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Welcome to our weekly e-mail.
Several more "impossible things" happened this week: The European Commission baldly downgraded its economic forecast for 2020 GDP by around 9 percentage points - to an almost unbelievable decline of more than 7% . Against this backdrop, the German Constitutional Court appeared to declare war on both the ECB and ECJ. But economic observers were left bewildered by the Court's grasp of the economic realities facing the ECB so the bond market vigilantes barely blinked – raising the German/Italian 10-year government bond spread by hardly 10 basis points. However, the political foundations of the European Union may need to be shored up in the fullness of time.
Articles from 30 April 2020 - 7 May 2020
General Financial Policy
Bundesverfassungsgericht: official translation of decision of 5th May re ECB : 1. Where an ultra vires review or an identity review raises questions regarding the validity or the interpretation of a measure taken by institutions, bodies, offices and agencies of the European Union, the Federal Constitutional Court, in principle... View Article
ECB takes note of German Federal Constitutional Court ruling and remains fully committed to its mandate : The Governing Council received a preliminary briefing by the governor of the Bundesbank and by the legal department of the European Central Bank (ECB). The ECB takes note of today’s judgment by the German Federal Constitutional Court regarding the Public Sector Purchase Programme (PSPP) View Article
FT: German court calls on ECB to justify bond-buying programme : Germany’s constitutional court has ruled the European Central Bank’s vast purchases of public sector debt were legal, but called for it to review if they were “proportionate” in pursuit of its monetary policy objective. View Article
POLITICO: France criticizes German court ruling on European Central Bank : The European Central Bank (ECB) alone can judge what monetary policy is needed for the eurozone, French Finance Minister Bruno Le Maire said in response to a German court ruling questioning the legality of the institution’s bond-buying programs. View Article
POLITICO: German court lays down EU law : Court rules that European Central Bank’s 2015 bond-buying program could be illegal. View Article
Bloomberg: EU Court Faces ‘Declaration of War’ From German Top Judges : The European Union’s top court faced the most stinging attack in its 68-year history -- not from Brexiteers, but from its German counterpart. View Article
FT: ECB to resist German court order to justify bond purchases : Four governing council members warn of risk to central bank independence View Article
Bruegel podcast: An analysis of the German Constitutional Court ruling on the ECB QE programme : What does today's ruling of the German Constitutional Court mean for the ECB's Quantitative Easing programmme? View Article
Buiter: Germany’s Judges Declare War on the ECB : Germany's highest court has threatened to throw a wrench into the ECB's efforts to extend liquidity and other forms of assistance to distressed eurozone governments. Coming amid a deep economic crisis, the court's decision could force one or more countries to crash out of the monetary union View Article
ACCA - Kattar: Covid-19 will have implications for investors now and in the future : The volatility in global stock markets in recent weeks in reaction to the spread of Covid-19 has been virtually unprecedented. In reality, no investor has a firm grasp of the implications of the crisis. My concerns span three distinct levels. View Article
Banking Union
SSM's Enria: Public hearing at the European Parliament’s Economic and Monetary Affairs Committee : Our first decisions were announced on 12 March, only three days after the first nationwide lockdown in Europe.This morning, I would like to further explain the reasoning behind those decisions and the additional ones that have been announced since then. View Article
EBA launches additional EU-wide transparency exercise : This will provide market participants with updated information on the financial conditions of EU banks as of 31 December 2019, prior to the start of the COVID-19 pandemic. The EBA expects to publish the results of this exercise at the beginning of June. View Article
Banks' dividends in Covid-19 times : Regulatory actions in the current circumstances need to focus on preserving banks' lending activity without jeopardising their solvency. This means that flexibility in capital requirements, including through the use of regulatory buffers, and capital conservation should go hand in hand. View Article
BIS: Releasing bank buffers to cushion the crisis - a quantitative assessment : Banks globally entered the Covid-19 crisis with roughly US$ 5 trillion of capital above their Pillar 1 regulatory requirements. View Article
Deutsche Bank: Crisis impact on bank balance sheets in the euro area : During March, banks' balance sheets grew substantially. Euro-area banks raised enormous amounts of liquidity from the ECB, other financial corporations and non-financial companies. But they kept a large part of that at the central bank or lent it to other banks and other financial corporations. View Article
CSFI Fuller: Bankers in Wonderland : “Why, sometimes I've believed as many as six impossible things before breakfast” - Alice in WonderlandHow would Alice do as a commentator on the banking sector as it tries to fit the impact of Covid-19 into accounting models? View Article
Capital Markets Union
ICMA publishes an in-depth report on consolidated tape for greater post-trade transparency in the EU bond markets : Establishing an EU consolidated tape (CT) for bond markets: This report was produced in response to a request from the European Commission’s DG-FISMA for a bespoke study assessing the feasibility of implementing a consolidated tape for EU post-trade raw bond data. View Article
Mifid II influence spreads beyond EU borders : Mifid II, European market rules introduced two years ago, are having a significant impact on fund managers’ use of investment research around the world View Article
EBA proposes framework for STS synthetic securitisation : This proposal, which is limited to balance-sheet securitisation, includes a list of criteria to be considered when labelling the synthetic securitisation as ‘STS' and provides the pros and cons of a potential differentiated capital treatment for this type of securitisation. View Article
