Welcome to our Friends weekly e-mail.
Last week, I was honoured to be re-elected to the Board of the Kangaroo Group again – which remained true to its founding impulse of jumping over barriers by electing a non-EU citizen!
This will be the last `weekly’ of 2023. I wish all my readers a Happy Christmas and hope for more peace in 2024.
Highlights of my week: The Spanish Presidency is going out with a bang, after its success this week in gaining agreement to set up the anti-money laundering agency -AMLA (though postponing the `small’ matter of the location!) The Solvency II file was also closed, as was the Corporate Sustainability Due Diligence Directive (CSDDD) Spain may yet clinch a deal on the new fiscal rules next week. Tomorrow, EU leaders must make historic decisions on supporting Ukraine – with financial and military assistance but also opening the door to EU accession – the ultimate security guarantee that will also lead to profound changes in the EU itself. COP 28 came to a reasonably successful conclusion though commentators are likely to argue about that in the next few months. The EBA published its latest transparency exercise for the main EU banks - showing them to be in good health ahead of the problems of rising interest rates, slowing economies and weak housing markets. Greenwashing remains a topic for many parts of the financial system. CER published an interesting report on the “Brussels effect”. Detractors may argue this diminishes in line with the EU’s falling share of the world economy but the EU remains a huge market for “technology” and it has created a comprehensive legal structure to balance many and varied interests. That balanced legislation may be the strength of “Brussels”. In Brexit-land, the PRA published its proposed rules on Basel 3.1 – are there any significant differences from EU rules? Is this just another contribution to what the Treasury Committee called “the damp squib” of the much-vaunted Edinburg reforms?
Graham Bishop
Articles from 8-14 December 2023
Policy impacting Finance
EURACTIV: France ramps up debt rules fight as file enters last leg of negotiations : French political heavyweights are raising their voices to warn against the risks of an unbalanced and counterproductive debt rules reform, as negotiations look to wrap up before year-end and austere German criteria appear to be here to stay. View Article
Bruegel: Bringing the reform of European Union fiscal rules to a successful close : EU fiscal rules must not unnecessarily restrict green investment -- Zsolt Darvas, Jean Pisani-Ferry, Jeromin Zettelmeyer . View Article
Project Syndicate's Mueller: When Election Losers Pretend to Be Winners : The stalling tactic recently employed by Poland’s outgoing government is part of a worrying trend in democracies, whereby the incumbent party rigs the game before leaving office. View Article
EPC's Marconi : Disinformation ahead of the EU Parliamentary Elections: A snapshot from Bulgaria, Germany, and Italy : As the 2024 European Parliament elections approach, the erosion of trust in institutions and information sources could undermine the integrity of the electoral process. View Article
Bruegel's Buti: When will the European Union finally get the budget it needs? : he EU budget needs radical reform, but certain conditions must be in place for it to succeed. View Article
ESAs launch second public consultation on joint Guidelines on the system for the exchange of information relevant to fit and proper assessme : The consultation covers amendments extending the scope of the joint Guidelines to legal persons, thus ensuring the complete coverage of data subjects. View Article
ESAs recommend steps to improve activities of innovation facilitators across the European Economic Area : The term encompasses innovation hubs and regulatory sandboxes. The Report identifies a number of benefits and challenges relating to the operation and design of such innovation facilitators and presents recommendations and considerations towards national competent authorities (NCAs)..., View Article
The General Board of the European Systemic Risk Board held its 52nd regular meeting : The banking sector is still benefiting from strong profitability and robust funding liquidity, but uncertainty is also weighing on its outlook. View Article
Banking Union
Council and Parliament agree to create new authority for countering money laundering : The new authority is the centrepiece of the anti-money laundering package, which aims to protect EU citizens and the EU's financial system against money laundering and terrorist financing. AMLA will have direct and indirect supervisory powers over high-risk obliged entities in the financial sector. View Article
Commission welcomes political agreement on the Regulation to establish the new Anti-Money Laundering Authority (AMLA) : The creation of the new EU Authority will transform AML/CFT supervision in the EU and enhance cooperation among Financial Intelligence Units (FIUs). AMLA will be the central authority coordinating national authorities to ensure the correct and consistent application of EU rules. View Article
EBA: The EU banking sector remains resilient despite pockets of risk stemming from the change in interest rates : EBA published its annual risk assessment of the European banking system....and publication of the 2023 EU-wide transparency exercise... detailed information, in a comparable and accessible format, for 123 banks from 26 countries across the European Union (EU) and the European Economic Area (EEA). View Article
