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Highlights of my week: Basel/IOSCO published their analysis of the margining dynamics in the commodities markets during the extraordinary 2022 stresses. ECB’s Panetta makes it clear ECB could launch a digital euro IF the EU’s co-legislators agree just as Council agreed its position on `instant payments’ for everyone in the EEA who owns a bank account. So what would be the benefit of a digital euro? The Commission published its retail investor strategy package – a vital part of CMU – but Better Finance felt it fell short in several areas. ECON agreed its position on the single access point (ESAP) for financial information. A broad spectrum of industry – including insurance – warned about the consequence of rushing the revised Product Liability Directive: raising a flag about rushing to complete law before the end of this electoral cycle. The Luxembourg SE seized the initiative – with ICMA – in providing the wider financial community with a database on sustainable bonds. The FT interviewed Commissioner McGuiness on the EU’s insistence about keeping the deadline for shifting some euro clearing business – highlighting the industry’s concerns rather than financial stability. Meanwhile, Barclays announced 200 new trading jobs in Paris. The UK seems to be waking up (finally) to the significance of arcane `rules of origin’ – a detail that Brexiteers tried to wish away.
Graham Bishop
Articles from 19 - 25 May 2023
Policy impacting Finance
FSB Europe Group discusses risks to financial stability, including recent banking sector stress, DeFi and climate change : The group discussed global and regional financial market developments and financial stability risks arising from decentralised finance (DeFi) and from climate change. View Article
BCBS-CPMI-IOSCO publish analysis of margining dynamics in centrally cleared commodities markets during 2022 stress events : The findings support the case for, and help inform, current international policy work aimed at enhancing the transparency of initial margin requirements and evaluating margin responsiveness to market stress. View Article
CEPR: The far side of the EU’s expenditure benchmark : This column argues that there is a blind spot in the dominant narrative, which can be easily fixed but can also weaken a reformed system if ignored. View Article
Les Echos Interview with Fabio Panetta, Member of the Executive Board of the ECB : If the Governing Council and the European legislators – Member States and Members of the European Parliament – agree, we could launch the digital euro in three or four years. View Article
CEPR: Open banking’s far-fetched promise of a financial revolution : .. there are considerable limits to the diffusion of financial information and to the use of such information to enhance competition. This column argues that the scope and the aims of open banking, although potentially ground-breaking, may thus be overstated. View Article
ESAs publish Joint Annual Report for 2022 : The Joint Committee focused on issues of cross-sectoral relevance, such as joint risk assessment, sustainable finance, digitalisation, consumer protection, securitisation, financial conglomerates, and central clearing. View Article
Banking Union
Capital markets union: Council agrees its position on the instant payments proposal : The Council agreed its position on the instant payments proposal which aims to improve the availability of instant payment options in euro to everyone who owns a bank account in the EU and in EEA countries. View Article
Bloomberg: EU Banks Are Said to Sail Through Early Round of Stress Test : Early results are said to raise questions from regulators; Results of stress tests are key to capital return policies View Article
SRB's Laboureix's speech: The challenges of the European supervisory and resolution framework : At the SRB, we work on ensuring every bank has a proper end of life plan in place, so that if the worst should happen, and your bank should fail, then we can manage that failure and safeguard financial stability, at no cost to the taxpayer. View Article
Expansion interview with Anneli Tuominen, Member of the Supervisory Board of the ECB : It’s more important than ever that banks continue to improve their internal governance. And they should also be paying attention to new areas like cybersecurity and climate risk. View Article
Capital Markets Union
Capital Markets Union: Commission proposes new rules to protect and empower retail investors in the EU : The aim is to empower retail investors (i.e. “consumer” investors) to make investment decisions that are aligned with their needs and preferences, ensuring that they are treated fairly and duly protected. View Article
Commission: Retail investment package : The aim is to empower retail investors (i.e. “consumer” investors) to make investment decisions that are aligned with their needs and preferences, ensuring that they are treated fairly and duly protected. View Article
AFME responds to Commission Retail Investment Strategy : Retail participation plays a key role in advancing the Capital Markets Union. We are also supportive of the key CMU goal to make the European Union a more attractive place for individuals to save and invest long-term. View Article
BETTER FINANCE: The Proposed Retail Investment Strategy Shows Potential for Investor Protection Progress, but Fails to Meet its Own Key Target : ..the legislative proposal, despite incorporating certain positive advancements, falls short of fulfilling several of its own key objectives in enabling EU individual investors to benefit... View Article
Reuters' Jones: EU power battle risks denting planned safeguards for financial products : Some countries reject more centralised supervision; Rules designed to improve investor confidence; State/EU friction could weaken impact View Article
BETTER FINANCE: CMU Assessment Report 2019-2022 | Building a Capital Markets Union “That Works for People” : BETTER FINANCE released its updated report on the progress of the European Capital Markets Union (CMU), and the results are discouraging. View Article
IAIS publishes Issues Paper on Insurance Sector Operational Resilience : Recognising that operational resilience is a broad and evolving area, the paper addresses the following three topics: Cyber resilience; Third-party outsourcing; Business Continuity Management View Article
AIMA: ESMA issues consultation on ELITF level 2 measures : This consultation will be important in setting the liquidity parameters of ELTIFs under the new rules. View Article
Insurance Europe: Proposed PLD revision may undermine Europe’s competitiveness : A group of industry representatives — including Insurance Europe — has released a statement to warn against the potentially adverse consequences of rushing institutional negotiations on the proposed revision of the EU Product Liability Directive (PLD). View Article
ECON: Deal struck on easier access to information relevant for investors : Common data space to attract investors; More efficient EU capital markets and SMEs made more visible; Capital market participants will be better informed while making decisions about investments View Article
ESMA: Final Report on market outages:The opinion sets out ESMA’s expectations on how National Competent Authorities (NCA) should ensure that trading venues have appropriate communication protocols in place, which arrangements should be in place to avoid an outage affecting the closing auction and how trading venues should ensure the market is provided with an official closing price.
