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11 May 2023

Friends Weekly Newsletter




 

Welcome to our Friends weekly e-mail.

 Highlights of my somewhat-light week: Thinking about the structure of banks after the recent crashes continues to rumble on: Did the post-GFC rules really solve the too-big-to-fail problem? Should banks be obliged to hold top-notch collateral to cover all their short-term funding? Leaks suggest the EU is about to backtrack on “inducements”. The FSB is working on global rules for crypto - but the Irish central bank Governor was blunt: unbacked crypto is little more than a Ponzi scheme. The first signs of serious opposition to a digital euro emerged in a European Parliament research paper. The UK government’s pledge to `sunset’ all retained EU law this year was finally dropped as Minsters realised the magnitude of the problem but 1000 texts relevant to financial services are still going through Parliament as part of the Financial Markets and Services Bill. Voters trounced the Brexiteer Tories in local elections and the latest poll puts Rejoin at 63% to only 37% stay out.

Graham Bishop


Articles from 5-11 May 2023

Policy impacting Finance

EURACTIV: European Parliament divided in debate over new debt rules : In a parliamentary debate on the European Commission’s proposal for new fiscal rules, EU lawmakers offered views diverging widely along both ideological and national lines, putting the Parliament’s ability to make its voice heard in the upcoming negotiations in doubt. View Article
Bruegel's Darvas: Fiscal rule legislative proposal: what has changed, what has not, what is unclear? : The proposed new fiscal rules constitute a major improvement from the current fiscal framework but missed an opportunity to foster green investment.  View Article
European Parliament: Olaf Scholz: “We need a geopolitical, larger, reformed EU, open to the future” : Chancellor Scholz stressed that Europe has a global responsibility beyond its borders “because the well-being of Europe cannot be separated from the well-being of the rest of the world.” View Article
Bloomberg: EU Banks Face Tougher Supervision Than Many in US, Villeroy Says : EU banks are all subject to stringent Basel requirements; French, EU banks benefit from rising interest rates: Villeroy View Article
FT: Former BoE deputy calls for radical overhaul of bank funding : Lenders should keep enough collateral with central banks to cover 100% of their short-term deposits in a single day, says Paul Tucker  View Article
CEPR: Credit Suisse: Too big to manage, too big to resolve, or simply too big? : It argues that the reforms adopted after the 2007-2009 crisis are still insufficient for resolving systemic institutions. Going forward, authorities must be able to act promptly and implement correction actions before risks of failure become too severe.  View Article
EFSF statement following Fitch Ratings’ decision to downgrade its long-term rating : The European Financial Stability Facility (EFSF) takes note of the decision by Fitch Ratings to downgrade the EFSF's long-term rating by one notch to AA- from AA. View Article
European Parliament: EU revenue: a new start for EU finances, a new start for Europe : Need to repay debt under the EU recovery plan is one of the main reasons for the introduction of new sources of EU revenue; A reliable and resilient financing of the EU budget requires a diversified and enlarged set of own resources  View Article
Commissioner McGuiness: Anti-corruption: Stronger rules to fight corruption in the EU and worldwide : The anti-corruption proposals presented today represent a milestone in the fight against corruption at national and EU level. View Article
IOSCO publishes a report to help its members enhance SPAC regulations : The recent surge in SPACs raised concerns for many IOSCO members about investor protection and market integrity. View Article

Banking Union

SSM's Elderson/McCaul: Diversity at the top makes banks better : Out of the 361 CEO appointments made between 2020 and 2022 at the significant institutions (SIs) directly supervised by the ECB, as well as at their subsidiaries, more than 300 were men.. only 36% of members of boards newly appointed in SIs were women. View Article
EBA notes EU wide consistent implementation of 2022 priorities in supervisory work programmes : and further improvements in the functioning of supervisory colleges but calls for more attention in some areas View Article
ECGI's Eidenmüller/Valbuena: Bailout Blues: The Write-Down of the AT1 Bonds in the Credit Suisse Bailout : In this post, we analyse the motives and mechanics of the write-down and argue that the prospect for a legal challenge is slim.  View Article
AIMA: STS for on balance sheet securitisations : A number of STS requirements in Level 1 for on-balance-sheet securitisations are the same as those for traditional (non-ABCP and ABCP) securitisation. Some amendments to applicable to both type of securitisations have been applied consistently across all three guidelines. View Article

Capital Markets Union

FT: Brussels backtracks on financial advice inducement ban : Leaked document indicates EU will allow asset managers to continue to pay commissions to advisers View Article

Environmental, Social, Governance (ESG)

IMF's Kammer: Europe, And the World, Should Use Green Subsidies Cooperatively : A coordinated approach, including toward subsidies, is needed to tackle climate change successfully  View Article
ESBG responds to the Commission’s consultation on its Taxonomy Environmental Delegated Act : ..criteria for economic activities that contribute substantially to one or more of the following environmental objectives... View Article
CEPR: Climate regulation and financial risk: The challenge of policy uncertainty : This column argues that it would be welfare-enhancing if policy changes were to follow a predictable longer-term path. Accordingly, the authors suggest a role for financial regulation in the transition.  View Article
ESBG submits its response to ESAs on the exchange of information relevant to fit and proper assessment : ESBG expressed its concern about proposed guidelines that could interfere with the distribution of responsibilities between ESAs and the national competent authorities in some Member States.  View Article

 

Fin Tech Regulation

POLITICO: Crypto can’t just ‘burn out’, says top global regulator : The FSB is working on a global regulatory framework for crypto assets. View Article
Finextra: Irish central bank governor compares crypto to ponzi scheme : In a blog, the governor says that while the Bank is "open" towards the potential of ‘backed crypto’ - such as Electronic Money Tokens and Asset Reference Tokens - unbacked crypto is a "very different proposition". View Article
Finextra: European Parliament paper pours cold water on digital euro : The risks of rolling out a digital euro currently outweigh the benefits and a CBDC should not be introduced unless "new elements " emerge, says a paper prepared for the European Parliament. View Article
Bruegel's Christie: Holdings limit will prove central to the digital euro’s future : The European Central Bank says its digital currency will not be a store of value, in contrast to global counterparts.  View Article

Brexit and the City

UK Finance: Updating the UK’s short selling regulation: starting from a good place : EU legislation doesn’t always have to be repealed ... all that is needed is a set of well calibrated adjustments. We highlighted that the current short selling regulation already functions well, and requires no fundamental change, only a set of targeted technical adjustments.  View Article

Brexit

What the UK thinks - Brexit poll : Rejoin 63%; Stay out 37% View Article
FT: UK pulls back on plan to revoke all EU regulations : Only around 600 out of 4,000-plus Brussels-derived rules will be scrapped by end of year View Article
CER's Springford: Are the costs of Brexit big or small? : Critics say my estimate – that the British economy is around 5 per cent smaller due to Brexit – is implausibly large. This insight tests their scepticism against other ways to estimate the cost of Brexit. View Article
EIAG: UK trade policy in an age of change and fragmentation : This paper is to look at UK trade policy in this period of undoubted change. There are particular trade risks for the UK. These include the fact that one of the clear trends is towards greater protectionism by the three big blocs (US, EU and China) and the UK is not in any of these blocs.  View Article

Experts blame France pipping UK to EU investment crown for second straight year on Brexit : The UK was home to 15.6 per cent, or 929, of all European foreign direct investment (FDI) projects last year, down from 16.9 per cent in 2021, according to consultancy EY. View Article

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