18 December 2015

Deepening EMU – Round-up of Key Events – December 2015

By Paula Martín Camargo, Editor

This year’s last Brussels for Breakfast/Brunch, with the participation of Graham Bishop, delivered useful material for financial professionals operating in the EU: 116th Brussels for Breakfast, live on BBA TV and the 9th `Brussels for Brunch’ 30 minute discussion on CISI TV with CPD points which is available to Friends.

Political

Commission President Juncker at the European Parliament Plenary session on the Economic and Monetary Union said that the euro was a political project, and thus had to be supervised by the European Parliament. Seeking to tie closer bonds between EU institutions to make the Commission more political, he shared thoughts on a deeper cooperation under Stage 1 of the Five President's Report.  

This meeting was held ahead of the European Council, were David Cameron tried to persuade EU leaders of the need for the reforms he asked for in a letter to Council President Tusk, for him to campaign against Brexit with full commitment. This is indeed crucial, because a Brexit would leave Britain in dangerous 'splendid isolation', according to former Prime Minister John Major’s words. But a formal agreement is unlikely to be reached during the Council, given to the refusal by Tusk of the in-work benefits cut for workers from the EU proposed by Cameron. Graham Bishop studied the figures carefully and warned against this: the UK is already in full employment and cutting the “in-work benefits” would save just £1.5 billion (0.1% of GDP). Moreover, the loss from Brexit to the UK’s GDP might be hugely bigger, according to the report of the City of London on the total tax contribution of UK financial services: the Government would lose up to £66bn if The City business moved away from London. Vox EU produced another relevant study arguing that EU membership has brought benefits to the UK through three key mechanisms – trade, foreign investment, and finance, - and that a Brexit would entail heavy losses to the UK’s economy. PM Cameron will therefore have a lot of pressure to bear in the next months: a poll by Open Europe and ComRes  - conveniently published as the European Council started - has shown that a failure to win the key reforms of his proposal - safeguards for non-Euro member states and restrictions on new EU migrants' access to in-work benefits - could swing UK’s EU referendum vote towards the ‘exit’ option.

Financial

Financial Services

Commissioner Jonathan Hill launched the long-awaited Green Paper on Consumer Finance, with a consultation that will go on for three months: EFAMAand ECRIwelcomed the debate on retail financial services as a means to rebuild confidence in financial markets, and said the Green Paper provided valuable insights into the benefits of a Single Market. Actions taken by EU institutions – such as the Council-Parliament agreement on tougher rules to tackle the manipulation of market benchmarks– and associations – a new report by ACCAshowing that recognition is more important than pay when it comes to motivating financial services’ professionals, - are key in reforming the financial services market after the crisis.

Banking

Commissioner Jonathan Hill reported on the impact of the CRR and CRD IV on bank financing of the economy and outlined the main responses for the key areas of the rules, such as supporting lending to SMEs or encouraging long-term investment.  The European Council issued a statement on Banking Union and bridge financing arrangements for the Single Resolution Fund, welcoming the agreement which will allow the SRF to be fully operational on 1 January 2016.

The EBA published its benchmark approaches comparing 19 different scenarios in recovery plans across the European Union, and the EPC informed about the next steps it will accomplish to support the ERPB’s objectives for instant payments.

Securities

The Council agreed its negotiating stance on securitisation at record speed on a legislative proposal to relaunch EU securitisation markets. This is one of the key parts of the Commission’s Action Plan on ‘Building a Capital Markets Union’, which was responded to by the IRSG - a body jointly sponsored by TheCityUK and The City of London Corporation -.

In another important movement within the CMU Action Plan, the Commission proposed to overhaul the prospectus rules to improve access to finance for companies and simplify information for investors. The initiative was welcomed by AFME, FESE, Invest Europe and EuropeanIssuers.

Insurance

The European Council adopted new insurance distribution rules to bring improved consumer protection for insurance products.  

Asset Management

The Financial Times reported that European asset managers have raised billions of dollars from investors to lend to companies as fund houses step into an arena traditionally dominated by banks.  

Corporate Governance/Accounting

Nicolas Veron presented a statement on the EU Endorsement of the IFRS 9 Standard on Financial Instruments Accounting, presented at a hearing of ECON Committee of the European Parliament. The EFRAG issued a letter to the Commissionexplaining its conclusion that IFRS 9 is not contrary to the true and fair principle, and IASB Chairman Hans Hoogervorst outlined the progress of improvements to the IFRSs and further changes.