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Highlights of my week: Financial stability topped the agenda this week with the European Financial Stability Review (EFSIR) providing the opportunity for senior officials to re-iterate the strength of the EU’s banking system. But “Basel” – in the form of the BCBS – is to review the entire `Core Principles’ and SSM’s Enria made the clear point that well-run banks don’t fail. The IMF produced the `chart of the week’ showing six EU states are in the highest default risk category from high household debt at floating rates. EU level politics may also be a source of instability for the next year as Spain will now be immersed in a potentially inconclusive election in the midst of its EU Council Presidency from July, while its successor – Hungary – may be stripped of its Presidency. Looking on the bright side, Parliament’s Eurobarometer reported a much higher awareness amongst citizens of next year’s Parliamentary elections. The Commission’s recently-published Retail Investment Strategy continued to be welcomed in principle – but there are widespread concerns about the devilish details of implementation. AFME highlighted the glaring gap in securitisation levels between the EU and US/Asia – a critical difficulty for a successful CMU. Greenwashing risks remain a key concern for the ESAs – and conflicts of interest among ESG rating agencies may attract legislative attention. Former US Treasury Secretary Larry Summers highlighted the risk of recession in the UK following the ‘Historic Error’ on Brexit.
Graham Bishop
Articles from 2 - 8 June 2023
Policy impacting Finance
Commissioner McGuiness: A strong European financial system for the future: working towards Banking Union and Capital Markets Union' : So I want to talk about what the economic and financial system looks like, and why we need to step up our work on Banking Union and Capital Markets Union. View Article
Commissioner McGuinness at EBF: How can banks help deliver sustainable growth in a more multi-polar world? : Without an effective, efficient, competitive, stable banking and financial system we will have nothing else – including we will not have the green and digital transition. View Article
Commission: John Berrigan at the European Financial Integration conference (EFSIR) 2023 : In general, we believe EU banks are resilient. Our strong regulatory framework applies equally to all our banks and liquidity and capital levels are strong. View Article
ECB's de Guindos: Banking Union and Capital Markets Union: high time to move on : The European banking sector has proven resilient. And the enhanced regulatory and supervisory framework put in place following the great financial crisis has proven its worth. But it is still incomplete ... View Article
SUERF - ECB's Schnabel: Monetary and financial stability – can they be separated? : A fundamentally sound, well-regulated financial sector protects central banks from any form of financial dominance. Governments and supervisors are therefore essential to enable monetary policymakers to focus on their primary mandate of price stability. View Article
Basel Committee discusses recent market developments, agrees to consult on Basel Core Principles, and advances work on cryptoassets : Members discussed analysis of the banking turmoil and agreed that: The first and most important source of financial and operational resilience comes from banks' own risk management practices and governance arrangements.... View Article
Council and Parliament reach provisional political agreement on financial services contracts concluded at a distance : The agreed text simplifies existing legislation, increases consumer protection, and creates a level playing field for financial services concluded online, via telephone or through other forms of remote marketing. View Article
IMF: How Falling Home Prices Could Strain Financial Markets as Interest Rates Rise : Countries with elevated housing prices and high household debt issued at floating rates are particularly vulnerable to monetary policy tightening View Article
BusinessEurope views on digital trade : In the absence of a multilateral framework on digital trade, growing regulatory divergence is taking place and resulting in the fragmentation of international digital markets. The proliferation of regulations is eroding the competitiveness of companies, especially of small and medium-sized companies View Article
Project Syndicate's Palacio: Can Spain Show European Leadership? : Europe needs a more cohesive stance in international forums, together with stronger strategic partnerships, to enhance its global influence. Spain can contribute to these goals when it assumes the presidency of the Council of the EU next month – if domestic politics do not get in the way. View Article
Parliament: One year ahead of European elections, citizens are aware of EU’s impact on their lives : The European Parliament released today its Spring 2023 Eurobarometer survey showing citizens’ strong support for democracy and a high awareness of the upcoming European elections. View Article
Delors Centre's Nguyen: Institutional Corsets and the Question of Timing: How Much Damage Can the Hungarian Council Presidency Do? : Thu Nguyen analyses the institutional role of Council presidencies, and argues that the Hungarian presidency will not be able to do much damage considering both the institutional corset and the time period in which it will operate. View Article
EPC's Petit: Will Hungary have another ‘EU first’ by being stripped of the EU Presidency? : Hungary is set to take over the rotating EU Presidency in July 2024, right after the European elections, but its damning record on respect for EU rights and values casts doubt on whether it is appropriate for Hungary to hold the Presidency at all. View Article
Banking Union
Criminal money: Council and European Parliament reach deal on access to financial information : Access to financial information is an important instrument in financial investigations and in efforts to trace and confiscate the proceeds of crime. View Article
