Welcome to our Friends weekly e-mail.
Highlights of my week: ECOFIN seems to edge closer to agreement on the reformed fiscal rules. IF it agreed, would that open the way to completing banking union and facilitate CMU? AFME’s latest scorecard on CMU progress reported that all the measures proposed as a result of the 2020 action plan are likely to be enacted but we are still a long way from a genuine CMU. What are the magic, missing ingredients for the 2024/29 Commission to propose? As the legislative flow comes to a halt, there is a corresponding slowdown in the think-tanks commentary but the massive issue of enlargement is quickly filling the void as it will require major governance changes in the EU and might provide a trigger for CMU actions rather than policy debates. Funding green investments is an obvious possibility – as the EU has emerged as the global rule setter – leaving the UK as a rule-taker (recognised by 84% of the poll responses to my recent webinar!) The same proportion also recognised that the UK would finish up taking EU rules on digital finance as SSM chair Enria pointed out that the EU is the first major jurisdiction to introduce a regulatory framework for the crypto industry. IOSCO has lagged behind and only just finalised its policy recommendations in this field. The SSM made clear that “most banks” post-Brexit business models “did not allow for meaningful and effective supervision” by the EU. Clearly, the desk-mapping review will have to continue until that supervisory need is satisfied.
Graham Bishop
Articles from 10-16 November 2023
Policy impacting Finance
Economic and Financial Affairs Council, 9 November 2023 : Today we see an agreement on the core elements and mechanisms of the new fiscal rules, on the need to have fiscal discipline, credibility, confidence ... There is a strong commitment by all member states to contribute, to work together and to reach a balanced deal before the end of the year. View Article
EURACTIV's Allenbach-Ammann: What we know about the new fiscal rules : EU finance ministers are optimistic that they have come closer to an agreement on fiscal rules. So what do we know about what they will look like, and what remains open for discussion? View Article
MEPs clear way for new EU revenue, call on EU countries to swiftly follow suit : New EU revenue based on the Emissions Trading System, the Carbon Border Adjustment Mechanism, and on corporate profits; Funds urgently needed to repay debts from Next Generation EU recovery fund borrowing; New EU revenue agreed in legally binding roadmap from 2020 View Article
FSB Plenary meets in Basel : Implementation of resolution reforms: Resolution remains a priority for the FSB. This meeting focussed on the FSB’s work on insurance resolution...Implementation of crypto-asset recommendations.. View Article
Carnegie Europe' Dempsey: Before Enlarging, the EU Must Cement Democracy at Home : Admitting countries from Eastern Europe and the Balkans would complete the European project. But before further enlargement, the union has to ensure the rule of law and security inside the bloc. View Article
EPC: Enlargement Package marks a turn in policy to the East : It was welcome news last week that the European Commission had approved the 2023 Enlargement Package, which has been regarded as historic because it covers ten aspiring members toward accession - the first time in many years. View Article
Bruegel's Grabbe: Rule of law rules future European Union enlargement : Clearer rule of law standards are needed to prevent strategic use of corruption in both enlargement countries and the current EU. View Article
CEPS's Blockmans: The impact of Ukrainian membership on the EU’s institutions and internal balance of power : In terms of pre-war population, Ukraine would be the fifth largest in the EU, amassing a vote share of almost 10 % in Council decision-making passed by qualified majority. View Article
Goldschmidt: The reform of the European Union is becoming increasingly unavoidable. : Welcoming Ukraine (and other candidates) raises problems for certain Member States. Unanimity should coalesce around the consequences of a second term of President Trump. View Article
Banking Union
Speech by Commissioner McGuinness at European Payment Institutions Federation Annual Conference : I want to talk about the digital revolution in payments, our work in the European Union that impacts payment institutions, and the global context for this work. View Article
FSI's : Challenges in supervising banks' large exposures : by Vasily Pozdyshev, Jean-Philippe Svoronos and Rize-Mari van Zyl..Banks need to limit and control their large exposures, because failure to do so makes them vulnerable to significant losses. This principle underpins the large exposures (LEX) standard issued by BCBS.. View Article
CEPS's Amal: the banking sector is increasingly looking to the cloud : But what are the real risks and opportunities for a new regulatory framework? View Article
Capital Markets Union
AFME: Capital Markets Union Key Performance Indicators – Sixth Edition 2023 : This year’s report shows a mixed picture, revealing no discernible medium-term advancement on the CMU key performance indicators. View Article
EURACTIV: As EU struggles to finance green investments, French businesses bet on capital markets union : Relaxing state aid rules is a step forward in unlocking new green financing, but “we must move quickly” on the capital markets union (CMU) to reach private investors’ money, French business association Medef’s chief Patrick Martin said. View Article
