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08 October 2019

155th Brussels for Breakfast – CPD Notes

Organised by the Centre for the Study of Financial Innovation (CSFI), hosted by CISI and with co-presenter Jacques Lafitte (Avisa).

This blog complements the subsequent Brussels 4 Brunch 30-minute CISI webinar that is also available to Friends of GrahamBishop.

We want to involve the Brussels Finance Watchers community in the choice of future topics so the invitation will include my then-current thinking of the top three topics but we will welcome your suggestions to


Clearly Brexit was the elephant in the room and, as the meeting finished, the news came through that Chancellor Merkel had declined to accept the UK Government’s proposals so negotiations were effectively over.

Commissioner hearings by the European Parliament

For financial services, the key hearing is that of Commissioner Dombrovskis and that was taking place as we talked. No-one expected he would have any problems – unlike Commissioner Goulard where there were concerns that – despite her undoubted expertise – she might fall victim to political payback for France vetoing the EPP’s Spitzenkandidat. The voting down of the Hungarian and Romanian candidates was felt to be an appropriate use of Parliament’s safeguard role.

The Green Deal

The UVL Commission will bring forward a `green deal’ within 100 days with a view to achieving a 50-55% reduction in EU emissions by 2030 and net zero by 2050. The Commission’s communication reported a Eurobarometer survey showing more than 90% of EU citizens in favour of such goals. The European Parliament elections results also illustrated a strong swing in views – even of not quite that magnitude!

As a concrete step, the Council greenlighted the passage of its position on the taxonomy regulation. As the Parliament had given it a first reading in March, trialogue may now begin on what is certain to be a hugely complex piece of legislation. This will include a border `carbon tax’ and some Central and Eastern states may oppose the whole process as they seek energy independence from Russia.


An AFME report on the use of artificial intelligence and machine learning in capital markets triggered a strong and wide-ranging debate. The key issue is how this can be used responsibly in CMU. There must be “explainability” – but does that risk limiting the technology? We were reminded of the dreadful parallel of 2006-8 when CEOs/Boards did not understand the functioning of CDOs etc. let alone the risks. We were informed that the UK’s Senior Management Certification Regime (SMCR) would ensure that `somebody’ in management was tasked to understand the situation and report to the Board. But not everyone was convinced that these arrangements would prevent a crisis.

A fragile financial system

The ECB’s interest rate cut and lengthening of TLTRO III to three years prompted discussion about the chances of Solvency II being partly rolled back as the insurance industry seems locked in to a low return environment that even prevented it from participating in the greening of the financial system. But the banking industry may be in worse shape as even the ECB is questioning the optimism of its profits forecasts that still project a return on equity for the system as a whole that is significantly below its cost of  capital. How long can this be sustained?


© Graham Bishop

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