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Highlights of my week: Swiss/EU talks on a new partnership arrangement broke down. Commissioner Dombrovskis said budget “rules” would be implemented again only in 2023. So that leaves plenty of time for politicians and economists to argue about what the rules should be – while investors (aka “bond market vigilantes”) may be left wondering who represents their interests. EBA published final amended standards on MREL and SRB reported only modest MREL shortfalls versus targets. IAIS published its Application Paper to guide insurance supervisors on climate change – another link in bringing all financial services to terms with sustainability responsibilities. The City of London set out possibilities for collaboration with the US in this field whilst recognising the EU’s drive for “first mover” advantage. The FT reported that G7 is close to a deal on corporate taxation – with a lower minimum rate, implying this would break the logjam at the OECD. For the first time for ages (feels like years…), I did not see any Brexit stories that were sufficiently interesting to include!
Graham Bishop
Articles from 20-27 May 2021
General Financial Policy
POLITICO: Switzerland ends talks on EU partnership treaty : The European Commission warned the decision will erode EU-Swiss relations. Switzerland on Wednesday canceled talks to salvage a long-delayed cooperation agreement with the EU, saying that it could not accept Brussels' demands on issues like citizen's rights and wages. View Article
Remarks by Executive Vice-President Valdis Dombrovskis at the ECOFIN press conference : Fiscal policy should remain supportive both this year and next, as the minister already outlined - and also based on the spring economic forecast, we can confirm our approach that we would keep the general escape clause activated in 2022 and but no longer as of 2023. View Article
EURACTIV: Budget rules to apply from 2023 to avoid ‘fiscal risks’ – Commission : The European Commission’s executive vice-president, Valdis Dombrovskis, has argued that the provision of liquidity to the debt markets for “too long” in the European Union could result in “fiscal risks” and that therefore the EU’s rules on budgetary discipline are to be reactivated in 2023. View Article
Vox: A new template for the European fiscal framework : The temporary suspension of the European fiscal rules to enable member states to take emergency measures against the Covid crisis offers an opportunity for an ambitious reform of a now clearly outdated fiscal framework. View Article
SUERF's Boonstra: How to prevent a too restrictive fiscal policy in Europe? : Public debt acquired by the Eurosystem has lost its significance. The central bank can keep this part of the public debt on its balance forever. Therefore, it would be wrong to base future fiscal policy on debt ratios without taking this into account. View Article
Better Finance: EC public consultation on the crisis management and deposit insurance (CMDI) framework : Better Finance feedback on why it's important for retail users to make sure there is adequate depositor protection shielding them from the effects of bank failures. View Article
ISDA: The Role of Financial Markets and Institutions in Supporting the Global Economy During the COVID-19 Pandemic : We looked in particular at three core financial market activities – extending credit, facilitating access to capital and market-making in the secondary markets. In so doing, we focused primarily on the large, international banks that are most active across these areas. View Article
Robert Schuman Fondation: The Democratic Rally (DISY) may remain in office in Cyprus after the 30 May parliamentary elections : An opinion poll by the CyBC Institute showed the fight against corruption is the first electoral issue for Cypriots, followed by the management of the health crisis. View Article
Banking Union
EBA publishes final draft technical standards on own funds and eligible liabilities : With the revised Capital Requirements Regulation (CRR) introducing new criteria and requirements for eligible liabilities, these amended RTS capture several aspects of eligible liabilities as well as the changes to the own funds framework. View Article
SRB publishes updated MREL policy and publishes MREL dashboard Q4.2020 : The Single Resolution Board (SRB) published its updated ‘Minimum Requirements for Own Funds and Eligible Liabilities (MREL) Policy under the Banking Package’. The updated policy introduces a number of new elements and refinements, based on the changes required by the Banking Package. View Article
IOSCO Issues Industry Surveys on Conduct Risks in Leveraged Loans and Collateralized Loan Obligations : IOSCO is conducting work to understand the potential conflicts of interest and misaligned incentives among participants in the LL and CLO markets across the chain of intermediation, from credit origination to the sale to end-investors. View Article
FT: Sunak to propose powers to block London listings on security grounds : Move comes as government concerns mount over ‘dirty money’ flowing through the City View Article
EPC: Pushing the frontiers of payments: towards a global payments area : CPMI is seeking to improve cross-border payments. We interviewed Tara Rice, Head of the CPMI Secretariat at the Bank for International Settlements (BIS) to shed some light on the objectives, success factors and future of this project. View Article
Capital Markets Union
ESMA responds to European Commission consultation on the ESAs : The recommendations put forward aim to support the objectives of the Capital Markets Union and further promote and facilitate supervisory convergence across Member States. View Article
ESMA letter to EC regarding the Review of the CSDR : ESMA has already provided input to the European Commission through two reports (on CSD cross border services, and on internalised settlement) published in November 2020, and, in the coming months, will provide further input through the publication of two more reports on banking-type ancillary services, and on the use of technological innovation by CSDs. View Article
