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Highlights of my week: The Polish and Dutch election results continue to reverberate and the latest projections for the European Parliament elections “if held today” point to the four “traditional parties” [EPP, S&D, Liberals and Greens] losing their overall majority. What complexion of Commission might emerge? Press interviews by leading bank regulators focussed on the likely transience of higher bank profits – as recognised by the low valuations accorded by financial markets. As banks do not even earn their cost of capital, boosting an effective CMU should become a key objective of the next Commission. The crypto world is steadily being drawn into the maw of standard financial regulation: the EBA issued guidance on AML/CFT precautions and the FSB assessed the risks of multi-function crypto-asset intermediaries (MCIs). Some commentators looked ahead to COP28 but next week is sure to bring a crop of appraisals of the results. Both the global banking and insurance regulators launched consultations on climate-related supervision while the UK’s FCA proposed a batch of measure on transparency and greenwashing to become effective next year. A key question for many investors will be whether these measures have been phrased to be compatible with detailed EU rules that will be transposed by Member States in the next couple of years. Commission President von der Leyen urged young people to take up the challenge of reversing Brexit! Clearly, she has read the demographics of Brexiteers…
Graham Bishop
Articles from 24-30 November 2023
Policy impacting Finance
BUSINESSEUROPE: Priorities for the Single Market beyond 2024 : - Reigniting the engine of Europe's global economic leadership View Article
EURACTIV: EU far-right dangerously boosted in new poll : If EU elections were to be held today, anti-EU far-right political parties, which have united under the umbrella of “Identity and Democracy” (ID) group in the EU Parliament, would win 87 out of 705 seats (currently holds 60 seats). View Article
LSE's Szczerbiak:What next for the Polish left? : Although the Polish left looks set to return to government after 18 years, its vote share decreased in last month’s election and it risks being subsumed within a coalition dominated by more economically liberal and socially conservative groups. View Article
Carnegie's Dempsey: Europe Waits for the New Polish Government : Poland’s recent vote offers hope amid worrying political trends in Europe. President Duda is doing his country no favors by delaying the appointment of a new government. View Article
LSE: Why the Netherlands looks set for a period of political uncertainty : by Mongrain, Bruce, Dassonneville, Lewis-Beck: Geert Wilders’ Party for Freedom won the largest vote share in the Dutch general election on 22 November. They reflect on their popular vote forecast for the election and the uncertainty over who will lead the country’s next government. View Article
Chatham House's van Rij: What a far-right surge in the Netherlands means for Europe : A solid bloc of Eurosceptic parties in power is cause for concern. The Netherlands is yet another European state to have swung to the right after the far-right Freedom Party (PVV) won the largest number of seats in the national elections. View Article
Banking Union
SSM's Enria: Interview with Expansión, Handelsblatt, Il Sole 24 Ore, Les Echos on banks' strength : There has been an improvement in general, but low profitability has been a major headache for all European banks. The average European bank has not been earning its cost of equity for a long while. View Article
ECB's de Guindos: Interview with De Standaard and La Libre Belgique: : The remuneration on savings accounts should reflect our interest rates. That is part of our monetary policy transmission...high bank profitability is not sustainable - financial markets are already convinced of this, as bank share valuations are in no way reflecting expectations of high profits. View Article
ECON briefing: Public hearing with D. Laboureix, Chair of the Single Resolution Board : Report on smaller banks, Updated resolvability assessment, SRB study on CMDI reform impact, Court confirmed the SRB's treatment of Banco Popular shareholders and creditors, Review of three external papers “Do "white knights" make excessive profits in bank resolution?", Liquidity in resolution... View Article
EBA consults on new Guidelines on preventing the abuse of funds and certain crypto-assets transfers for money laundering and terrorist f : These ‘travel rule’ Guidelines specify the steps that Payment Service Providers (PSPs), Intermediary PSPs (IPSPs), crypto-asset service providers (CASPs) and Intermediary CASPs (ICASPs) should take to detect missing or incomplete information that accompanies a transfer of funds or crypto-assets. View Article
EBA consults on standards for assessing the materiality of extensions and changes to the new market risk internal models under the FRTB : These RTS follow the Capital Requirements Regulation (CRR) differentiation between material extensions and changes, to be approved by competent authorities, and non-material extensions and changes, to be notified to competent authorities. View Article
EBA issues guidance to AML/CFT supervisors of CASPs : The new guidelines set clear expectations of the steps supervisors should take to identify and manage money laundering and terrorism financing (ML/TF) risks in this sector and are an important step forward in the EU’s fight against financial crime. View Article
Single Resolution Board publishes MREL dashboard Q2.2023 : Banks continued to make progress in building up their levels of MREL. In aggregate terms, the total MREL shortfall (including the CBR) against final targets of resolution entities decreased significantly, reaching EUR 13.6 bn (corresponding to 0.2% TREA) View Article
ECA: Auditors report on contingent liabilities for the EU bank resolution mechanism : For 2022, the SRB, Commission and Council reported no contingent liabilities for the resolution of failing banks in the euro area; The SRB disclosed contingent liabilities related to banks’ contribution to the Single Resolution Fund (SRF) totalling €1 892 million, up from €8 million in 2021 View Article
Capital Markets Union
Council adopts regulation easing access to corporate information for investors : The EU is about to create a single point of access to public financial and non-financial information about EU companies and EU investment products.The European Single Access Point will give companies more visibility towards investors and open up more financing opportunities,... View Article
Council adopts regulation on Central Securities Depositories : The Council today adopted a regulation that updates the rules on central securities depositories (CSDs). The new law will reduce the financial and regulatory burden on CSDs and improve their ability to operate across borders, while also strengthening financial stability. View Article
