Organised by the Centre for the Study of Financial Innovation (CSFI), hosted by Chartered Institute of Securities and Investment (CISI) and with co-presenter Hans Hack (FTI consulting).
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 37th `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
Of course the first topic had to be The Deal – but focussing on the financial services part of the Political Declaration on the Future Relationship. This has expanded from the 26 page draft to 36 pages of double-spaced text with plenty of white spaces… but the word “autonomy” continues to be appear 12 times and usually at the beginning of each section where the principles are laid down. EU27 – at around 7 times the size of the UK – has made quite clear that it retains autonomy of its own regulations whether in general terms or specifics such as in financial service regulations. Moreover, the three paragraphs on financial services continue to include the wording on the “prudential” carve-out so there cannot be any doubt about who sets the rules. I asked for a show of hands from those who think this Deal may benefit the City. None went up – or even thought of going up! My recent article laid out the risks from leaving on WTO terms so we now await Parliament’s vote.
The impending dissolution of the European Parliament is a growing influence on the legislative calendar but it seems that the Austrian Presidency has done enough to get the banking package over the line next year. But what effect could the new Parliament have on the next legislative period? That will define the top jobs that are in play. The Robert Schumann Fondation has produced a cogent analysis of the possible political landscape as it seems likely the combined EPP and S&D `families’ will fall well short of maintaining control. However, the risks from the `populists’are easily over-stated as they may advance from their numbers in this Parliament but there is little reason to expect the higher level of co-ordination needed to bring effective power. The key may be how President Macron interacts with the Liberals – potentially making them `kingmaker’ for the Commission Presidency if they refuse to play the Spitzenkandidat game that would hand the prize nearly automatically to the EPP.
The EBA’s 2018 stress test for 48 banks covering 70% of banking assets showed the system as a whole is well clear of capital shortfall even on the `adverse’ scenario. However, the outgoing Chair of EBA criticised the test’s “static” approach being used to push for any necessary capital increases after the test is published. He approved of the US `dynamic’ approach where the capital increase comes at the same time as the test publication so bank shares are not depressed by an overhanging risk – perhaps including reduced dividends.
The implementation of IFRS17 for insurance companies is going to be postponed by a year to coincide with the introduction of IFRS9 for insurance company assets but pressure from trade associations for a delay in the application of the Benchmarks Regulation faces greater legislative hurdles as the Commission is not yet ready to propose such a delay.
The first round of derivative data from ESMA underlined the incredible scale of activity – more than €600 trillion in total, equivalent to about 50 times Eurozone GDP. No wonder Member States are very concerned about the financial stability implications!
These Notes for the Friends of Graham Bishop will be supplemented by our full Workbook for our CPD clients (link) – in conjunction with the 30-minute CISI webcast.
Our monthly round-up of key EU regulatory issues is available here
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