What UK thinks: In hindsight, do you think Britain was right or wrong to vote to leave the EU? : Right 45%, Wrong 55% View Article
BCC: UK EXPORTS CONTINUE TO TREAD WATER : Reacting to the latest ONS Trade data for February, William Bain, Head of Trade Policy at the BCC, said:“This latest data provides further evidence the UK is finding it tough to generate any sustained rise in exports.The overall picture for the last two years is broadly static, although this masks a better position on services than with goods View Article
IoD: How to improve the post-Brexit exporting environment : IoD research shows exporters are feeling constrained by the current trading environment. A combination of Brexit related friction, wider macro-economic pressures and a heightened sense of geopolitical risk has weakened confidence in their exporting initiatives. View Article
Federal Trust video: Stevens, Donnelly: Brexit Drowning in the Pacific? : In this Federal Trust video, our Director Brendan Donnelly and Chair John Stevens review the British decision to join the Trans-Pacific Partnership or CPTPP. They believe that this decision will bring at best minimal benefits to the UK and some disadvantages. Its importance is being overstated by the British government simply as a distraction from the unfolding difficulties of Brexit. View Article
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