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Highlights of my week: European Parliament elections are now confirmed for 6-9 June 2024 so there are probably just 10 full EP plenary sessions left to finalise current legislative proposals. Eurogroup is already talking about the work plan of the next Commission (from 1 November 2024). Traditionally, the incoming financial services Commissioner launches a review of the left-overs from their predecessor before setting out detailed legislative plans – producing a two-year hiatus in major policy initiatives from about now (absent crises!) Despite many brave words from the regulatory authorities about the resilience of European banks, the markets do not seem to believe it – judged by the lowly valuations and still-massive discount of shares to book value. Indeed, the Court of Auditors was very critical of the ECB’s supervision of credit risk and the SREP Review panel made many suggestions for improvement – even recognising that EU-level supervision has only existed for a decade. Capital Markets Union remains unfinished and the EBF produced a thoughtful, detailed paper on how to ensure that the reform of derivatives clearing avoids the classic unintended side-effects. Council adopted new rules on Markets in Crypto Assets (MiCA) and the debate about the need for a digital euro shows no sign of being resolved even as the ECB moves towards describing how it would work – ahead of an imminent legislative proposal from the Commission (together with a cost-benefit analysis). The Commission has formally adopted a draft MoU for EU financial regulators to co-operate with those in the UK but – to the surprise only of Brexiteers – it stops short of giving market access.
Graham Bishop
Articles from 12-18 May 223
Policy impacting Finance
POLITICO: 2024 EU elections will take place June 6-9 : A Portuguese bid to shift the timing was not successful. View Article
Economic and Financial Affairs Council, 16 May 2023 : Main results included Taxation, Bank Crisis Management and Deposit Insurance framework, Financial services, Economic recovery in Europe, European Semester: Economic policy of the euro area View Article
Remarks by Paschal Donohoe following the Eurogroup meeting of 15 May 2023 : Topics: Banking Union, Capital Markets Union, digital euro View Article
SRB's Laboureix: The challenges of the European supervisory and resolution framework : ...The CMDI review will modify the EU framework, not only the Banking Union one. These are imperfect, but good proposals. If adopted, they will enable EU authorities to manage bank crises in a more efficient and harmonised way... View Article
EURACTIV: Bank crisis rules proposal ‘not acceptable yet’ for Germany, Austria :Industry-funded deposit guarantee schemes are regarded as an obstacle to the EU’s Banking Union as only some national banking markets can afford to set up these schemes, thus distorting competition in the European banking market. View Article
CEPR: The Commission’s Crisis Management and Deposit Insurance proposal has the potential to significantly improve banking resolution in the : CEPR's Dewatripont/Praet/Sapir: The authors suggest it should be accompanied by further efforts to increase loss-absorbency and liquidity requirements, supervision, and managerial accountability in order to reduce moral hazard... View Article
EBF Board: Europe needs a stable and capable banking sector to support its economy : Sustainable profitability is essential to ensure that the European banking sector remains resilient and capable of withstanding future challenges, while also attracting investors and fulfilling its core function of financing investments and promoting growth and competitiveness in the European economy. View Article
ESAs draw consumers’ attention to how rises in inflation and interest rates might affect their finances : They published an interactive factsheet to help consumers understand how the recent increases in inflation and interest rates can affect their money. View Article
IOSCO Encourages Regulators, Responsible Entities and Trading Venues to Review and Adopt Good Practices for ETFs : ETF industry developments include new products with exposures to less liquid and more novel asset classes and more complex investment strategies. The IOSCO Board has therefore concluded that ETF Principles would benefit from being supported, and further operationalised, by a set of Good Practices. View Article
Banking Union
ECA: ECB supervision of banks’ credit risk needs improvement : The ECB oversees 110 large banks in the EU holding over 80 % of assets in the Banking Union; Auditors ask for more guarantees that banks properly manage their credit risks; Higher-risk banks are not currently subject to proportionately higher capital requirements View Article
SSM's Restoy interview: “What got you here won’t get you there” : Fernando Restoy, Chair of the Financial Stability Institute at the BIS and member of the expert group that reviewed the ECB’s SREP, explains the group’s recommendations to streamline processes, redefine the scoring, focus on qualitative measures and modify the approach to calculating P2R. View Article
ECB's de Guindos speech: A resilient banking sector for the euro area : The limited exposures of euro area banks to the sources of US and Swiss bank stress, their solid fundamentals, and the comprehensive regulatory and supervisory frameworks in place shielded them from a more severe financial unravelling. View Article
Anti-money laundering: Council adopts rules which will make crypto-asset transfers traceable : The EU is making it more difficult for criminals to circumvent anti-money laundering rules via crypto currencies. Today the Council adopted updated rules on information accompanying the transfers of funds by extending the scope of the rules to transfers of crypto assets. View Article
Capital Markets Union
EIOPA:Risk Dashboard shows macro and market risks as top concern for insurers : The analysis shows that insurers’ exposures to macro and market risks are currently the main concern for the insurance sector, while all other risk categories are at medium levels. View Article
EBF: Derivatives Clearing – Review of EMIR and accompanying changes to other Regulation : Review of the European Market Infrastructure Regulation and accompanying changes to other Regulation and Directives (EMIR/CRR/MMFR and UCITD/CRD/IFD) View Article
Withholding Tax on Cross-Border Dividends in the EU continues to be a nightmare for investors : More than 90% of European investors find the WHT reclaim procedure overall difficult, while in close to 70% of cases the investors incurred costs. View Article
ESMA calls for legislative amendments to prevent undue costs in funds : The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, has published an Opinion to the European Commission with suggested clarifications of the legislative provisions under the UCITS Directive and the AIFMD relating to the notion of “undue costs”. View Article