SSM's Elderson: Powers, ability and willingness to act – the mainstay of effective banking supervision : Do we, at the ECB, possess the necessary powers, ability and, crucially, the willingness to act in banking supervision? The short answer is an unequivocal yes. View Article
CEPS' Arnal: Why holding up the ESM Treaty’s ratification is a missed risk sharing opportunity for the Banking Union : ..blocking the ESM Treaty will not help the one holdout from gaining any leverage on other ongoing discussions; and the stigma that the ESM suffers from will not likely be sorted out in the short term. View Article
BIS: Bank transfers in resolution – practices and lessons : Their adoption in resolution can offer advantages in comparison with other strategies. Furthermore, a transfer is a flexible resolution tool that may be combined with others. Operationalising a failed-bank transfer requires authorities to consider several key factors at the same time. View Article
The EBA publishes peer review on supervision of creditors’ treatment of mortgage borrowers in arrears under the Mortgage Credit Directive : It found that competent authorities’ supervision is overall effective and has been adapted to reflect the current interest rates environment and risks to mortgage borrowers. View Article
Capital Markets Union
Legislators strike deal on updating the EU’s rules regulating the insurance sector : The changes to the Solvency II rules will free up money in reserve, allowing the sector to channel more funds into the economic recovery and the European Green Deal... the cost-of-capital rate, ... is assumed to be equal to 6%, whereas the agreement reached will take this rate down to 4,75%. View Article
ESMA publishes annual peer review of EU CCP supervision : The Peer Review measured the effectiveness of NCA supervisory practices in assessing CCP compliance with EMIR requirements on due diligence of clearing members View Article
EIOPA consults on the prudential treatment of sustainability risks : ...the expected mandate under the Solvency II Directive, which requires EIOPA to assess whether a dedicated prudential treatment of assets or activities associated substantially with environmental or social objectives, or harm to such objectives, would be justified. View Article
ESMA to launch and participate in Common Supervisory Action on ESG disclosures for Benchmarks Administrators : The CSA will focus on supervised benchmarks administrators, located either in the Union or in a third country, that have acquired an authorisation, registration, recognition or endorsement of their benchmarks under the BMR. View Article
Environmental, Social, Governance (ESG)
Reuters: Nations strike deal at COP28 to transition away from fossil fuels : COP28 reaches deal to reduce fossil fuels consumption; Summit President Sultan al-Jaber calls accord 'historic'; Small island states say deal does not do enough; OPEC wanted focus on emissions not fuels View Article
Parliament: COP28 climate talks agree on transitioning away from fossil fuels : “This outcome is really historic: the COP28 decided on the transition away from fossil fuels and towards renewables and energy efficiency. Nuclear energy also has its place. .. View Article
Project Syndicate's Wagner: How to Assess the Outcome of COP28 : Yet the summit did deliver some new commitments, and there is good reason to think that they are more than just empty words. View Article
COP28: insurance industry underscores commitment to climate action and closing protection gaps : Across Europe, insurance companies are contributing to the mitigation and adaptation of climate change. In particular as the largest group of institutional investors in Europe with over €10 trillion in assets, the insurance industry is supporting the sustainable transition. View Article
Corporate Sustainability Due Diligence: Council and Parliament strike deal to protect environment and human rights : The Council and the European Parliament today reached a provisional deal on the corporate sustainability due diligence directive (CSDDD), which aims to enhance the protection of the environment and human rights in the EU and globally. View Article
ECB blog: Climate risks, the macroprudential view : Climate change can endanger financial stability. The ECB Blog looks at how a common macroprudential policy framework could complement microprudential initiatives to make the financial system more resilient View Article
BDB's Schwantes : Study on Taxonomy KPIs : In preparation for the forthcoming Green Asset Ratio, the Association of German Banks analysed the taxonomy profile of the broader economy. The study covering around 450 corporates shows that the GAR will not adequately represent the banks’ sustainability profile. View Article
OECD: Assessing net-zero metrics for financial institutions : Supporting the monitoring of financial institutions’ commitments View Article
EBF's Quarin: ‘Regulating the ESG Rating Market: The European Banking Sector perspective’ : This initiative represents a significant step towards regulating the ESG ratings market, with the primary objective of augmenting integrity, transparency, responsibility, good governance, and independence of ESG rating activities ... View Article