ALFI responds to the European Commission consultation on supervisory convergence and the single rulebook : As a general comment, in ALFI’s view, ESMA reaches its objective to protect the public interest by contributing efficiently to the short, medium and long-term stability and effectiveness of the financial system as stated in Article 1 of the ESMA Regulation. View Article
Environmental, Social, Governance (ESG)
EBA publishes results of EU-wide pilot exercise on climate risk : The findings give a clear picture of banks’ data gaps and highlight the sense of urgency to remedy them if they are to achieve a meaningful and smooth transition to a low-carbon economy. View Article
IPE: New climate research house for investors to tackle high impact sectors : "There is a role for Industry Tracker because “despite the massive growth of the sustainable finance industry and more and more countries committing to ambitious net zero targets, capital is not currently being directed to the type of real-economy transformation that is required”. View Article
IAIS: Press Release: IAIS and SIF set out key recommendations for insurance supervisors to strengthen efforts to address climate-related ris : The Application Paper on the Supervision of Climate-related Risks in the Insurance Sector provides recommendations and examples of good practice for insurance supervisors to manage the challenges arising from climate change. View Article
SSEI: Exchange in Focus: GPW Publishes “ESG reporting Guidelines” : The Warsaw Stock Exchange in partnership with the European Bank for Reconstruction and Development has published the ESG reporting Guidelines, an ESG reporting manual for listed issuers which structures and organises relevant guidelines and recommendations. View Article
UNEP FI: New ICAP framework drives investor action on climate crisis, accelerating transition to net-zero : The founding partners of The Investor Agenda released today a new tool to enable institutional investors to step up action to tackle the climate crisis and accelerate the transition to a net-zero economy. View Article
EuropeanIssuers welcomes the Final Report of the Technical Expert Stakeholder Group on SMEs : The European Commission’s Technical Stakeholder Group (TESG) on SMEs published its final report on ‘Empowering EU Capital Markets for SMEs – Making Listing Cool Again’. View Article
FEBAF: Italian banks focus on ESG : The findings come from a survey of non-financial disclosure reports published in 2020 by banks representing 94 per cent of the banking system's total assets. View Article
City of London Corporation: Data, Direction, Dialogue : Climate change is a global problem requiring global action. With the world turning its attention to climate action in the runup to COP26, and President Biden’s election bringing the US back to the centre of this debate, the UK and US have an opportunity to collaborate on this vital agenda. View Article
Protecting Customers
Better Finance: Funds Europe article: Financial Advice Fluctuates Randomly According to Mood of the Day : “Behavioural finance experts [at Oxford Risk] have found financial advisers can give “remarkably different” advice from each other to the same clients based on factors including sleep or how long since the adviser last ate.” View Article
Dutch Banking Federation: Towards data-driven digital finance - Options for an Open Finance framework : The Dutch Banking Association (the NVB) considers that data access and sharing of personal data between businesses – on the initiative of and with the explicit approval of the consumer – can and must be structured in a standardised and transparent manner. View Article
Fin Tech Regulation
ESMA launches call for evidence on digital finance : The call for evidence aims to gather relevant information on particular issues including value chains, platforms and groups’ provision of financial and non-financial services. View Article
FT: Bitcoin gyrates on fears of regulatory crackdown : Digital asset market under intense pressure after China warns on use of cryptocurrencies.Cryptocurrency markets swung in chaotic trading and related stocks were hit after Chinese regulators signalled a crackdown on the use of digital coins, which have soared in price this year. View Article
PwC, Elwood and AIMA Publish Third Annual Global Crypto Hedge Fund Report : Total AuM of Crypto Hedge Funds almost doubled in '20 to reach US$3.8 billion (vs US$2 billion in '19).Crypto Hedge Funds on average returned 128% in '20 (vs +30% in '19).47% of Traditional Hedge Fund managers surveyed representing US$180 billion of AuM are already invested/considering crypto. View Article
Friends' Standard Services
CSFI: 173rd Brussels 4 Breakfast - 19 May 2021 : It has been a busy month. The EP has formally approved the TCA - but that hasn't stopped efforts by the Commission and by individual member states to take business away from London. The inaugural meeting of the Conference on the Future of Europe was held in Strasbourg... View Article
Economic Policies Impacting EU Finance
FT: G7 is close to deal on taxation of world’s largest companies : Accord would curtail the ability of companies to shift profits to low tax jurisdictions View Article
EBF presents recommendations for a fairer and more efficient EU tax framework EBF Tax Blueprint : Based on these four priorities, the EBF has formulated 10 concrete policy recommendations that are elaborated in the 48-page EBF blueprint ‘Recommendations for a fairer and more efficient EU tax framework’. View Article
BusinessEurope: Corporate tax should support growth and investment : “We need a modern corporate tax framework to overcome the current economic downturn, caused by the Covid-19 pandemic. We share the European Commission’s desire to make corporate taxes across the EU simpler and more conducive to investment and economic growth." View Article
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