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23 April 2020

This week in "Brussels"

Welcome to our Gold Friends weekly e-mail.

In a few hours we will know if EUCO has agreed on "corona" bonds (however defined) or some other form of major funding to protect the EU economy and, correspondingly, the financial system. Expectations are low and the bank share index continues to hover around 30-year lows (and literally half the levels seen in February) as we await banks' Q1 results in the next couple of weeks. The realism of the "expected losses" required by IFRS 9 may give a foretaste of how Europe will cope with the biggest recession in modern times.


Articles from 17 April 2020 - 23 April 2020


General Financial Policy


FT: Neel Kashkari: Big US banks should raise $200bn in capital now : Biggest lenders must prepare for the worst to survive deep economic downturn, writes Fed official View Article


COVID-19: Lessons from the 'euro crisis': EPC's Emmanouilidis and Zuleeg : The paper takes some lessons from the ‘euro crisis’ for the EU’s response to the COVID-19 crisis.  View Article


Veron: Risks for the US Dollar as the World's Reserve Currency : I argue that the main present risk comes from overreach by the United States in their application of financial sanctions, a risk that is highly correlated to the outcome of this year's presidential election.  View Article


VOX: Daniel Gros - A corona financial solidarity levy : Multiple proposals for a ‘solidarity fund’ have been made. This column argues that a one-time EU-wide levy on financial assets could raise €300-400 billion, and thus finance a European Solidarity Fund. ..and would avoid the need for controversial Coronabonds. View Article


ISDA: Impetus for Automation : the remote working and social distancing measures introduced as part of the pandemic response have underscored another issue – the difficulties caused by complex, inefficient and highly manually processes. View Article


Banking Union


SSM Chair Enria: wide-ranging interview on use of capital flexibility and loan loss provisions : In general, euro area banks entered this crisis with much stronger balance sheets, stronger capital positions, better asset quality and stronger liquidity buffers. Profitability was the weak spot.  View Article


Expected loss provisioning under a global pandemic : In response to the 2007-09 Great Financial Crisis (GFC), accounting standard setters introduced a new methodology to value loans based on expected credit losses (ECL). The previous approach, based on incurred losses, was viewed as procyclical and inconsistent with prudential objectives.  View Article


ECB Banking Supervision provides temporary relief for capital requirements for market risk : ECB temporarily allows lower capital requirements for market risk Move aims to maintain market-making activities and market liquidity ECB to review decision after six months View Article


Statement of EU ministers of finance on continuing bank lending and on maintaining a well-functioning insurance sector amid the COVID-19 pan : It is crucial that banks continue financing households and corporates, including SMEs experiencing temporary difficulties amid the COVID-19 pandemic. Making full use of the flexibility provided for in the prudential and accounting framework, is essential.  View Article


Statement of EU ministers of finance on continuing bank lending and on maintaining a well-functioning insurance sector amid the COVID-19 pan : It is crucial that banks continue financing households and corporates, including SMEs experiencing temporary difficulties amid the COVID-19 pandemic. To this end, making full use of the flexibility provided for in the prudential and accounting framework, is essential. View Article


Reuters: ECB to give banks ample time to resume pre-crisis capital rules: press :  View Article


Capital Markets Union


Review of the regulatory framework for investment firms and market operators : Consultation extended to 18 May View Article


ESMA's Newsletter: including Covid Recommendations to financial market participants : ESMA has launched its new page on COVID-19 as it continues to closely monitor the situation in view of the impact the virus is having on EU financial markets View Article


EIOPA: Statement on principles to mitigate the impact of Coronavirus/COVID-19 on the occupational pensions sector in Europe :  View Article


Environmental, Social, Governance (ESG)


EU COVID-19 recovery plan must be green and ambitious, say MEPs : Parliament called on the Commission to propose a recovery and reconstruction package that “should have at its core the Green Deal and the digital transformation in order to kick start the economy." View Article


GRI: We need a green transition after COVID-19 : GRI welcomes continued commitment to achieving the EU Green Deal??The ‘bold leadership’ shown by the EU in re-committing to the European Green Deal, even as the coronavirus pandemic is being tackled, has been recognized by GRI chief executive Tim Mohin. View Article


TCFD to-do list: How do I know I’ve met the TCFD recommendations? : Follow the 9 steps as outlined in the TCFD to-do list to ensure that you are making effective TCFD aligned disclosures.  View Article


