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11 June 2020

This week in "Brussels"

Welcome to our Gold Friends weekly e-mail.

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 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

Articles from 5 June to 11 June 2020

 General Financial Policy

Christine Lagarde: Hearing at the Committee on Economic and Monetary Affairs of the European Parliament : overview of the economic outlook for the euro area and explain the ECB's recent monetary policy decisions in response to coronavirus...share considerations on the policies needed to support the European recovery....a few words on the international role of the euro. View Article
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. View Article
Politico: Lagarde rebuffs German court but hints at some answers: The European Central Bank won’t bow to Germany’s Constitutional Court but can at least give the Karlsruhe judges a hint where to find some answers. View Article
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. View Article
Reuters: Spain says would be 'good news' if Economy Minister Calvino became Eurogroup chief : The Spanish government started lobbying on Wednesday for Economy Minister Nadia Calvino to take the presidency of the Eurogroup, with a minister saying “it would be good news” if she were to replace Mario Centeno, who is stepping down.  View Article
EPC: Eurogroup: Centeno’s successor should be a Commissioner: Following Centeno’s resignation, Andrew Duff argues for breaking with precedent and appointing a senior member of the European Commission as president of the Eurogroup.Both the legal status and political efficacy of the Eurogroup have been questioned in recent times. Rightly so. View Article
ECOFIN: 9 June - Ministers boost investment for the EU's recovery. : Ministers exchanged views with the Commission concerning Europe’s recovery post COVID-19 crisis, with a focus on the repair, recovery and resilience needs. They also discussed the basic structure of the recovery plan for Europe. View Article
POLITICO: Finland rejects EU recovery fund, arguing it’s too large: Helsinki objects to the size and structure of the proposed €750 billion Recovery Instrument, according to a Finnish government statement published today. View Article
POLITICO: Dutch government doubles down on opposition to EU recovery fund proposal : The Dutch government today said it remains critical of the European Commission’s proposal for a €750 billion recovery fund and vowed to “strongly push” with like-minded countries for changes. View Article
Project 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. View Article
CEPS:  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.  View Article

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  View Article
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.  View Article
ECB report shows areas for improvement in banks’ lending standards before the COVID-19 crisis: It covers banks’ practices in 2016-18. It shows several cases where loan pricing did not cover expected losses and costs Banks with high NPL levels tended to grant housing loans more conservatively than others No evidence banks using internal models applied better risk-based pricing  View Article
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." View Article
POLITICO: Europol and banks need more data-sharing power, Commissioner Johansson says : Europol and banks need more power to share information in the hunt for criminal money, European Home Affairs Commissioner Ylva Johansson said.The Commission is considering legislation to boost Europol’s data-sharing authority. View Article

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. View Article
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.  View Article
AFME: High-Level Forum report on CMU comes at key moment for EU capital markets : AFME strongly supports the following policy recommendations contained in the report: View Article
AFME: Capital Markets Union – will the opportunity be seized? : The economic shock generated by the Covid-19 pandemic has amplified the need for deep and well-integrated capital markets in the EU in virtually every area. View Article
The Report of the High-Level Forum on the European Capital Markets Union (CMU): European Savers one step closer to getting Sustainable Value : The group of 28 experts has now published its “New Vision for Europe’s Capital Markets” with a list of key recommendations. Several of those have been proposed by BETTER FINANCE and endorsed by the Group, which is good news for EU Citizens as Financial Users. View Article
FT: EU urged to tackle insolvency laws for unified capital market : Brussels will need to tackle Europe’s fragmented insolvency laws and create more uniform shareholder rights if it wants to build deeper capital markets and speed up its economic recovery, an official expert group has warned. View Article
Insurance Europe: Insurers respond to EIOPA proposals on Solvency II supervisory reporting and public disclosure : Support for EIOPA’s suggestion that undertakings provide links to the Solvency and Financial Condition Report (SFCRs) in regulatory reporting and it agrees that the publication of the links to SFCRs on the websites of EIOPA/national competent authorities would be helpful in finding the reports. View Article
OECD: Responding to the COVID-19 and pandemic protection gap in insurance : The COVID-19 pandemic and the measures taken to limit the spread of the disease have significantly disrupted economic activity in countries around the world, resulting in significant business interruption losses. View Article
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. View Article
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. View Article

Environmental, Social, Governance (ESG)

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.  View Article
A centralized register for ESG data in EU: EACB, EBF, EFAMA, ESBG, IE, PE Joint Letter : EBF, together with five other financial industry associations, is calling for the European Commission to establish a common ESG data register in the European Union to enhance the availability of relevant and reliable ESG data, facilitate disclosure and scale-up sustainable funding. View Article
ESAs announce public hearing on ESG disclosures : The three European Supervisory Authorities (EBA, EIOPA and ESMA - ESAs) will organise a public hearing on 2 July on proposed environmental, social and governance (ESG) disclosure standards for financial market participants, advisers and products. View Article
CDP: Economic renewal must catalyze the transition to a sustainable future – we must build back better : We cannot afford to go back to normal. We must reinvent and renew our economy into one that is more resilient, inclusive, sustainable and zero-carbon. If we prop up the old system, against the backdrop of increasing and impending climate change hazards, we risk locking in a pathway of greater risk. View Article

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.  View Article
IPE: ESG roundup: EU urged to use bank rules to end ‘doom loop’ : Policy-makers should take immediate action to harness banking prudential regulation to tackle the climate finance “doom-loop”, as existing measures focussed on transparency, risk modelling and stress tests would not be effective quickly enough, NGO Finance Watch has argued. View Article
IFAC: As Companies Look to Post COVID-19 Recovery, Finance Teams Must Embrace Opportunities to Lead : "Supporting Accountants in Business & Public Sector through Uncertain Times": the IFAC Professional Accountants in Business Committee (PAIBC) shares latest thinking on focus areas for finance teams, including on value creation, data, accountancy careers, and professional and skills development. View Article
FT: UK delays pledge to follow EU green finance rules post-Brexit : Treasury letter raises prospect of split on sustainable finance between London and Brussels.The UK has held off on fully committing to the EU’s landmark sustainable finance rules after Brexit, raising the prospect of a regulatory clash.  View Article

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.  View Article
SUERF: Towards a wider international role for the euro : The euro at 20 is young. An aspect of this development that has recently attracted both analytical and policy interest is its international use. Thhis article aims to foster debate on a more important international role of the European currency. View Article
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. View Article


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 View Article
FT: Barnier ‘ready’ to compromise with UK in trade talks : EU’s chief Brexit negotiator signals flexibility on key issue of level playing field View Article
FT: EU states warn Brussels of hard Brexit risk to coronavirus plans : Ireland and Belgium urge bloc to prepare for double blow from UK no-deal exit and pandemic View Article
UK-US trade negotiations - new Lords committee seeks evidence : The House of Lords International Agreements Sub-Committee has today launched its first call for evidence, seeking views on the ongoing UK-US trade negotiations. View Article
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. View Article

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© Copyright 2020 Graham Bishop

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