Welcome to our Friends weekly e-mail.
My highlights of the week: A year from today, we will have the results of the European Parliament elections and the pundits are already gaming scenarios, but the immediate issue is whether Hungary can/should be stopped from taking over the Council Presidency to deal with the results. The ESRB’s function as an early warning signal was demonstrated by their Non-Bank Financial Intermediation (NBFI) Monitor highlighting some of the liquidity/leverage risks in the sector. AFME was caustic about the impact of Article 5 of the EU’s Securitisation Regulation in hampering the growth of securitisation. More comments on the Retail Investment Package – this time from the Luxembourg fund management industry. The Commission announced a further package on sustainable investment including an extension of the taxonomy and regulation for ESG ratings firms – the latter supported by EFAMA. But EuropeanIssuers strongly opposed new disclosures for companies. The Consumer Financial Protection Bureau (CFPB) publicised the increasing use by banks of useless chatbots. This chimed with Finextra’s story about the ex-CEO of Barclays saying that banks are becoming “museums of technology”. Bruegel joined the questioning of the need for a euro CBDC. The deadline for reviewing the Brexit deal draws closer but Brussels does not seem in any hurry as the consequences of Brexit sink in and electoral support for Brexit fell to a new low.
Graham Bishop
Articles from 9-15 June 2023
Policy impacting Finance
Fondation Schuman's Joanin: New political equations in Europe one year before the European elections : What does the political landscape in Europe look like one year before this major electoral event? View Article
Delors Centre's van den Brink: An Inconvenient Constraint: A Hungarian Council Presidency and the EU’s Rule of Law : On 1 July 2024, Hungary takes over the EU Presidency. Given the ongoing rule of law violations in Hungary, concrete proposals have been put forward to prevent it from exercising the Presidency. Van den Brink argues that the proposed EU measures violate the EU’s very own rule of law. View Article
ECIPE: Increasing Systemic Legal Risks in the EU: The Economic Impacts of Changes to the EU’s Product Liability Legislation : Most of the proposed changes would bring new legal risks to manufacturers of technology products, software developers and services providers specialising in the development and commercialisation of digitally provided services. View Article
CEPR's Buti/Coloccia/Messori : European public goods : A well-functioning economic union needs a permanent central fiscal capacity. This column argues that European public goods are a promising way for the EU to pursue projects implemented at a centralised level by means of common financing. View Article
Banking Union
ESRB publishes EU Non-bank Financial Intermediation Risk Monitor 2023 : Financial stability risks increased overall in 2022, owing to rising geopolitical tensions, higher-than-expected inflation and tightening financial conditions. Against this backdrop, the NBFI Monitor highlights three main risks and vulnerabilities. View Article
SRB's Laboureix: Now the banks have to pay if one bank falls down : Dominique Laboureix: We don't want taxpayers to be hit if things go wrong somewhere. View Article
EBA issues Opinion in response to the European Commission’s proposed amendments to the draft technical standards on crowdfunding service providers : In the Opinion, while accepting the change proposed by the Commission on the treatment of personal data, the EBA notes the importance of ensuring that crowdfunding providers can access historical data to improve the assessment of creditworthiness and the performance of their scoring models. View Article
Capital Markets Union
Capital markets union: Council agrees its negotiating mandate on the listing act : The Council agreed its negotiating mandate on the listing act, a package which will make EU public capital markets more attractive for EU companies and facilitate access to capital for companies of all sizes, in particular small and medium-sized enterprises View Article
AFME: New report finds stringent aspects of EU Securitisation Regulation severely restrict growth of ABS investor base : The report finds that, under Article 5, investors are likely to interpret ambiguous provisions conservatively and in doing so will assume disproportionately high costs to the business. View Article
ALFI preliminary statement on the European Commission Retail investment package : ALFI fully supports the European Commission’s ambition to create the necessary conditions to enhance retail investor participation in capital markets in line with the core objective of the Capital Markets Union to ensure that consumers can fully benefit from investment opportunities. View Article
EFAMA's latest Fact Book shows sustainable funds and ETFs bucked the outflow trend in 2022 : It also includes an extensive overview of the regulatory developments across 28 European countries as well as a series of info-boxes addressing important regulatory issues EFAMA is actively working on. View Article
Environmental, Social, Governance (ESG)
