Welcome to our Friends weekly e-mail.
Highlights of my week: While we await the Commissioner-designate Hearings, the normal business of Eurogroup and ECOFIN rolls on: will consumers take to the digital euro? Digital resilience is a major concern for the ESAs and Insurance Europe’s Wenning questioned the actions of cybercriminals and how cyber insurance could help. Amidst the Commerzbank/Unicredit debate, SSM’s Buch argued strongly for financial integration – highlighting the economic benefits to the transformation of the Baltic states since EU membership. New listing rules were agreed by Council and Spain opened the case for a `vanguard’ of three or more states proceeding to break the CMU stalemate. However, the existing system of “enhanced co-operation” of at least nine states is rarely used in practice. The incoming Commission may find that plans to revive securitisation are advancing quickly – given the push by many sectors and now the launch of the Commission’s consultation. The ECB’s Cipollone also pointed to the continuing problems from the lack of harmonisation of the financial system’s `plumbing’. Many of the major professional bodies in capital markets strongly criticised ESMA’s proposed Post-trade Deferrals for Bonds. ESMA published its first annual report on carbon trading and set about improving the accounting treatment of carbon `assets’ though EFAMA criticised ESMA’s green Fund Naming Guidelines. BEUC levelled serious charges against the six Big Tech Gatekeepers for non-compliance with the Digital Markets Act and BIS researchers highlighted the risk to the financial system’s cryptography from quantum computing. POLITICO reported that the City of London will – yet again – be left out of any re-set in relations between the EU and UK.
Graham Bishop
Articles from 04 - 10 October 2024
Policy impacting Finance
POLITICO: Two proposed timetables put forward for commissioner hearings : See who’s up for a grilling in the European Parliament on which days. View Article
Remarks by Paschal Donohoe following the Eurogroup meeting of 7 October 2024 : Discussion on the digital euro...public outreach on the digital euro remains key for the success of its potential future rollout....Capital Markets Union (CMU) statement. This is in line with the roadmap on CMU that we endorsed in May. View Article
Main results - Economic and Financial Affairs Council, 8 October 2024 : It discussed implementation of the Recovery and Resilience Facility. Ministers discussed the economic and financial impact of Russia’s aggression against Ukraine. The Council approved conclusions on climate finance and on the revision of the EU list of non-cooperative jurisdictions for tax purposes. View Article
Joint Committee of the ESAs to focus on digital resilience and sustainability disclosures in 2025 : It placed particular emphasis on ongoing collaboration to tackle cross-sectoral risks, promoting sustainability in the EU financial system and strengthening financial entities’ digital resilience. View Article
ESRB: financial stability risks remain elevated amid heightened geopolitical risks and the still fragile economic recovery in the EU. : Geopolitical events may have financial stability implications via real and financial channels, creating challenges for both households and businesses. Such events can disrupt global trade and increase commodity prices. View Article
InsuranceEurope/Muninch Re's Wenning:Insurance - a cornerstone of cyber risk management : Cybercriminals and other threat actors are taking advantage of the increasing interdependencies and interconnectedness that are being created. In this context, cyber insurance has become an established part of risk management, but it requires a greater contribution from all stakeholders in society. View Article
Project Syndicate: Can Europe Create an Innovation Economy? : by Aghion, Dewatripont, Tirole: Europe urgently needs to adopt a new economic doctrine and reform agenda, or else it will continue to fall behind the United States and others. View Article
Banking Union
SSM's Buch: Financial integration in the Baltics: lessons in resilience and transformation : The Baltic experience holds important lessons: First, financial integration and resilient banking systems make a key contribution to economic transformation. The entry of foreign banks into the Baltic countries has improved the quality of financial services and financed economic growth. View Article
CEPR: Addressing banks’ vulnerability to runs, part 1: Facts, arguments, and policy challenges : by Beck, Ioannidou, Perotti, Sánchez, Suarez, Vives:The bank failures in March 2023 revived old debates about the role of deposit funding for banks, how to address the fragility of deposit funding, and general policy reflections on the need to adjust banks’ regulatory and supervisory frameworks. View Article
