Welcome to our Friends weekly e-mail.
We will now be taking a summer break and the next “weekly” will be on 7 September – wishing all or readers a restful summer break!
The Federal Trust has published my study “Has the City of London benefitted from Brexit as the golden days continue to fade?”
Highlights of the last two weeks: The desks are being cleared for summer holidays – with a rush of papers. But there are decisions as well: negotiators reached agreement on AIFMD/UCITS reforms in the early hours of this morning! Both FSB and BIS have reflected on the recent banking and crypto turmoil but resistance to some parts of the Commission’s CMDI proposal seems to be growing and even supporters accept it is not perfect. Retail investors are essential if CMU is to succeed – according to Commissioner McGuiness – but the low levels of financial literacy shown by Eurobarometer are disheartening. The delegated act on European Sustainability Reporting Standards (ESRS) is drawing support for the principles but concerns on some details. IMF bloggers called for comprehensive policies about the safety of crypto and ESMA responded with its call for input on detailed rules for crypto markets. The drip, drip of Brexit pressure on the City continues: EIOPA is looking at supervisory expectations of “third country re-insurers” and a study for ECON was rather sanguine about preparations for the shift in euro clearing by 2025. However, Chancellor Hunt continued to trumpet the UK’s ambitions in his `Mansion House’ speech.
Graham Bishop
Articles from 7-20 July 2023
Policy impacting Finance
FSB Chair outlines work on recent banking turmoil and to finalise crypto-asset recommendations - ahead of G20 meeting : The FSB has reprioritised its work to focus on lessons learned from recent banking-sector turmoil, including lessons for the effective implementation of the international resolution framework, the interaction between interest rate and liquidity risk and the role of technology and social media. View Article
Remarks by Paschal Donohoe following the Eurogroup meeting of 13 July 2023 : ...discussion on the future of European capital and financial markets...the digital euro: the Commission about the excellent work on the single currency package that has two pillars - a legal framework for issuing a digital euro, supported by a proposal to harmonise the legal tender of cash. View Article
ECB's blog - Di Sano/ Gunnella/Lebastard : Deglobalisation: risk or reality? : After decades of being both hero and villain, is globalisation on the retreat. There is a common perception that companies are diversifying supply chains and relocating business closer to home..are we heading towards deglobalisation? We dig deeper and find that the data tell a different story. View Article
ESMA performs an analysis of the cross-border investment activity of firms : In terms of number of firms, Cyprus is the primary location for firms providing cross-border investment services in the EU/EEA, accounting for 23% of the total firms passporting investment services. Luxembourg and Germany follow with 16% and 13% of all firms, respectively. View Article
CEPS' de Gauwe/Ji:Towards monetary policies that do not subsidise banks : Our favoured proposal is a two-tier system of reserve requirements that would only remunerate the reserves in excess of the minimum required. View Article
Banking Union
SRB's Dominique Laboureix's speech at ECON Committee : ...some lessons on the recent market turmoil, the CMDI proposal, resolvability and the SRM Strategy. View Article
The EBA publishes final guidance on the overall recovery capacity in recovery planning : The Guidelines establish a consistent framework for the determination of the overall recovery capacity (ORC) by institutions in their recovery plans and the respective assessment by competent authorities and aim at strengthening institutions’ effective crisis preparedness. View Article
Finance Watch's Stiefmuller: 8% – We had a deal! : Europe’s “8% rule” requires bank shareholders to cover losses on up to 8% of the bank’s balance sheet. It is the embodiment of the EU’s promise that taxpayers would “never again” pay for banks’ under-capitalised risk-taking. View Article
BDB: CMDI Legislative Proposal Misses Mark on Key Issues : “We see the fundamental necessity for the framework for crisis management of banks to be modernised. However, the Commission’s plan to expand the resolution regime to include small and medium-sized banks is the wrong way of going about it..." View Article
Finance Watch's Ford: Bank Capital is Good for the Economy : The data from Basel III are in. Stronger, better capitalised banks are better for the EU’s economy, in both the good times and bad. Any future discussions about bank capital should be built on this empirical finding. View Article
EBF: Credit Spread Risk in the Banking Book: Banking Industry Common Understanding : In the new Guidelines, the EBA defines the criteria in dedicated sections about the identification, assessment, and monitoring of Credit Spread Risk in the Banking Book (CSRBB). View Article
Bloomberg: Europe Has a Hot Money Problem Too, Top ECB Official Says : Phenomenon of brokered deposits gaining regulatory scrutiny; EU bank watchdogs are looking harder at liquidity requirements View Article
Capital Markets Union
Capital markets union: provisional agreement reached on alternative investment fund managers directive and plain-vanilla EU investment funds : Negotiators enhanced the availability of liquidity management tools; reached a provisional agreement on an EU framework for funds originating loans, i.e. funds that provide credit to companies and enhanced rules for delegation by investment managers to third parties. View Article
