Welcome to our Gold Friends weekly e-mail.

My highlights of the week: The Commission’s Sustainable Finance Strategy and Green Bond Standard dominated attention – and were warmly welcomed by key EU professional bodies. In the run-up to COP26 in November, we are now ready for jockeying for the lead role amongst various players (national as well as global standard setters) and the EU seems to be taking an early lead in the race. At the more mundane level, CEPS estimated that 2-5% of global GDP is laundered each year and called for the EU to get real with its regulatory framework. POLITICO reported that the Commission’s imminent plan may create a new independent agency. Two more professional bodies have called for the Mandatory Buy-In regime to be postponed pending the forthcoming review.

Brexit has jumped out of the shadows as Chancellor Sunak set out his plan – amidst the magnificence of Mansion House and plenty of hyperbole – for the divergence of “agile” UK regulation from the EU’s. This is said to be just the beginning - citing the new financial services partnership with Singapore. However, the Singapore Monetary Authority seems to think it is little more than an agreement to talk about things … and will meet again in 2022! Shades of the MoU with the EU.

Graham Bishop

Articles from 1 - 8 July 2021

General Financial Policy

 Bloomberg: Germany’s Altmaier Spurns French Push for Permanent EU Debt : Focus should be on spending EU750 billion, industrial projects; German economy minister speaks at Aix-en-Provence gathering View Article

 Commissioner Gentiloni on the Summer 2021 Economic Forecast : Both these two factors, the better outcome in the first quarter and the quick re-opening, are fuelling economic recovery in the EU....The second message is that the growth forecast is revised up markedly for 2021, and slightly also for 2022. View Article

 Summer 2021 Economic Forecast: Reopening fuels recovery : The European economy is forecast to rebound faster than previously expected, as activity in the first quarter of the year exceeded expectations and the improved health situation prompted a swifter easing of pandemic control restrictions in the second quarter.  View Article

 Vox's Buti, Gaspar: Maastricht values : The authors were both involved in preparing the Maastricht summit and examine the arithmetic of the Maastricht reference values in relation to the macroeconomic facts as of today. Broader questions to do with fiscal architecture and institutional design will be addressed in a subsequent column. View Article 

 FSB Chair presents a comprehensive roadmap for addressing climate-related financial risks : The letter notes mounting evidence of global recovery, even if uneven across regions. However, some risks to financial stability remain elevated. View Article

Banking Union

POLITICO:EU to bypass banking agency with new dirty-money watchdog : Draft Commission plans admit Paris-based regulator has failed to tackle money laundering. View Article

SSM's Enria: Exchange of views at the Finance and Treasury Committee of the Italian Senate - credit risk and NPLs : Your chosen topic for today’s exchange of views – credit risk and the potential surge in non-performing loans (NPLs) as a result of the pandemic shock – is very timely and important. I am happy to provide you with my views on this subject, which is one of our top priorities. View Article

SSM's Enria: Hearing at the European Parliament’s Economic and Monetary Affairs Committee : "..banks have proven to be resilient so far. They have robust capital positions and their profitability recovered in the second half of 2020 and the first quarter of 2021. However, there is still some uncertainty about how the pandemic will evolve..."  View Article

BIS: Limits of stress-test based bank regulation : Contrary to conventional wisdom, we show that higher capital requirements can create adverse incentives. This can lead to more risky banks when information frictions are present.  View Article

BIS: Early lessons from the Covid-19 pandemic on the Basel reforms : The report provides a preliminary assessment of whether the reforms implemented to date have functioned as intended in light of the pandemic. View Article

Capital Markets Union

AFME calls for action on mandatory buy-in rules : “It is helpful that the Commission has stated its intention to consider amendments to the mandatory buy-in regime, subject to an impact assessment. Given that amendments may now be made at a later date, it does not make sense for the current rules to be implemented and enforced on 1 February 2022... View Article

 EFAMA urges changes to Mandatory Buy In (MBI) implementation timetable : We are faced with the major burden of implementing requirements under the Mandatory Buy-in (MBI) Regime as of 1 February 2022 knowing these are likely to change as a result of the impact assessment that the EC is conducting following the conclusions of their report.  View Article

 EFAMA publishes 2021 industry Fact Book - Report highlights key developments in the European fund industry in 2020 : The 2021 Fact Book provides an in-depth analysis of trends in the European fund industry, an extensive overview of the regulatory developments across 29 European countries and a wealth of data.  View Article

 EFAMA: No need for fundamental reform of EU Money Market Funds Regulation : According to the association, European MMFs continued to meet redemptions throughout 2020, even though liquidity management proved challenging for all market participants in March 2020. View Article

 ESMA publishes first overview of national rules governing fund marketing : In this report, ESMA provides an overview of the marketing requirements across Member States, and analyses the effects of national laws, regulations and administrative provisions governing the marketing of investment funds. View Article