UK Finance: T+1 lessons learnt across various jurisdictions : In February 2023, the US SEC finalised rule changes to reduce the settlement timeline for most securities transactions, from T+2 to T+1 by 28 May 2024. View Article
Environmental, Social, Governance (ESG)
ICMA launches new sustainable bond database powered by the LGX DataHub : Established by ICMA and built and fed by the Luxembourg Green Exchange (LGX), LuxSE’s leading platform for sustainable finance, the database provides ICMA members and the wider financial community with important insights into the sustainable bond market. View Article
ELFA and ICMA publish Practical Recommendations for High Yield Sustainability-Linked Bonds : ELFA and ICMA have partnered to create a set of recommendations for the high yield bond market in line with ICMA’s Sustainability-Linked Bond Principles (SLBP). View Article
GFIA supports OECD work on financial resilience to disasters : Responding to the draft OECD Recommendation on Building Financial Resilience to Disaster Risks, GFIA has welcomed the OECD’s Recommendation as one that is well conceived and focuses on financial resilience to aid recovery. View Article
Commercial Risk: Swiss Re latest to quit Net-Zero Insurance Alliance : Swiss Re is the latest high-profile member to leave the UN’s Net-Zero Insurance Alliance (NZIA) in the face of growing political pressure from US republicans. The world’s second-largest reinsurance company told media that it is quitting the alliance.. View Article
Protecting Customers
EBF: JOINT STATEMENT Access to data by public bodies: a double-edge tool to use with caution and restraint : The statement encourages EU policymakers to take the necessary time to build a clear and proportionate framework that does not allow unrestricted access to any data on vague grounds but will on the contrary protect fundamental rights and the rule of law. View Article
Insurance Europe: Insurers’ position on the EU Data Act : The EU Data Act is set to shape the future of the EU single market for data. It is therefore crucial that it establishes a framework that supports innovation. View Article
Fin Tech Regulation
IOSCO Sets the Standard for Global Crypto Regulation : In a major initiative designed to improve global standards of regulation of crypto-assets, IOSCO has set out how clients should be protected and how crypto trading should meet the standards that apply in public markets. View Article
B de F's Beau: After the crypto-winter, the spring of crypto-assets regulation and supervision : Combining three regulatory approaches: banning crypto-asset activities; containing and isolating them from traditional finance and the real economy, which implies banning certain specific aspects and practices (e.g. advertising); regulating the crypto-asset market... View Article
Oliver Wyman's Elliott: Four Visions For The Future Of Digital Money : Money is about to undergo fundamental changes in the way it is created and used, potentially reordering the financial system. View Article
Brexit and the City
FT: EU sticks with post-Brexit clearing trade deadline despite objections : Brussels insists on wresting lucrative business from London as derivatives houses fear threat to stability View Article
Irish Funds welcomes upcoming sector review as opportunity to modernise and simplify : Ireland is the third largest funds and asset management centre in the world and the 2nd largest in Europe; The total number of Irish domiciled funds, including sub-funds, reached a record 8,689 with approx. €3.7 trillion AuM. View Article
City of London Corporation responds to Labour Party listing reforms : The City of London Corporation, Policy Chairman Chris Hayward, said: “The UK’s capital market is in urgent need of reform; we welcome these pro-business steps the Labour party have outlined... View Article
Bloomberg: Barclays Sees 200 New Paris Jobs in Post-Brexit Trading Push : Lender expects to have 500 local staff in two to three years; Bank has leased a new, larger building near Arc de Triomphe View Article
Brexit
UK TPO's Gasiorek/Tamberti: Rules of origin do matter after all! : The issue is the following: The Trade and Cooperation Agreement with the EU allows for tariff-free trade between the EU and the UK, providing that the goods being exported originate (i.e. are sufficiently produced) in each country. There are different rules regarding batteries and cars View Article
UK and EU's Jurkovic: Energy security and industrial strategy: UK and EU divergence : Jurkovic examines the UK and EU’s divergent approaches to energy security and investment in green technologies since the US Inflation Reduction Act was signed into law, looking at whether it’s too late for the UK to develop its own industrial strategy. View Article
Bloomberg: Brexit Caused a Third of UK Food Price Inflation, LSE Paper Says : Economists say border costs added £7 billion to grocery bills; Study comes as ONS data shows food prices driving inflation View Article
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