ESMA and EU CCPs participate in a Global fire-drill : The exercise taking place this week entails over 30 CCPs simultaneously running a simulation of their default management processes. It is jointly coordinated by ESMA, in cooperation with EU and non-EU authorities, CCPs, and industry associations. View Article
EIOPA’s occupational pensions statistics update comes with visual insights into asset allocation and members : The latest data release, encompassing information from the final quarter of 2022, includes a visual factsheet that provides a clear picture of how European IORPs allocate the approximately €2.5 trillion euros they manage across different asset types and jurisdictions. View Article
Environmental, Social, Governance (ESG)
SSM's Elderson: Making finance fit for Paris: achieving “negative splits” : ...we can deliver on our commitments to limit global heating ... provided that solid foundations have already been laid in the first half of the decade and on the – admittedly extremely challenging – condition that we run at a world record-breaking pace in the second half. View Article
ESAs publish amended technical standards on the mapping of External Credit Assessment Institutions : ESAs published two amended Implementing Technical Standards (ITS) on the mapping of credit assessments of External Credit Assessment Institutions (ECAIs). They reflect a monitoring exercise on the adequacy of existing mappings, and the deregistration of three credit rating agencies (CRAs). View Article
UN EP FI: How can policy makers support finance industry action on net-zero: Establishing an appropriate emission scope : A credible net-zero financial commitment must therefore ensure full coverage of the emissions scope of the financial institution, including all activities throughout its value chain. View Article
Fin Tech Regulation
SSM's Enria: Regulating crypto finance: taking stock and looking ahead : It is remarkable that the European Union is the first major jurisdiction in the world to introduce a regulatory framework for the crypto industry. The Markets in Crypto-Assets Regulation (MiCAR) entered into force at the end of June 2023 and will be applicable in its entirety by the end of 2024. View Article
IOSCO Finalizes its Policy Recommendations for Crypto and Digital Asset Markets : These recommendations are central to the delivery of a coordinated global regulatory response to the significant investor protection and market integrity risks posed by centralized crypto-asset intermediaries called crypto asset service providers (CASPs). View Article
ESMA to put cyber risk as a new Union Strategic Supervisory Priority : ESMA, the EU’s financial markets regulator and supervisor, is changing its Union Strategic Supervisory Priorities (USSPs) to focus on cyber risk and digital resilience alongside ESG disclosures. View Article
ECB: digital euro - Where does the project stand? : We’re fully committed to continuing our engagement with all stakeholders involved in this journey. We stand ready to cooperate with EU legislators, market participants and civil society organisations, among others, to ensure no one is left behind. View Article
SUERF's Meller, Soons: How would banks respond to central bank digital currency? : In our paper Meller and Soons (2023) we model and simulate a CDBC introduction to inform the debate on holding limits and the impact of CBDC on banks’ funding structure, collateral availability and the central bank balance sheet. View Article
Economic Policies Impacting EU Finance
European Commission: Autumn 2023 Economic Forecast: A modest recovery ahead after a challenging year : Following a robust post-pandemic expansion in 2021 and 2022, the EU economy has lost momentum. Real GDP contracted very mildly in the fourth quarter of 2022 and barely grew in the first three quarters of this year. View Article
Brexit and the City
Financial Services Club webinar - Bishop: Has The City Of London Benefitted From Brexit As The Golden Days Continue To Fade? : Three years after leaving the EU, there are no discernible signs of any benefits for UK finance. There are multiplying signs of a lack of substance to the initial, bold slogans. The UK will become a `rule-taker' for green and digital finance? 84% agree strongly/somewhat; 11% disagree somewhat. View Article
SSM: Post-Brexit stocktake and the way forward : It soon became apparent that most banks’ booking models fell significantly short of the ECB’s expectations and did not allow for meaningful and effective supervision. To address these concerns, the ECB launched a desk-mapping review (DMR) in May 2020. View Article
CITY AM: City chiefs urge chancellor to tackle ‘downward spiral of investment’ and reform ISAs and pensions : The CMIT was established last year to strengthen the competitive position of the UK’s capital markets amid concerns that fast-growing companies are increasingly being tempted to list overseas. It is chaired by London Stock Exchange CEO Julia Hoggett. View Article
City of London: Lord Mayor calls on London to use its unparallel global connections to address global challenges in areas like AI and climat : The 695th Lord Mayor of the City of London Professor Michael Mainelli will highlight how London’s strengths in financial services,... View Article
Brexit
Federal Trust video - Stevens, Donnelly: How Brexit Has Changed British Politics for Ever : A discussion of the dismissal of Suella Braverman and the appointment of David Cameron. View Article
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