Regulation and sustainability: SSE launches new database; IOSCO launches new report : The Board of the International Organization of Securities Commissions published its report on Sustainable Finance and the Role of Securities Regulators and IOSCO, which seeks to help market participants address issues related to sustainability and climate change View Article


EURACTIV: Timmermans promises green recovery to EU lawmakers : The European Commission’s Green Deal chief, Frans Timmermans, assured EU lawmakers on 21 April that “every euro” spent on economic recovery measures after the COVID-19 crisis would be linked to the green and digital transitions. View Article


Protecting Customers


SUERF: Regulation, Corporate Culture and Individual Responsibility in Banking : David Llewellyn considers the role of institutional culture and individual responsibility in banking and the role and focus of regulation. Should the focus be on individuals or financial institutions for regulation, supervision, accountability, and sanctions? View Article


Fin Tech Regulation


First cohort of firms join rebranded IA FinTech hub - Engine : Five new firms to join the IA's FinTech accelerator. Accelerator rebranded ‘Engine’. New Global Fintech Partners Programme launched. View Article


Tether dominates Ethereum-based stablecoins, according to research from The Block : Tether, a blockchain-enabled platform that powers the largest stablecoin by market capitalisation, is pre-eminent among Ethereum-based stablecoins, amid a recent surge in market volatility and the inflation of foreign currencies against the US Dollar, according to research from The Block. View Article


Economic Policies Impacting EU Finance


Soros: The EU Should Issue Perpetual Bonds : The disruption in the European Union caused by the COVID-19 pandemic should be temporary, but only if EU leaders take the extraordinary measures needed to avoid long-term damage. Fortunately, there is an easy, fast and low-cost way to finance the proposed €1 trillion European Recovery Fund. View Article


Merkel backs EU bonds to fight coronavirus crisis : German Chancellor Angela Merkel said she is in favor of issuing EU bonds via an existing clause in the union’s treaties to finance the bloc’s economic recovery from the coronavirus crisis. View Article


IMF blog -- The Great Lockdown: Worst Economic Downturn Since the Great Depression : As countries implement necessary quarantines and social distancing practices to contain the pandemic, the world has been put in a Great Lockdown. The magnitude and speed of collapse in activity that has followed is unlike anything experienced in our lifetimes. View Article


EURACTIV: ‘Coronabonds’ vs ‘Recovery bonds’: Where does Germany stand? : While German Chancellor Angela Merkel has opposed the idea of ‘coronabonds,’ German MEPs from her own political faction have spoken out in favour of ‘recovery bonds,’ a position that could weigh heavily on the EU summit on Thursday. View Article


EURACTIV - Conte doubles down on demand for coronabonds : The “full firepower” of the European Union will be needed to overcome the historic shock of the coronavirus crisis, Italian Prime Minister Giuseppe Conte told German media Sunday (19 April), repeating calls to pool European debt. View Article


EURACTIV: EU Commission will propose ‘borrowing’ to finance recovery plan: Dombrovskis : The EU executive will propose borrowing from the markets in order to finance a recovery plan that will come on top of the EU budget, the European Commission’s vice-president for the economy, Valdis Dombrovskis, told EU lawmakers on Monday (20 April). View Article


Invitation letter by President Charles Michel to 23 April EUCO + Recovery Plan : I now attach to this invitation a Roadmap for recovery with a strong investment component, which sets out some important principles and defines four key areas for action. I believe that these roadmaps provide a coherent and useful framework for our joint action towards overcoming the crisis. View Article


More ambition needed for EU recovery instruments, says majority of MEPs : numerous MEPs called for stronger measures to be put forward, arguing that the ones currently on the table consisted mostly of loans which would leave those countries most hit by the Coronavirus heavily indebted and increase economic divergence in the Eurozone. View Article


Why we all need a joint European fiscal response: ECB's Panetta : A strong, symmetric fiscal response that offsets the economic damage from the pandemic is in the economic interest of all countries in the eurozone. View Article


Covid-19, Corona Bonds and “Kicking the can down the road”: Federal Trust : As the various countries in the Eurozone (EZ) moved into lockdown mode, so they enacted a variety of national measures designed to alleviate the economic pain caused by Covid-19. View Article


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© Copyright 2020 Graham Bishop

© Graham Bishop

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