Further Tier 1 capital needs for the full implementation of the EU specific Basel III reform are minimal, the EBA Report finds : In terms of minimum required capital, the impact has further decreased in relation to the previous reference date of December 2022. The impact is minimal in terms of estimated Tier 1 capital shortfall, while the total capital shortfall is estimated at EUR 5.1 billion. View Article
POLITICO: EU’s three biggest countries push for bank deregulation : Request comes amid Macron’s warning that the EU “could die” if its economy falls behind global rivals. View Article
Capital Markets Union
Listings on European stock exchanges: Council adopts the listing act : The Council today adopted the listing act, a legislative package that will make EU public capital markets more attractive for EU companies and facilitate the listing of companies of all sizes, including small and medium-sized enterprises (SMEs), on European stock exchanges. View Article
FT: Spain to propose mini-coalitions to break EU capital markets stalemate : Madrid wants three or more countries to be able to forge ahead when others are opposed View Article
Commission consults on EU securitisation rules : Securitisation can play a crucial role in the development of the capital markets union and the savings and investment union. By freeing up balance sheets, banks and non-bank lenders can increase lending to households and corporates, while also providing another asset for investors to invest in. View Article
PCS: And it begins... European Commission publishes its consultation on securitisation : The last few months have seen numerous calls by eminent people to takes steps to reform the regulations governing securitisations and thus revitalise of the market on a sound basis.The Commission's consultation started the process that, with a fair wind, could result in those hoped for reforms. View Article
SUERF's Walther: European securitisation market – ready for a comeback? : Renewed political support, stronger push factors in the form of looming higher capital requirements... all provide tailwinds for the securitisation market. However, without targeted regulatory measures, a meaningful pick-up in securitisation volumes will probably remain elusive. View Article
ECB's Cipollone: Towards a digital capital markets union : ...the lack of harmonisation in the legislative and regulatory framework regarding custody, asset servicing and tax-related processes, for example, prevents the sector from reaping the benefits and synergies that an integrated European market could bring. View Article
EIOPA presents its value for money benchmark methodology for unit-linked and hybrid insurance products : Such benchmarks are central to EIOPA's and national supervisors’ efforts to adopt an increasingly data-driven and risk-based approach to the supervision of value for money risks. View Article
ICMA responds to ESMA’s consultation on the characteristics and guidelines on the selection and calibration of liquidity management tools : It welcomes the opportunity to provide feedback on ESMA’s proposed regulatory technical standards (RTS) on the characteristics of liquidity management tools (LMTs), as well as the Guidelines on the selection and calibration of LMTs for AIFMD and UCITS. View Article
ALFI responds to the ESMA consultation on the regulatory technical standards on liquidity management under the AIFMD and UCITS Directive : The response assesses the operational impact of the definition provided for the list of Liquidity Management Tools: View Article
EBF: Joint Association Statement on MIFIR RTS 2 Post-trade Deferrals for Bonds : Central to the recommendations offered by the Associations is the importance of ESMA following a credible, balanced and data-driven approach in determining the appropriate calibrations for applying deferrals. The proposal by ESMA in its Consultation Paper is not consistent with this approach.. View Article
Environmental, Social, Governance (ESG)
ESMA publishes its first annual report on EU Carbon Markets : This first edition of the report is providing details and insights into the functioning of the EU Emissions Trading System (EU ETS) market. View Article
ESMA: Improving financial reporting for issuers engaging in carbon allowance programmes : ESMA takes stock of the different accounting approaches in the financial statements of European listed issuers regarding compliance market carbon allowances – specifically emission allowances, rights and permits, such as the EU Emissions Trading System. View Article
UNEP FI: Target Setting for Capital Markets Activities : ‘Target Setting for Capital Market Activities’ is a report from the Net-Zero Banking Alliance (NZBA) that explores the differences between financed and facilitated emissions, target design options, and implementation considerations... View Article