 EIOPA reports on key financial stability risks in the European insurance and pension sectors : EIOPA emphasizes that the pandemic crisis is still not over and many uncertainties remain despite the progress in vaccination campaigns and decreasing trends in the number of new infections. View Article

 Environmental, Social, Governance (ESG)

Commission puts forward new strategy to make the EU's financial system more sustainable and proposes new European Green Bond Standard : The new Sustainable Finance Strategy; The European Green Bond Standard proposal; Delegated Act on the information to be disclosed by financial and non-financial companies about how sustainable their activities are, based on Article 8 of the EU Taxonomy.  View Article

Vice-President Dombrovskis at the press conference on the New Sustainable Finance Strategy and a European Green Bond Standard : We have raised our climate targets significantly, including with the European Green Deal. Next week, we will take this ambition one step further when we present the Fit for 55 package. View Article

Commissioner McGuinness on the New Sustainable Finance Strategy and a European Green Bond Standard : Today’s proposals helps to raise our ambition, so the financial system plays its full role in the European Green Deal and climate neutrality by 2050, while making sure that we have an orderly, fair transition to get there. View Article

Questions and Answers: European Green Bonds Regulation : The Commission is proposing today a Regulation to create the “European Green Bond Standard” or “EUGBS”. The EUGBS is intended to be a voluntary “gold standard” for green bonds. View Article

Next stage of sustainable finance agenda critical to meeting EU sustainability objectives, says AFME : Adam Farkas, CEO AFME: “Europe’s leadership on sustainable finance has given rise to several ambitious and comprehensive regulatory proposals... the sustainable finance agenda will be critical to mobilise private investment on the scale needed to meet the EU’s sustainability objectives." View Article

Accountancy Europe: EU green bond standard: Europe’s next move to help finance sustainable projects : Green bonds (GB) are one of the financial instruments that can help channel funds towards environmentally friendly projects. The interest towards green bonds is growing; but the lack of standards and definition of what ‘green’ really means is a source of uncertainties for issuers and investors.  View Article 

CDSB: New European sustainable finance strategy gives hints on mainstreaming sustainable finance through global standards and frameworks : CDSB welcomes the Renewed Sustainable Finance Strategy and the EU’s intention to contribute to the development of ambitious reporting standards in Europe and beyond, building on the recommendations of the Task Force on Climate-Related Financial Disclosures.  View Article

 POLITICO: EU green bonds won’t meet the bloc’s own high standards : Brussels’ ambition on sustainable finance may be waning. Brussels may be planning to raise €250 billion in green bonds — but they won’t meet its own best-in-class standards. View Article

Fin Tech Regulation

 Vox: Central bank digital currency: The battle for the soul of the financial system : Central banks may substitute publicly issued digital currency for the bank-issued digital money that people use every day. How this plays out can profoundly reshape the financial system and make it less stable. This column argues that we don’t need CBDC to solve financial system problems,  View Article

 ESBG’s new paper analyses digital euro’s main challenges : Since the publication of the report on a digital euro in October 2020, ESBG and its members have been following closely and with great interest the developments made by the European Central Bank (ECB) in the project of a digital euro.  View Article

 German Banking Industry Committee presents policy paper on “digital euro” : Experts from Germany’s five national banking associations draw up an ecosystem of innovative forms of money that extends far beyond the idea of digitalised central bank money, which is referred to as Central Bank Digital Currency (CBDC).  View Article 

Economic Policies Impacting EU Finance 

Brexit

Bruegel: Banks post-Brexit: regulatory divergence or parallel tracks? : Post-Brexit UK bank regulation is not likely to compromise on international standards, but will place greater emphasis on competition, making close UK-EU dialogue essential. View Article

 ECON Brief: What are the main differences between the practice of supervising large banks in the UK and in the euro area, and what are the : The ECB is likely to take a more stringent stance in prudential supervision than UK authorities. The setting of risk weights and the design of macroprudential stress test scenarios d o cu ment this hypothesis. View Article

Joint readout of principals’ meeting of UK and US authorities regarding central counterparty resolution : Senior officials from the Bank of England, Federal Deposit Insurance Corporation, Commodity Futures Trading Commission, Securities and Exchange Commission, and Federal Reserve Board convened a virtual meeting today to discuss certain issues relating to the concept of resolution of a CCP. View Article

Bloomberg: City of London Drew Fewer Foreign Investors in 2020, Report Says : U.K. narrowly ahead of France in 2020, according to EY survey; Square Mile has been hampered by years of Brexit uncertainty View Article

Reuters: Paris gets new JPMorgan trading hub in post-Brexit push : French President Emmanuel Macron inaugurated JPMorgan's (JPM.N) new trading hub in Paris on Tuesday, as France pitches for more banking jobs and tries to lure finance workers looking to leave London after Brexit. View Article

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