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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
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: View Article
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. View Article
Der Spiegel: Concerns Rise as Bulgaria Prepares to Join the Euro : Bulgaria has significant problems with corruption and money laundering. Nevertheless, the European Union is prepared to accept the country as the next member of the eurozone. Many fear that might be a bad idea. View Article
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. View Article
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 View Article
Better Finance: Expropriation of Investors in Slovenian Banks ruled a Violation of Property Rights by European Court of Human Rights : Even though there are no details to date, it is undeniable that this violation of property rights must be remedied through the appropriate pecuniary compensation. View Article
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." View Article
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. View Article
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... View Article
Insurance Europe: Only a permanent reduction in capital requirements would enable insurers to contribute further to Europe’s economy : We welcome the EC’s acknowledgement of the need for an overall reduction in insurers’ capital requirements. View Article
Invest Europe calls on EU policymakers to use the full potential of the Solvency review : This revision paves the way towards reducing undue costs and barriers that still apply to insurers seeking to invest equity directly or indirectly into long-term projects. View Article
Insurance Europe: EC Data Act proposal can benefit insurance consumers by improving framework conditions for data partnerships : Insurance Europe has published its response to a consultation by the European Commission on its upcoming proposal for a Data Act, which aims to facilitate access to and use of data, including business-to business and business-to-government. View Article
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 View Article
EFAMA: Fund managers retain only 41% of the total cost paid by retail investors : In this new Market Insights, we deep dive into the costs of UCITS, focusing specifically on the fees charged by the various opera-tors along the investment fund value chain View Article
PensionsEurope submits comments on EFRAG Due Process Procedures on EU Sustainability Reporting Standard-Setting : PensionsEurope welcomes the opportunity to comment on the consultation regarding the EFRAG Due Process Procedures on EU Sustainability Reporting Standard-Setting. View Article
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 View Article
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. View Article
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. View Article
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. View Article
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. View Article
IFAC: Tax Changes Should be Targeted to Help Covid Recovery and Boost Fight Against Climate Crisis in G20 Countries, According to Accounting : New joint report from ACCA, CA ANZ, and IFAC finds a fall in public support for international tax collaboration despite recent corporation tax agreement View Article
ECA: Special Report 22/2021: Sustainable finance: More consistent EU action needed to redirect finance towards sustainable investment : European Court of Auditors: “Unsustainable business is still too profitable." View Article
IASB: Investor Perspectives: Disclosures in financial statements to better reflect investor needs : To help companies, the International Accounting Standards Board has proposed a new approach to developing and drafting disclosure requirements in IFRS Standards View Article
BETTER FINANCE response to the call for feedback to the Platform on Sustainable Finance’s draft report on social taxonomy : BETTER FINANCE welcomes the horizontal and vertical dimensions represented in the objectives of the taxonomy. View Article
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. View Article
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. View Article
EURACTIV: Banking and fintech: not a zero sum game : By working together, and with policymakers, banks and fintech businesses can speed up the EU’s economic recovery, writes Ellen Moeller View Article
Insurance Europe: Insurers welcome EC proposals for European digital identity and highlight technical considerations : Digital identities are an essential component of the digital single market and of national and European economies. The insurance industry therefore welcomes the EC’s initiative in this area and foresees a lot of potential in the insurance context. View Article
AFME: Building Resilience in the Cloud : A report by the Association for Financial Markets in Europe (AFME) outlines potential key regulatory barriers to the greater adoption of cloud services in capital markets and provides recommendations for policymakers and Cloud Service Providers (CSPs) to assist banks with their adoption. View Article
Capital Risk & Capital Trade Associations Respond to Basel Committee Consultation on Cryptoassets : ISDA, the Global Financial Markets Association, the Financial Services Forum, the Futures Industry Association, the Institute of International Finance and the Chamber of Digital Commerce submitted a joint response to the Basel Committee on Banking Supervision (BCBS) on its consultation on preliminary proposals for the prudential treatment of cryptoasset exposures. View Article
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. View Article
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 View Article
Insurers reiterate concerns about BEPS framework to Irish Department of Finance : GFIA has published its response to a consultation by the Irish Department of Finance on proposed changes currently being discussed as part of the OECD/G20 base erosion and profit shifting (BEPS) Inclusive Framework. View Article
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. View Article
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. View Article
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). View Article
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