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 Highlights of my week: Merkel about to leave - amidst clichés about `big shoes’! The Solvency II reform was announced – easing capital requirements on Europe’s largest investors. (How does it differ from the UK’s new version?) ESG standards are now embedded in corporate activity for more than half major global firms and 40% of banks are applying UN `responsible’ principles. The CME has launched clearing for `sustainable derivatives’ – another key step in the greening of the financial system (but that begs the question of whether derivatives are actually a `good thing’?). SSM’s Enria spoke about bank profitability – with a dramatic chart to underline the unsustainable situation of the EU’s banking system. Digitalisation of banks is proceeding apace but can regulators keep up? Will Ireland be able to extract a concession for clearing the last obstacle to a global minimum tax rate?

Graham Bishop

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Articles from 17-23 September

General Financial Policy

POLITICO: Merkel's big shoes : ELECTING A GLOBAL LEADER: With less than four days for the leading candidates to convince Germans they have what it takes to replace Angela Merkel, here’s a reminder of what people across the world have come to expect from a German chancellor:

CEPS: An unpredictable German election… but a (mostly) predictable outcome for EU politics : This election is unlikely to usher in much change, even though it has arguably been the most unpredictable election cycle in nearly 20 years.

POLITICO: EU ambassadors back German nominee for top finance job : Decision follows months of political infighting among EU capitals. German financial regulator Verena Ross on Wednesday won the backing of EU ambassadors to become the next chair of the European Securities and Markets Authority.

Banking Union

SSM's Enria:The many roads to return on equity and the profitability challenge facing euro area banks : Banks’ profitability is a key driver of capital strength, financial stability and resilient financial intermediation. First, organic profits are the first line of defence against shocks to the economy. Second, banks’ ability to raise capital when needed depends on their profitability 

Capital Markets Union

Remarks by Commissioner McGuinness at the press conference on the review of EU insurance rules : "We will make it less costly for insurers to invest, when such investments are made with a long-term perspective. We will also improve the framework so that market volatility does not result in short-sighted investment decisions. Our businesses need long-term, stable capital funding."

Reviewing EU insurance rules: encouraging insurers to invest in Europe's future : The European Commission has today adopted a comprehensive review of EU insurance rules (known as “Solvency II”) so that insurance companies can scale up long-term investment in Europe's recovery from the COVID-19 pandemic.

Questions and Answers: Proposals for amendments to the Solvency II Directive and a new Insurance Recovery and Resolution Directive : The review is an opportunity to reflect more broadly on the lessons learned from the first years of application of these rules, including during the COVID-19 crisis. The (re)insurance sector (insurance and reinsurance) holds large volumes of investments...

ICMA AMIC responds to EC consultation to review the EU securitisation regulation (SECR) : The response highlights that the low level of securitisation issuances since the entry into application of the SECR is mainly due to the accommodative monetary policies of central banks, but that there is still merit in introducing amendments to the SECR

Environmental, Social, Governance (ESG)

SASB: More Than Half of S&P Global 1200 Now Disclose Using SASB Standards : Milestone represents growing international momentum around ESG disclosure to investors

UNEP FI: At the 2-year mark, over 40% of the banking sector is now committed to the Principles for Responsible Banking : We celebrate the Principles for Responsible Banking and the work of signatory banks as they continue along their 4 year journey of implementation. 

EuropeanIssuers raises concerns on the European Commission’s Corporate Sustainability Reporting Directive Proposal : EuropeanIssuers contributed to the European Commission’s call for feedback on the Corporate Sustainability Reporting Directive (CSRD) Proposal.

ICMA publishes an update on the EU sustainability disclosure regime : New and amended EU legislation is introducing significant sustainability and ESG related disclosure requirements that are impacting all participants in the European capital markets.

SSE Initiative: Exchange in Focus: CME Group Launches First-Ever Sustainable Derivatives Clearing Service : Companies are increasing their sustainable hedging activity, defined as both the trading of exchange-traded derivatives such as carbon offsets, battery metals, and bioenergy, as well as hedging activity with interest rate and foreign exchange futures to support ESG initiatives. 

Fin Tech Regulation

SSM's Enria: Digital innovation in the banking sector: pay-offs and perils : The pandemic has turbo-charged digitalisation. Innovation in the banking sector has proved its value to society.

EBA sees rapid growth in the use of digital platforms in the EU’s banking and payments sector and identifies steps to enhance the monitoring : The use of digital platforms in the EU’s banking and payments sector is growing rapidly and offers opportunities for EU consumers and firms. Platformisation is resulting in new dependencies between financial and non-financial firms but supervisors are facing challenges in monitoring developments.

Bruegel: El Salvador’s great crypto experiment : Can bitcoin surpass the dollar in popularity and make El Salvador the first state to operate entirely with a private currency? In September 2021, the government of El Salvador became the first to make bitcoin legal tender.  

Economic Policies Impacting EU Finance

FT: Varadkar says Ireland wants to be ‘in the tent’ on OECD global tax deal : An end to Dublin’s objections would clear a big hurdle to final agreement on a worldwide corporate 15% rate 

Brexit and the City

Trade Associations Submit Letter on UK CCP Equivalence : ISDA and eight other trade associations sent a letter to Commissioner Mairead McGuiness, requesting that the European Commission (EC) extend its equivalence decision for UK central counterparties.

City AM: Brexit-proof: City's share of European investment management market larger than Frankfurt, Paris and Zurich combined : The City of London and the UK remain the second largest investment management centre in the world, behind New York City and other US hubs taken as one market, the Investment Association said today.

Brexit

EURACTIV: EU exodus from UK continues, new data finds : The number of EU nationals living in the UK dropped by 200,000 in 2020, the year that the UK left the bloc, according to data published on Friday (17 September) by the UK’s Office of National Statistics (ONS).