Commissioner McGuinness at the DG FISMA Roundtable on the distribution of retail investment products : clear that the European retail investment market is not living up to its full potential....we won't have a fully functional Capital Markets Union without retail investment. View Article
PubAffairs: Eurobarometer survey reveals low levels of financial literacy across the EU : The survey tested both the financial knowledge and financial behaviour (jointly considered as financial literacy) of EU citizens. The results show that only 18% of EU citizens have a high level of financial literacy, 64% – a medium level, and the remaining 18% – a low level. View Article
EIOPA consults on supervisory expectations regarding the supervision of reinsurance concluded with third-country reinsurers : This draft supervisory statement outlines the supervisory expectations for national supervisors and the industry in the event of using reinsurance from third countries. View Article
EIOPA Report on Colleges Activities 2022 outlines key developments and themes in cross-border group supervision : The report highlights the importance of efficient and effective coordinated supervision of cross-border insurance groups in the EU and provides an overview of the main developments and the key topics discussed in the colleges. View Article
InsurancceEurope: Solvency II review: limited improvements by MEPs are a missed opportunity for insurers : Europe's insurance industry has expressed some disappointment at the position adopted by the European Parliament's Committee of Economic and Monetary Affairs on the Solvency II review today. View Article
PCS: ESMA publishes an updated securitisation Q&A : Unsurprisingly, in view of their remit, these deal primarily with disclosure and templates. Helpfully, ESMA has highlighted additions and amendments. View Article
PCS responds to the EBA consultation on STS synthetic guidelines and the Commission issues final RTS on retention : Globally, the EBA proposals are sensible but we do point out some aspects of the proposal that we think could benefit from some fine tuning. View Article
ECON Study: Post-trade services and financial stability : Assessing prospects for post-Brexit market infrastructure in the EU View Article
ESMA proposes revised technical standards on anti-procyclicality margin measures : ESMA’s proposals include targeted changes to the existing RTS in order to better mitigate the potential procyclical effects of big steps margin changes on clearing members and clients, as well as limit the spread of liquidity stress to other parts of the financial system. View Article
Environmental, Social, Governance (ESG)
FSB outlines next steps on climate roadmap, following the finalisation of the global sustainability disclosure standards : The FSB welcomes the publication of the ISSB’s final standards, which will serve as a global framework for sustainability disclosures. Responsibility for monitoring progress on firms’ disclosures will transfer from the TCFD to the ISSB in 2024. View Article
GRI's Adams: Keeping up the standard setting momentum : View Article
Response of the Platform on Sustainable Finance to the call for feedback on the draft European Sustainability Reporting Standards (ESRS) : View Article
AccountancyEurope: Europe needs robust sustainability reporting standards that enable a successful implementation : We have actively contributed to all the ESRS development phases. In our recent feedback to the European Commission’s (EC) draft delegated act, we presented a detailed analysis of the standards and voiced the urgent changes needed for improvement. View Article
EuropeanIssuers welcomes the flexibility given in the European Commission’s draft ESRS Delegated Act whilst calls for further Clarity, Simpl : As companies are actively engaged in the transition to a greener finance, EuropeanIssuers supports the standardization of sustainability reporting in the EU. While approving the Draft Standards, EuropeanIssuers has concerns and perspectives of listed companies regarding operational realities. View Article
EFAMA: Joint industry letter on corporate sustainability reporting : Reducing mandatory requirements for corporate ESG reporting would deprive asset managers of data needed for sustainable investment disclosures. View Article
IFAC Responds to European Sustainability Reporting Standards : Transparency and interoperability needed to support a global system for reporting and avoid costly regulatory fragmentation, especially regarding matters of materiality View Article
IOSCO publishes a final report to help its members develop sound and well-functioning compliance carbon markets. : “This report intends to facilitate the implementation of CCMs across IOSCO-member jurisdictions in a swift and efficient manner. It builds from the experiences of more advanced jurisdictions and gives other jurisdictions a solid starting point to avoid repeating past mistakes.” View Article
The EBA is collecting institution’s data on environmental, social and governance risks to set up a monitoring system : The EBA will collect on an ad-hoc basis ESG data from large, listed institutions based on their pillar 3 quantitative disclosures on ESG risks. his collection will provide competent authorities with data to monitor ESG risks and support the EBA in fulfilling its ESG mandates... View Article
ISDA: A Conceptual Framework for Climate Scenario Analysis in the Trading Book : Regulators and financial institutions are now shifting their focus to the shorter-term effects of climate risk on the trading book. View Article