PCS: EBA publishes its final paper on STS and synthetics : The EBA has published its final paper on whether and how the STS framework could be made to encompass synthetic securitisations. This paper drafted by the EBA at the request of the European Commission, is the technical advice provided to the latter to enable the Commission to report to the EP View Article
ESMA extends four trade repositories registrations to include securities financing transactions reporting : The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has approved the extension of registrations of four trade repositories (TRs) to include securities financing transactions (SFT) reporting under the Securities Financing Transactions Regulation. View Article
ECIIA: EIOPA: response to the COVID-19 crisis : Interview with EIOPA Chairman Bernardino: EIOPA measures include recommendations on supervisory flexibility regarding deadlines of supervisory reporting and public disclosure by insurers View Article
Commercial Risk Europe: Best reviews IASB decisions on IFRS 17 accounting standard : AM Best does not expect any near-term impact from IFRS 17 on credit ratings. View Article
Environmental, Social, Governance (ESG)
IPE: Germany pursues sustainable finance plan for EU presidency : As it gears up to assume the EU presidency in July, the German government is getting input from a hard-working committee of experts that was assembled to help it develop and implement a sustainable finance strategy. View Article
ICMA: UPDATE ON THE EU’S SUSTAINABILITY DISCLOSURE REGIME : New and amended EU legislation is introducing significant sustainability and ESG related disclosure requirements that will impact all participants in the European capital markets. This is arguably leading to what we are referring to as an “EU sustainability disclosure regime”. View Article
CDSB’s ambitious push towards climate & nature-related financial reporting wins support from EU LIFE Programme : A four-year plan is currently underway by Climate Disclosure Standards Board (CDSB) in a bid to bring natural capital, including climate change, into the heart of financial decision-making. View Article
The challenges for corporate reporting post COVID-19 : If ever there was a time to conclude that the world cannot continue to function based on the primacy of financial reporting above all else, it is now. View Article
European Climate Law proposal: EU insurers ready to continue playing pivotal role in addressing climate change challenge : Europe’s insurers are ready to continue contributing to the EU’s political commitment to be climate neutral by 2050 and to play a pivotal role in financing the transition to carbon-neutrality, resource-efficiency and greater sustainability. View Article
Accountancy profession encourages renewed Sustainable Finance Strategy : The accountancy profession is eager to contribute to the European Commission (EC)’s initiative to renew its Sustainable Finance Strategy. Our response to the 8 April consultation will draw on the field experience of the 1 million professional accountants we represent. View Article
Protecting Customers
Better Finance: The EU Supervisor falls short of advising a complete ban on commissions for “retail” investment advisors : ESMA published its advice on “inducements” under “MiFID II”, one of the main EU investor protection directives up for review this year, pushing the issue off into the future by encouraging the European Commission (EC) to further deepen its assessment of the “inducements”. View Article
CFA Institute: Earning Investors Trust : Trust in financial services industry dips compared to 2018 levelsWhat will it take to boost confidence? View Article
EBF key messages to inform the preparation of the EC report on the application of the GDPR : European Banking Federation would like to share its key messages, which it has also submitted to the Commission through the membership of the EC multi-stakeholder expert group on the GDPR. View Article
Fin Tech Regulation
Politico: Deal on global digital tax plan may be delayed until 2021 : Parts of a global deal on how to tax the digital world may be delayed until next year, according to a senior official overseeing the talks. View Article
Economic Policies Impacting EU Finance
European Commission: Spring 2020 Economic Forecast: A deep and uneven recession, an uncertain recovery : The coronavirus pandemic represents a major shock for the global and EU economies, with very severe socio-economic consequences. Despite the swift and comprehensive policy response at both EU and national level, the EU economy will experience a recession of historic proportions this year. View Article
ECB Vice-President de Guindos to ECON: : I will start by presenting the assessment of the economic outlook and the measures taken by the ECB thus far...then discuss in more detail the impact of the COVID-19 pandemic on the financial sector, and conclude by examining the role that the EU’s financial agenda could play in the recovery phase. View Article
Top MEP: Coronavirus recovery fund must include grants : An over-reliance on loans risks splitting North and South, says Italian MEP Irene Tinagli. View Article
Business Europe: Ambitious recovery plan essential to avoid long-term scars to EU economy : BusinessEurope on 30 April proposed urgent actions to kick-start Europe’s weakened economy.BusinessEurope’s EU recovery plan sets out detailed proposals under 4 pillars View Article
Vox - Garicano: Towards a European Reconstruction Fund : The idea that Europe’s response to the economic crisis should be based on the issuance of common perpetual bonds has been slowly gaining ground, but proposals that entail substantial increases to member states’ debt risk hampering growth for decades to come. View Article
Basic Enconomic Indicators
Eurostat GDP flash estimate 1Q 2020: : Preliminary flash estimate for the first quarter of 2020GDP down by 3.8% in the euro area and by 3.5% in the EU-3.3 % and -2.7% respectively compared with the first quarter of 2019 View Article
Brexit
FT Trade secrets: Brexit’s back, and this time it’s terminal : The first of three negotiating rounds on final trade arrangements concluded last week with predictably little progress being made. The big deadline is the end of June. View Article
Federal Trust/Blick: Moving beyond the Brexit divide? Options for the new Labour leadership : The most obvious dramatic change that is not a consequence of the global emergency is the election of Sir Keir Starmer as leader of the Labour Party. In any circumstances, Starmer was surely the candidate that the Conservative Party least wanted to see win the contest. View Article
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