EIOPA seeks feedback on its proposed approach to tackle greenwashing in the insurance and occupational pension sectors : The principles within the draft Opinion aim to pave the way for a more effective and harmonized supervision of sustainability claims across Europe and thereby limit the risk of greenwashing in the insurance and occupational pensions sectors. View Article
Joint ICMA response to the European Commission’s targeted consultation on the SFDR : SFDR’s adoption has been positive, it currently fails to fulfil its primary objective of investor protection and helping sufficiently channel capital towards sustainability for various reasons including use of disclosures as labelling, complexity and overload of disclosure requirements, ... View Article
IFAC: Integrated Internal Control Needed to Build Trust in Sustainability Reporting : This analysis highlights how companies can integrate sustainability information within their existing internal control and governance frameworks. View Article
EU Platform: Draft report on EU taxonomy-aligning benchmarks (TABs) : With the introduction of these voluntary benchmarks, the Platform on Sustainable Finance (PSF) aims to initiate a discourse on the pivotal role the Taxonomy could assume in shaping climate and environmental benchmarks. View Article
Fin Tech Regulation
IMF's Georgieva: Leaving the Wild West: Taming Crypto and Unleashing Blockchain : The crypto Wild West was a tough place. With few sheriffs around, and limited legislation and regulation, it was a land of crashes and criminals. Money laundering and other illicit activity has been estimated in the tens of billions of dollars per year. View Article
CER's Meyers: In tech, the death of the Brussels effect is greatly exaggerated : The US and post-Brexit Britain want to carve out their own paths to regulating technologies like artificial intelligence. The EU, however, will continue to enjoy the most influence on global technology regulations. View Article
ALFI responds to the second ESMA’s consultation on proposed RTS/ITS on MiCA : The response covers the following four sets of proposed rules: Sustainability indicators for distributed ledgers;Disclosures of inside information; Technical requirements for white papers; Business continuity requirements for crypto-asset service providers View Article
Bankenverband: Discussion paper Decentralised Finance – an evolution of the financial services sector? : The DeFi platforms are usually characterised by low barriers to entry, a lack of geographical restrictions and a high degree of autonomy from the traditional financial system, known as centralised finance (CeFi). View Article
Brexit and the City
‘Damp Squib’? Treasury hits back after Edinburgh Reforms slammed by MPs : The Treasury has hit back at an assessment of its landmark Edinburgh Reforms for the City, which were today labelled a “damp squib” in a scathing attack by an influential group of MPs. View Article
City AM: London floats fall to six-year low as UK firms snub Square Mile : The number of applications to list on the London Stock Exchange (LSE) has fallen to its lowest level in at least six years, new figures from the City watchdog show, as the Square Mile struggles to attract new IPOs. View Article
City AM: London-based Marex files for New York IPO in huge blow to the City : London-based commodities broker Marex has filed for an IPO in New York in a huge blow to the City ...Marex confirmed today it has submitted a filing to the US SEC for an IPO next year, meaning one of London’s top private financial services firms will opt to list its shares across the Atlantic. View Article
The PRA publishes the first of two policy statements for the implementation of the Basel 3.1 standards : Today the Prudential Regulation Authority (PRA) has published the first of two near-final policy statements covering the implementation of the Basel 3.1 standards for market risk, credit valuation adjustment risk, counterparty credit risk, and operational risk. View Article
AFME welcomes the UK PRA’s publication of elements of Basel 3.1 standards implementation : “Implementing internationally agreed post-financial crisis reforms is an important step in maintaining the role of the UK as a leading international financial centre... The policies are closely aligned with international standards with some adjustments to improve risk measurement." View Article
City stalls UK drive to shorten settlement times for trades : Task force appointed by UK Treasury struggles to agree on date to narrow window for finalising securities deals View Article
UK Finance: UK legal services revenue uptick boosts economy and strengthens global influence : The report reinforces the international prestige of English common law, which is the most widely used legal system globally. The UK also remains the world-leading centre for international dispute resolution and continues to strengthen its credentials as a global hub for legal services innovation. View Article
Brexit
UKandEU: support for a closer EU-UK isgrowing but risks reigniting old divides : Jake Puddle summarises British Future’s new report examining public attitudes towards a closer relationship with the EU, which finds that voters support a closer relationship with Europe but that there is an aversion among voters to re-opening Brexit divisions. View Article
FT: UK manufacturers face EU trading hurdles 3 years after Brexit : Trade body finds ‘little improvement’ in ability of businesses to export to the bloc View Article
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