SSM's Enria: Well-run banks don’t fail – why governance is an enduring theme in banking crises : The lessons we have learnt from the recent turmoil are much more relevant for supervisors than for regulators, says Supervisory Board Chair Andrea Enria. The common root causes of recent bank failures were weak governance and poorly managed risks. View Article
EBA publishes final draft technical standards specifying the data collection for the benchmarking exercise in 2024 : The European Banking Authority (EBA) published today its final draft Implementing Technical Standards (ITS) on the benchmarking of credit risk, market risk and IFRS9 models for the 2024 exercise. View Article
ECB consults on counterparty credit risk governance and management : ECB invites comments from banks and practitioners on counterparty credit risk sound practices report, consultation period ends 14 July 2023; The review finds a number of good practices but also highlights several areas to improve View Article
CEPS' Thomadakis: SVB and Credit Suisse : The regulatory system that was put in place after the global financial crisis was a bail-in system – alongside other tools that were added to the toolkit, like systemic stress testing, living wills, etc. View Article
Capital Markets Union
Joint Industry Statement on the EU Retail Investment Strategy : Industry response to Retail Investment Strategy - AMICE, EACB, EAPB, EBF, EFAMA, ESBG, EUSIPA, Insurance Europe View Article
FBF: Protecting savings for all: France’s financial community comes together to better adapt the Retail Investment Strategy : We, French stakeholders, representatives of companies, notably SMEs, producers, and distributors of savings products, share the ambitions of this strategy and welcome the provisions ... However, we would like to express our great concern about the text finally proposed by the Commission. View Article
ESRB publishes EU Non-bank Financial Intermediation Risk Monitor 2023 : This is the eighth edition in an annual series monitoring systemic risks and vulnerabilities associated with investment funds and other financial institutions. For the first time, this edition extends the monitoring universe to crypto-assets and associated intermediaries ... View Article
AFME: US and Asia securitisation markets contribute far more to financing their economies than Europe - “Now is the time to address the gap : AFME published new data highlighting the contrasting fortunes of the securitisation market in Europe (EU +UK) in terms of the amount its securitisation market contributes to the financing of its economy.versus the rest of world, demonstrating that Europe languishes far behind its global competitors View Article
IPE's Kokozka: PLSA pinpoints UK investment potential for pension funds : A range of new solutions and policy levers to attract greater pension fund investment in assets that have potential to drive growth in the UK economy have been identified by the Pensions and Lifetime Savings Association (PLSA). View Article
Environmental, Social, Governance (ESG)
FSB holds 2023 Roundtable on External Audit : The discussion focused on ways to promote financial stability by enhancing public confidence in external audits. View Article
FERMA’s comments on the proposed Global Internal Audit Standards by the Institute of Internal Auditors : FERMA provided its comments and suggestions on the proposed Global Internal Audit standards on behalf of the European risk management profession for consideration by the Institute of Internal Auditors. View Article
FT: EU eyes conflicts of interest crackdown in ESG ratings rules : Agencies could face fines of up to 10% of turnover under proposals to regulate funds’ ethical scores View Article
ESAs put forward common understanding of greenwashing and warn on risks : EBA, EIOPA and ESMA published their Progress Reports on Greenwashing in the financial sector. In these reports, the ESAs put forward a common high-level understanding of greenwashing applicable to market participants in banking, insurance and pensions and financial markets. View Article
Protecting Customers
Finextra: Bank customers ill-served by poorly deployed chatbots - CFPB : The Consumer Financial Protection Bureau (CFPB) is monitoring banks' increasing use of AI-powered chatbots amid a surge of complaints from frustrated customers trying to receive straightforward answers from their financial institutions or raise a concern or dispute . View Article
Fin Tech Regulation
City AM: Regulator plays sheriff as it takes on crypto marketing ‘wild west’ : Crypto firms face a regulatory clampdown in the UK this year as the City watchdog cracks the whip on the “Wild West” landscape of crypto marketing. View Article
Brexit
Federal Trust's Melding: Federalism, Union and Secession : In this new essay for the Federal Trust, our Council member and former member of the Welsh Senedd David Melding argues that federal structures are the best way of preserving the constitutional and geographical integrity of the United Kingdom. View Article
UKandEU: UK trade tracker- June 2023 : The Competition and Markets Authority blocked Microsoft’s acquisition of Activision. Trade tracker takes a deep dive into the UK’s post-Brexit mergers and acquisitions market - a substantial increase in the market has taken place, driven by several factors and despite significant uncertainty. View Article
Federal Trust's Donnelly/Gow: UK Trade and Investment: The Brexit Economic Hit : They conclude that these effects, which are already damaging the British economy, are likely to worsen with time. Popular pressure will soon begin to mount for the UK to rejoin the structures of the European Union. View Article
POLITICO: ‘Brexit has failed’: Nigel Farage is the new poster boy for Remainer campaign : Led By Donkeys campaign group will put anti-Brexit billboards up across the UK. View Article
Bloomberg: Larry Summers Sees UK Recession After ‘Historic Error’ on Brexit : View Article
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