ECB's Lagarde: A Kantian shift for the capital markets union : I will focus on how we can achieve this, and in particular on how to make Europe’s capital markets more supportive...I will argue that a capital markets union (CMU) is an indispensable project in this context that we have so far failed to advance, for two reasons. View Article
MEPs aim to make the EU an attractive clearing hub while addressing risks : The intention of the European Parliament is to start negotiations with the Council before Christmas, and finalise this file, crucial for the strength and competitiveness of European capital markets, before the end of the mandate. View Article
EFAMA proposes alternative solutions to benefit investors within the Retail Investment Strategy : This document outlines the needs of EU investors, how the European Commission’s proposal is expected to help them, and what still needs to be adjusted. View Article
EIOPA analyses cross-border IORPs trends in 2023 report : End of 2022 data shows that the number of cross-border IORPs active in Europe has remained low and unchanged from the previous year, with only 31 IORPs operating across borders. View Article
EBF: European associations set out recommendations to ensure pension adequacy for all : The recommendations contribute to the debate on how to strengthen and ensure affordable and sustainable pension systems in the EU....the old-age dependency ratio — the number of people aged 65 and over relative to those aged 20 to 64 — is expected to double between 2023 and 2080... View Article
Environmental, Social, Governance (ESG)
Basel Committee consults on a disclosure framework for climate-related financial risk : - Basel Committee issues public consultation on a Pillar 3 disclosure framework for climate-related financial risks.- Forms part of its holistic approach to address climate-related financial risks to the global banking system. View Article
IASB consults on improved accounting requirements for financial instruments with both debt and equity features : IAS 32 Financial Instruments: Presentation sets out how a company that issues financial instruments should distinguish debt instruments from equity instruments... important because the classification of the instruments affects the depiction of a company’s financial position and performance. View Article
IAIS launches public consultation on climate risk supervisory guidance – market conduct and scenario analysis : Climate change is a key strategic theme for the IAIS as it is a source of financial risk, which impacts the resilience of individual insurers and could lead to financial stability risk. View Article
EBF: Report of the C-ESG Risk Roundtable Data Workstream : The objective of the report was to identify commonly applied practices for addressing data and methodological uncertainties associated with disclosures against the Implementing Technical Standards (ITS) on prudential disclosures and ESG risks (Pillar 3) View Article
BETTER FINANCE Unveils Key Insights on EU Transition Investing : The paper stresses the need for credible, transparent transition plans to avoid greenwashing, advocating for structured engagement over divestment in carbon-intensive industries to drive the shift to net zero. View Article
ICMA and the Executive Committee of the Principles update the Guidance Handbook : Market participants have sought additional information on how to interpret this guidance especially for its practical application for transactions, as well as in the context of market developments and complementary initiatives. View Article
ICGN: Reflecting climate-related matters in financial statements Viewpoint : It focuses on climate change and explores whether climate-related matters are adequately reported, specifically in financial statements. among sustainability issues, climate change is a material topic for companies in nearly all economic sectors, and on which reporting is relatively more advanced. View Article
UNEP FI: The Principles for Responsible Banking Releases Climate Adaptation Target Setting Guidance Ahead of COP28 : The new guidance comes following the latest UNEP Adaptation Gap Report, which reveals a staggering USD 194-366 billion funding deficit in developing countries for adaptation annually. View Article
GRI: COP28: Transparency for impacts is high on the global agenda : The annual global gathering to raise the bar for action to address climate change gets underway next week, as COP28 is held in the United Arab Emirates. View Article
Fin Tech Regulation
FSB assesses risks of multi-function crypto-asset intermediaries : Report warns that combining different activities within multifunction crypto-asset intermediaries (MCIs), many of which are typically restricted or separated in traditional finance, could exacerbate MCI vulnerabilities. View Article
The Commission launched a 4-week have your say feedback on two delegated regulations under DORA : These delegated regulations are the first of a series of delegated acts to complement and complete the EU regulatory framework on cybersecurity matters for the financial sector, that will apply from 17 January 2025. View Article
CFA Institute Launches Cryptoassets Valuation Guide for Investment Professionals : Developed by the CFA Institute Research and Policy Center, the guide seeks to equip investment professionals with the most relevant valuation models and tools to support analysis of cryptoassets, in connection with smart contract platforms, decentralized applications, and bitcoin. View Article
Economic Policies Impacting EU Finance
Accountancy Europe: BEFIT proposal: a common tax base for the EU : The European Commission (EC) released a legislative proposal to simplify the tax reporting and the tax base calculation for cross border groups with a presence in the EU View Article
Brexit and the City
FCA: Sustainability disclosure and labelling regime confirmed by the FCA : The FCA has confirmed a substantial package of measures to improve the trust and transparency of sustainable investment products and minimise greenwashing. View Article
CITY AM: OECD: UK economy faces “urgent” challenges as growth downgraded and inflation remains high : New forecasts from the Organisation for Economic Co-operation and Development (OECD) project the UK to grow at 0.7 per cent next year and 1.2 per cent in 2025. View Article
Brexit
EU’s von der Leyen urges youth to reverse Brexit : European Commission president says politicians ‘goofed it up’ in 2016 and the next generation will ‘have to fix it.’The U.K. is on a clear “direction of travel” toward rejoining the EU, the president of the European Commission said — as she urged young people to reverse Britain’s departure. View Article
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