Sustainable Finance: Commission takes further steps to boost investment for a sustainable future : The aim of today's package therefore is to ensure that the EU sustainable finance framework continues to support companies and the financial sector, while encouraging the private funding of transition projects and technologies. View Article
ECB's Elderson: The economy and banks need nature to survive : Humanity needs nature to survive, and so do the economy and banks. The more species become extinct, the less diverse are the ecosystems on which we rely. This presents a growing financial risk that cannot be ignored, warns Frank Elderson View Article
EFAMA: Bringing ESG ratings and data providers within the regulatory perimeter : ...the reliance on external ESG data and ratings without sufficient regulation poses risks for asset managers. View Article
EUROPEAN BANKING FEDERATION RESPONSE TO THE EUROPEAN COMMISSION HAVE YOUR SAY ON THE EU ENVIRONMENTAL TAXONOMY : Comments on the Taxonomy Environmental Delegated Act, Annex V-VII toEnvironmental Delegated Act (Art 8) View Article
EuropeanIssuers comments on the European Commission’s proposal to further expanding and upgrading the use of digital tools and processes: ... while fully supporting the strengthening of the BRIS interconnection system and the "once-only" principle, EuropeanIssuers strongly opposes the introduction of new disclosure requirements for companies and the extension of the Directive to partnerships. View Article
UNEP FI: Fulfilling individual fiduciary responsibilities requires a collaborative response to climate risk : Given asset owner specificities, what could be gained from working collaboratively? A fair question, yet one that overlooks the complexity of systemic risks, such as those posed by climate change. View Article
OECD: Updated guidelines lift ambition on responsible business conduct : The Guidelines, last updated in 2011, are the leading global standard on responsible business conduct and are widely applied in business practice and public policy. 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
BIS: Banks' cyber security - a second generation of regulatory approaches : This highlights that cyber security is a top priority for bank supervisory authorities worldwide. Moreover, cyber regulations have evolved and recent ones could be described as "second-generation". View Article
Bruegel's Demertzis/Martins: The value added of central bank digital currencies: a view from the euro area : Central bank digital currencies do have added value, but this is not the same for every country. View Article
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
Finextra: Banks are becoming "museums of technology" says ex-Barclays boss : Ex-Barclays boss Antony Jenkins has decried banks as "museums of technology" who have failed to properly embrace true digital transformation and are consequently shedding huge numbers of customers to more nimble tech-first rivals. View Article
Brexit and the City
FT: Banks alarmed at threat of EU crackdown on cross-border access : JPMorgan, Goldman Sachs, HSBC, Citigroup and Morgan Stanley among those concerned at approach from Brussels View Article
FT: Fresh blow to City as WE Soda pulls $7.5bn London IPO : In a statement on Wednesday, WE Soda chief executive Alasdair Warren said that “investors, particularly in the UK, remain extremely cautious about the IPO market” View Article
Brexit
Independent: Blow for British businesses as EU rules out renegotiating Brexit trade deal for years : Maroš Šefcovic says he does not want to put existing deal ‘in the shredder’ View Article
EURACTIV: Post-Brexit trade deal means ‘inevitable’ business costs, says EU : “Trade can no longer be as frictionless and dynamic as it was before. This inevitably means additional costs for businesses on both sides,” View Article
IOD: What changes do you want to see to the UK-EU Trade and Cooperation Agreement? : As part of the Trade and Cooperation Agreement (TCA), there is a mechanism for a regular five-year review. This means the first review of the TCA will take place in 2026. View Article
Federal Trust's Stevens/Donnelly video: Johnson, Sunak and Brexit: A Trio From Hell : In this video, our Chairman John Stevens and Director Brendan Donnelly discuss the disruptive and divisive consequences of Brexit for the Conservative Party. View Article
UK TPO: Driving round the bend: Rules of origin and cars : The concern it because of the changes in the rules of origin (ROOs) requirements (for EVs and batteries) which will become more difficult from January 2024, and again from 2027 and 2028 onwards. View Article
LSE's Newell: Reversing Brexit: Lessons from history : Is Brexit reversible? James L. Newell examines what the prohibition of alcohol in the United States can tell us about the potential to reverse seemingly irreversible policy decisions. View Article
UKandEU's Usherwood: Necessary but not sufficient: The Windsor framework and UK/EU relations : Instead, it represents a return to a more classic mode of British European policy: pragmatic, but somewhat rudderless. View Article
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