GRI: Momentum building on climate finance and climate action : GRI Climate Change and Energy Standards examined at New York Climate Week View Article
ICMA publishes new paper on the role of commercial paper in the sustainable finance market : As issuers continue to seek innovative and flexible financing options to support their sustainability goals, the paper outlines how sustainable CP can serve as an important short-term funding mechanism in support of long-term environmental, social, and governance (ESG) objectives. View Article
Business Europe: EU’s path to decarbonising without deindustrialising : View Article
EFAMA: Fund naming guidelines put growth of corporate green bond sector at risk : Clarification is urgently needed to enable rather than restrict EU sustainable investment. ESMA’s new Fund Naming Guidelines create inconsistencies with other sustainable finance regulations, like the EU Green Bond Standard, which could hamper the growth of the corporate green bond sector. View Article
Protecting Customers
BETTER FINANCE: Unmasking Digital Deception: Protecting EU Investors from Online Investment Fraud : Findings show that 67 fraudulent entities target EU citizens, generating a staggering 1.3 million Google search impressions within a specific timeframe. These scams primarily focus on high-risk products, including cryptocurrency trading, which has shown a marked increase in fraudulent activity. View Article
FBF: A national campaign to raise awareness of payment fraud in France : Faced with the technical reinforcement of security, fraudsters are coming up with increasingly sophisticated ploys to manipulate their victims, extorting their bank information from them by taking advantage of news stories or enthusiasm surrounding major events. View Article
Fin Tech Regulation
IOSCO: Investor Education on Crypto-Assets : This Report presents updated findings based on the 2023 survey responses and discussions among C8 members regarding the behavior and experiences of retail investors regarding crypto-assets. It updates the risks involved and makes suggestions for additional investor education measures. View Article
BEUC: Where six Big Tech gatekeepers are likely to not be compliant with the Digital Markets Act : We summarise in this new paper how we believe Apple, Meta, Alphabet/Google, Amazon, ByteDance and Microsoft are not complying with the most important, consumer-facing parts of the law. View Article
FERMA calls for streamlining of EU cyber reporting processes following release of “Cyber Reporting Stack” report : FERMA is urging EU Institutions to streamline cyber reporting requirements as well as consider the insurance implications of cyber-related legislation, following the release of a new report providing guidance on recent and upcoming regulations. View Article
BIS: Quantum computing and the financial system: opportunities and risks : by Auer, Dupont, Gambacorta, Suk Park, Takahashi, Valko: the advent of quantum computers also introduces a potential threat to financial stability, especially through their ability to breach some of the most widely used cryptographic algorithms. View Article
Brexit and the City
POLITICO: Brexit ‘reset’ won’t include financial services : Britain’s economic powerhouse the City of London is being left out — again — even as EU and UK relations thaw. View Article
City AM's Conchie: Don’t turn the City into the ‘best regulated graveyard’, pension funds told : A group of pension funds has been warned against turning the City into the “best regulated graveyard” today after they called for the boss of the London Stock Exchange to stop lobbying for reform of financial services rules. View Article
FCA's Alder: Delivering vibrant capital markets : Opportunities unique to market-based finance explain why we delivered the most significant reforms of the UK’s public equity markets in a generation; Our review of the financial advice and guidance boundary aims to unlock innovation so people can get the support that suits their financial needs; View Article
Brexit
What UK think's Curtice: Where do those who voted Labour in July stand on Brexit? : 74% of those who voted Labour in 2019 say they would now vote to rejoin the EU. In July the equivalent figure was 72%. View Article
Federal Trust video: Will Brexit Destroy the Conservative Party? : In this Federal Trust video, our Chair John Stevens and Director Brendan Donnelly discuss the possibility of a realignment of the British party system. In particular, they discuss the threat posed to the Conservative Party by Reform, a threat which Brexit has largely created. View Article
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