Stakes are high for the Council meeting at the end of June, with too many crucial aspects to be thrashed out: the UK is yet to send in a paper what kind of Brexit it wants, while France and Germany are working towards an agreement on banking union that would be discussed at June’s gathering.
Graham Bishop/Paula Martín Camargo
Organised by the Centre for the Study of Financial Innovation (CSFI) with co-presenterLucy McNulty (Financial News)This blog covers the key subjects since our last meeting that I hoped to cover but, as always, we ran out of time to deal with them all. As a Friend, you can watch the 33rd `structured’ CPD web-cast with CISI. These Notes may be read to record a further 30 minutes of `structured CPD’, including a dipping into the links to the underlying stories.
Highlights from the “Brussels for Breakfast” meeting
Now that we are less than 300 days to go, we believe this meeting cannot add enough value to the torrent of media comment so we are reverting to focussing only on the financial services developments in the EU since the last meeting.Brexit will only be mentioned if there is a specific operational implication from a regulatory development. This new process did indeed give us time to range far more broadly to discuss the big issues around banking union and capital markets union, as well as some of the welter of details that continue to fill out the big decisions taken in the “glory days” after the Great Financial Crash.
Banking union has to remain top of the agenda as the Commission is pushing very hard to get it “completed” before the legislative window shut after the Parliament’s last Plenary on April 19th next years – ahead of its elections now agreed for 23-26 May. ECOFIN finally agreed its position on the banking package of November 2016. But the final piece of the jigsaw is widely thought to be EDIS and the prospect of Germany agreeing to that seems to have receded as the Italian crisis grew.
The ECB made a string of comments about the need for a “safe asset” to buttress banking union and reported that the LCR effectively requires banks to hold government securities equal to an average 100% of their CET1 capital. The doom loop is alive and well! But CMU also needs a risk-free yield curve to price fixed income securities and the Commission published their proposal for SBBS to kill both birds with one stone. However, unanimous opposition from the EU’s government debt managers – as well as the new German finance minister – does not augur well. Perhaps the time is now “ripe” for my plan for a Temporary Eurobill Fund.
CCPs were back in the news as ECON agreed its report – which included a provision for a review of “recognition” of third-country CCPs every 2-5 years. Moreover, the ECB launched a major explanation of the rationale for amending Article 22 of its Statutes to empower it to localise systemically import euro CCP activity.
On a broader note, the Commission’s three- yearly “aging report” suggested that public spending on pensions only needs to rise from the current average of 11% of GDP to 13.5% in the eurozone by 2040.
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