FT: Investment banks squabble over carbon footprint of underwriting deals : Working group votes on whether to exclude portion of underwriting deals from net zero targets, but critics see ‘double standards’ View Article
ECGI's Willey: Why ending quarterly reporting will not solve the stock market short-termism problem…but may be justified for other reasons : Both the EU and the UK have ended mandatory quarterly financial reporting and instead allow listed companies to provide half year reporting. These changes were made due to concerns that quarterly reporting timeframes were contributing to the perceived problem of stock-market short-termism. View Article
Fin Tech Regulation
FSB finalises global regulatory framework for crypto-asset activities : Final recommendations incorporate learnings from events of the past year in crypto-asset markets and feedback received during the FSB’s public consultation. Framework is based on the principle of ‘same activity, same risk, same regulation’ View Article
BIS: Lessons learnt on CBDCs - Report submitted to the G20 Finance Ministers and Central Bank Governors. : The world's central banks are stepping up efforts to prepare the ground for central bank digital currencies (CBDCs) either as digital cash (retail) or tokenised reserves (wholesale). View Article
IMF blog - Adrian/He/Ismail/Moretti: Crypto Needs Comprehensive Policies to Protect Economies and Investors : Establishing effective policies has become a priority for authorities amid the failure of some exchanges and collapse of certain crypto assets View Article
ESMA seeks first input on detailed rules for crypto markets : In this first of three consultation packages, ESMA is seeking input on proposed rules for crypto-asset service providers (CASPs), in particular related to their authorisation, identification and management of conflicts of interests and also how CASPs should address complaints. View Article
BIS: Making headway - Results of the 2022 BIS survey on central bank digital currencies and crypto : The responses from 86 central banks show that the proportion engaged in some form of CBDC work has risen to 93% and that the work on retail CBDC is more advanced than on wholesale CBDC. View Article
CEPR: Central bank digital currency and heterogeneous beliefs about bank stability: The role of public money as a store of value : This column evaluates how central bank digital currency as a store of value impacts bank intermediation, investments, and welfare. The findings suggest that central bank digital currency can increase social welfare despite partial disintermediation of banks. View Article
EIOPA publishes paper on methodological principles of insurance stress testing of cyber risks : It is the fourth paper in a series of papers on methodological principles of insurance stress testing. The paper focuses on the cyber risk component, and it is a further step in enhancing EIOPA’s bottom-up insurance stress testing framework. View Article
Brexit and the City
Federal Trust's Bishop: Has the City of London benefitted from Brexit as the golden days continue to fade? : Financial expert Graham Bishop argues that three years after leaving the EU, there are no discernible signs of any benefits from Brexit for the UK financial sector. As the City’s leaders are recognising with growing alarm, the City’s international standing is slowly sinking. View Article
TheCityUK: The Chancellor’s Mansion House speech – summary : Chancellor Jeremy Hunt set out his ‘Mansion House Reforms’, a substantial package of measures aimed at enabling the financial services sector to increase pension and other investment returns for people across the UK and boost the supply of investment capital available to support the growth of high potential businesses across the UK economy. View Article
AFME welcomes UK Mansion House reforms, including optionality on how to pay for investment research : AFME members are supportive of the UK Government’s approach to the provision of investment research which allows for more flexibility in that clients will have the option to choose how they pay for the research they consume... View Article
TheCityUK response to the Mansion House Reforms to drive greater access to capital markets : "The Mansion House Reforms are ambitious, pragmatic and necessary. They will underpin the UK industry’s future success..." View Article
UK Treasury publishes near-final draft of the rules replacing the EU Securitisation Regulation : The approach, in line with other changes to the legal and regulatory landscape of UK finance, is to remove large parts of the rules from primary law making and the UK Parliament to vest them in the regulatory authorities. View Article
City AM: Citi’s European boss says London has not been diminished by Brexit : In an interview with The Daily Telegraph, David Livingstone, Citi’s Europe, Middle East and Africa boss, said the City has “not been diminished” by Brexit, despite attempts by the EU to attract more firms to the bloc. View Article
Brexit
BCC: NEW APPROACH NEEDED AS EXPORTS FALL : Reacting to the latest trade data from the ONS, William Bain, Head of Trade Policy at the BCC, said: “It is disappointing to see that April’s improved goods export performance was not sustained into May. View Article
CEPR's Portes: The impact of Brexit on the UK economy: Reviewing the evidence : The impact on trade overall appears to have been broadly consistent with predictions so far, that on immigration much less negative (and perhaps even positive) and on investment somewhat worse. Perhaps the best estimate of the negative impact on Brexit on UK GDP to date is 2–3% of GDP. View Article
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