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10 January 2019

147th Brussels for Breakfast – CPD Notes

Organised by the Centre for the Study of Financial Innovation (CSFI), hosted by Chartered Institute of Securities and Investment (CISI) and with co-presenter Conor Foley (Norton Rose).

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 38th `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

As political history unfolds at Westminster, it was inevitable that Brexit took up much time. News from the ECJ topped the agenda as the Court moved at lightning speed to rule that the UK could indeed unilaterally withdraw its Art 50 notice --- BUT it must be done in a proper constitutional manner and must “not involve an abusive practice”. The European Council met in its Art 50 formation and reconfirmed its November conclusions about the agreement but “It is not open for renegotiation.”

The Commission has started its process of implementing its “no deal” planning with just 14 measures. These include a strictly limited equivalence decision of 12 months for CCPs and 24 months for CSDs. There was also a regulation for 12 months to facilitate novation for OTC contracts moving into EU 27 from the UK. This was announced at the very last moment to forestall announcements about giving notice to UK contracts. The tight time frames triggered a surprising discussion about Switzerland’s troubles with the EU that resulted in a 12 month equivalence decision for the Swiss stock exchange. However, this was extended for a further 6 months even after the Swiss government postponed their decision on the EU’s “institutional framework” proposal.

ECOFIN/Eurogroup put through several measures to wrap up this legislative cycle: the 2016 “risk reduction banking package”, further steps on money laundering, developing the ESM, a backstop for the resolution fund and a Directive to encourage speedy writing off of NPLs. Finally, the business insolvency plans were agreed as part of CMU and the STS securitisation regime came into force at the beginning of the year – despite some strong reservations from the industry.

The banking sector came under the microscope as usual: EBA published it first look at the results of IFRS 9 as well as its annual report on risk and vulnerabilities, and its Risk Dashboard. The good news is that CET1 levels are still rising – to 14.7% - but the bad news is that profitability - at 7% RoE – is still well below the cost of capital and has “still not reached sustainable levels”. To underline the fragility of the EU’s banking system, the ECB appointed administrator to Italy’s 10th largest bank – Carige – when key shareholders baulked at providing fresh equity (see my forthcoming article in Financial World).


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.


© Graham Bishop

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