BETTER FINANCE raises serious concerns over the current “trialogues” on EU capital market structure and their impact on the retail investmen : While the discussions are highly technical and complex, it is imperative that retail investors are able to benefit from a level playing field in transparent and regulated European securities trading. View Article
Environmental, Social, Governance (ESG)
SUERF's Kund/Rugilo: Does IFRS 9 increase banks’ resilience? : We find that the drawbacks of IFRS 9 prevail in the short-term, but are overcompensated in the long-term and increase banks’ resilience in particular at the onset of potential crises. View Article
Finance Watch's Grandjean: ESG ratings must disaggregate ESG parameters to repair sustainable investors’ trust : Aggregating E, S and G scoring is problematic however as it can allow fossil fuel companies to rank as “sustainable”. Only comprehensive reforms at EU level can repair the trust of sustainable investors. View Article
New IFAC Publication Equips Accountancy Organizations to Lead the Fight Against Corruption : Global Fight, Local Actions: Anti-Corruption Advocacy Workbook for PAOs equips PAOs and accountancy profession leaders with the background and framework to craft bespoke approaches and messages that best fit their jurisdiction and needs. View Article
GFIA response to IAIS Public Consultation on climate risk supervisory guidance : ...stressing the need for close global and local cooperation between insurers and their supervisors in assessing the management and governance of climate risks. View Article
Fin Tech Regulation
Digital finance: Council adopts new rules on markets in crypto-assets (MiCA) : The EU brings crypto-assets, crypto-assets issuers and crypto-asset service providers under a regulatory framework. Setting an EU level legal framework for this sector for the first time, the Council today adopted a regulation on markets in crypto-assets (MiCA). View Article
SUERF's Angeloni: The digital euro: a precautionary device, not a deus-ex-machina : This article summarizes the main facts about the PDE and concludes that, if the decision on adoption had to be taken today, the arguments against would outweigh those in favor. View Article
BIS: Crypto, tokens and DeFi: navigating the regulatory landscape : Ocampo, Branzoli and Cusmano: This paper provides an overview of policy measures taken in 19 jurisdictions to address the risks associated with activities that incorporate cryptoassets and distributed ledger technology (DLT) programmability capabilities in financial services. View Article
Economic Policies Impacting EU Finance
ECOFIN: Cooperation between national taxation authorities: Council puts the spotlight on crypto-assets and the wealthiest individuals : Council agreed amendments to the directive on administrative cooperation in the area of taxation... concerning the reporting and automatic exchange of information on revenues from transactions in crypto-assets and information on advance tax rulings for the wealthiest (high-net-worth) individuals View Article
Broadening the International Role of the Euro
CEPR's Eichengreen: Is de-dollarisation happening? : This column argues that while there is evidence of a decline in the dollar’s share of allocated foreign exchange reserves, reports of its demise as the dominant global currency have been greatly exaggerated. View Article
Brexit and the City
Reuters' Jones: EU pushes forward with post-Brexit forum for EU, UK financial regulators : The European Union's executive body said it has formally adopted a draft memorandum of understanding (MoU) to allow financial regulators from Britain and the bloc to cooperate more closely, though stopping short of market access. View Article
BCC: SWISS TRADE NEGOTIATIONS A KEY STEP FOR UK SERVICES : The 2021 post-Brexit continuity agreement only rolled over terms on trade in goods but not services, so there has been a major gap to fill, affecting just under half of our trade. View Article
UK Finance: New research finds action needed to enhance UK capital market competitiveness : UK Finance releases a new report analysing the current state of the UK’s capital markets. The report identifies areas that require further attention and puts forward a series of recommendations for consideration to enhance the UK’s competitiveness on the global stage. View Article
FCA`s Pritchard: Meeting the challenge in our changing global markets : Following recent proposals to reform listing requirements, we will shortly be considering what if any reforms we should make to prospectus rules. View Article
Revolut Founders Criticize UK, Say Won’t Consider London IPO : Storonsky and Yatsenko attack UK’s regulatory regime; Fintech is yet to receive a banking license from PRA View Article
Bloomberg: Brexit ‘Cannibalized’ London IPO Pool, Top JPMorgan Banker Says : “Clearly, Brexit has kind of cannibalized the listing pool and a lot of European companies are now listing on European exchanges.” View Article
FT: The City needs to embrace risk : CEO Harrison of Schroders: Proposals to overhaul listings rules are step in the right direction but much more work needs to be done View Article
Brexit
What UK Thinks' Curtice: Is Brexit Over? Lessons from the Electoral Geography of the Local Elections : As a result, there has been a marked weakening of the relationship between Brexit outlook and party choice. That said, the weakening looks less marked if we look at current attitudes towards Brexit rather than how people said they voted seven years ago. View Article
Uk in Changing EU: Tabloid tales how the tabloid press shaped the Brexit vote : Kathryn Simpson and Nick Startin set out the findings of their recent paper, which analyses the front pages of the five British daily tabloids during the final stages of the Brexit referendum campaign. View Article
IfG's Rutter: Government sees some sense at last on the Retained EU Law Bill : Rishi Sunak and Kemi Badenoch were right to face down their critics and amend the Retained EU Law Bill. View Article
Federal Trust video - Donnelly and Palmer: Can the EU and the UK learn to love each other? : Brendan Donnelly and John Palmer discuss the recent tentative improvement in relations between the EU and the British government. They attribute this improvement to the growing realisation by the British government that Brexit has failed to produce economic or political advantages for the country View Article
City AM: Brexit is ‘threat’ to UK car factories says parent firm of Vauxhall, Citroen, Peugeot and Fiat : One of the world’s largest carmakers has said it will be unable to keep their commitment to make electric vehicles in the UK without changes to the Brexit deal. View Article
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