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11 June 2020

Standard Weekly Newsletter


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Covid dominates everything – nearly all the stages of the CRR “quick fix” amendments are done since the idea was floated at Easter. The ECB is treading a delicate line between pushing banks to provision properly while also improve lending standards. It provided a loosening of capital buffers but banks seem reluctant to use it for fear of market reactions. That should not be surprising as the €400 billion of available capital only approximates to the losses in the sovereign debt crisis yet the GDP decline in this crisis is expected to be twice as deep.

Brexit grinds on – even amidst the Covid crisis – and the EU unanimously decided not to change Barnier’s negotiating mandate. However, he may have a little wiggle room on state aid to keep the playing field level.

  Graham Bishop

(This e-mail provides the headers of a selection of the articles published this week. If you would like to upgrade to our Gold service and  access all articles - with liive links to the underlying news - please click on the button) 

Articles from 5 June to 11 June 2020

General Financial Policy

ECON: COVID-19 and German constitutional court decision top meeting with ECB’s Lagarde : MEPs quizzed ECB President Christine Lagarde for the first time since the pandemic and the German constitutional court’s ruling on the ECB’s bondbuying programme. 
POLITICO: Three saddle up for Eurogroup horse race : The finance ministers of Spain, Ireland and Luxembourg will likely be in the running for Eurogroup president when incumbent Mário Centeno steps down next month.Centeno resigned from the Portuguese government on Tuesday and announced he will not run for a second term.
Projetc Syndicate: Europe’s New Deal Moment : Franklin D. Roosevelt’s 1930s reforms are now accepted as an essential part of America's “economic constitution.” The longer-term challenge for the European Union will be to implement its COVID-19 crisis measures so they are seen as useful economic stabilization tools when more normal times return.
CEPS: CEPS In Brief Next Generation EU bonds might face a credit-rating challenge : The Commission’s Next Generation plan would increase the EU’s financial obligations fifteen-fold. Two-thirds of the envisaged €750 billion of bonds receipts will fund grants and, for the first time, will therefore not be backed by individual member states borrowing the proceeds from the EU. 

Banking Union

ECON: COVID-19: Revised rules to encourage banks to lend to companies and households : Temporary and targeted relief in prudential rules for EU banks; Banks and supervisors will be on the same footing and banking system remains stable; Mitigate the severe economic consequences of the pandemic
Transcript of the media briefing on June 9, 2020 (with Q&A) Andrea Enria, Chair of the Supervisory Board of the ECB, : "I hope you have no excessively high expectations as to how much I can dispel the uncertainty in which we are living right now, but at least I can give you some background on what we are doing and what we are thinking about the European banks right now."
EBA releases bank-by-bank data at the start of the COVID-19 crisis : The European Banking Authority (EBA) published today the seventh EU-wide transparency exercise. This additional data disclosure comes as a response to the outbreak of COVID-19 and provides market participants with bank-level data as of 31 December 2019, prior to the start of the crisis. 

Financial Institutions

Commercial Risk Europe: Marsh says pandemics are insurable but need public-private partnership : “We believe a pandemic risk solution is needed now to accelerate our economic recovery from the global Covid-19 pandemic and provide much-needed protection against future pandemic risks,” said John Doyle, president and CEO of Marsh.

Capital Markets Union

Final report of the High Level Forum on the Capital Markets Union - A new vision for Europe’s capital markets : Bringing about an EU Capital Market, i.e. a true single market for capital foreverybody, remains, rightly so, a priority for those who want to make Europestronger, resilient and dynamic. With Covid 19 it is now urgent in order to rebuild the European economy.
Markets4Europe urges the EU to launch the reforms proposed by the Report of the High Level Forum on CMU : Markets4Europe (M4E) supports the recommendations published by the High Level Forum (HLF). From the start, the Markets4Europe campaign has pushed for thinking big and launching ambitious reforms to fully integrate and develop the financial markets of the EU. 
IOSCO encourages issuers’ fair disclosure about COVID-19 related impacts : The Board of IOSCO issued a public statement highlighting the importance to investors and other stakeholders of having timely and high-quality information about the impact of COVID-19 on issuers´ operating performance, financial position and prospects.

 Environmental, Social, Governance (ESG)

Non-Financial Reporting Directive Review: EBF response : General recommendations: Regulation instead of Directive; Consistency of disclosure requirements across EU legislation (alignment with EU Taxonomy Regulation, Disclosure Regulation, CRR2 Pillar 3 requirements, June 2019 EC Non-Binding Guidelines on Climate Reporting, ECB guidance.
ICMA: Green & Social Bond Principles publish Sustainability-Linked Bond Principles and update the Social Bond Principles and other key guida : These are voluntary guidelines for sustainability-linked bonds (SLBs) defined as forward-looking performance-based bond instruments where the issuer is committing to future improvements in sustainability outcomes within a predefined timeline. 

Broadening the International Role of the Euro

SUERF: The international role of the euro : In spite of the existential crisis that it faced in 2011-2013, membership of the euro area has continued growing...Beyond the euro area’s borders, the euro has been unchallenged as the second most used global currency since its creation. 
Jacques Delors Centre: The weaponisation of the US financial system: How can Europe respond? : With geopolitical tensions rising, it is possible that the US could impose secondary sanctions on larger EU trading partners. In light of this possibility, this paper explores why secondary sanctions are so effective and offers concrete proposals to counter them.


Bloomberg: Brexit Impasse Grows as EU Resists Changing Barnier Mandate : Brussels envoys unanimously reject demands to change negotiating mandate and allow the bloc’s chief Brexit negotiator to offer more concessions to the U.K. Bloc’s chief negotiator accuses Britain of intransigence
FT: Barnier ‘ready’ to compromise with UK in trade talks : EU’s chief Brexit negotiator signals flexibility on key issue of level playing field
Federal Trust: Brexit: How “No Deal” became the bookies’ favourite : Many commentators and political actors have only recently begun to take seriously the possibility that the “transition period” for the UK’s exit from the European Union will end on 31st December 2020 without an agreement on the future EU/UK trading relationship.

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© Copyright 2020 Graham Bishop

© Graham Bishop

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