Welcome to our Gold Friends weekly e-mail.
Highlights of my week: The Commission laid out clearly the next steps in its creation of a `silent foundation’ for the EU’s global leadership in standards e.g., for green finance. The Conference on the Future of Europe (CoFE) enters the next phase of moving from discussion of ideas to shaping policy proposals that could define the EU that new members might join in the mid-2020s and onwards. The EBA launched the aptly named EuReCa database to find AML weaknesses. ESMA had an active week – publishing the final parts of its CCP recovery regime as well as consulting on CCP anti-pro-cyclicality and ending the clearing exemption of pension funds. The latter will push EU pension funds towards using EU-based CCPs. ESMA also took steps to stop UK firms’ “tied agents” circumventing MiFID rules. Commissioner McGuiness introduced the Complementary Delegated Climate Act to allow nuclear and gas to be counted transitionally as `green’ but triggered a threat of Court action from Austria and Luxembourg. Facebook’s Libra/Diem cryptocurrency project was sold – but is it really the end? City AM reported that the next Queen’s Speech will feature a bonfire of financial services regulation in the UK. Whatever else, it would be a clear signal of divergence from EU rules.
PS: Don't forget to watch the video of my 179th Brussels 4 Breakfast with Tilman Lueder of DG FISMA
Graham Bishop
Articles from 28 January-3 February 2022
General Financial Policy
European Commission: New approach to enable global leadership of EU standards promoting values and a resilient, green and digital Single Mar : Standards are the silent foundation of the EU Single Market and global competitiveness. They help manufacturers ensure the interoperability of products and services, reduce costs, improve safety and foster innovation. View Article
ECON: Eurogroup President questioned on fiscal rule reform, inflation, and banking union : The reform of the EU’s fiscal rules, banking union, inflation and the economic recovery topped the discussion MEPs had with Eurogroup President Paschal Donohoe on Wednesday. View Article
DG FISMA newsletter: capital markets, listing rules, French Presidency on financial services, financial competence : View Article
EPC: High Noon for the Conference on the Future of Europe : Last weekend, the Conference on the Future of Europe entered a new phase. View Article
Banking Union
MEPs agree on changes to improve resolution framework for EU banks : The text adopted today by a large majority introduces several important points significantly improving on the European Commission proposal. View Article
SRB publishes MREL dashboard Q3 2021 : The dashboard shows that, on the whole, banks continue to make progress in building up their level of MREL, the financial instruments each bank must hold to absorb losses and recapitalise in the event of a failure. View Article
EBA launches today 'EuReCA', the EU's central database for anti-money laundering and counter-terrorism financing : This European reporting System for material CFT/AML weaknesses, EuReCA, will be central to coordinating efforts by competent authorities and the EBA to prevent and counter money laundering and terrorist financing (ML/TF) risks in the Union. View Article
ISDA: Time to Revisit FRTB Treatment of Funds : In some cases, this balance isn’t quite right, and further work is needed to fine-tune the rules. The treatment of equity investments in funds (EIIF) under the revised market risk capital framework is one such area. View Article
Capital Markets Union
ESMA publishes Final Reports on CCP recovery regime : The seven Final Reports cover proposals for Regulatory Technical Standards (RTSs) on the methodology for calculation and maintenance of the additional amount of pre-funded dedicated own resources, on the factors to be taken into account.. the recompense mechanism for non-defaulting clearing members. View Article
ESMA consults on CCP anti-procyclicality measures : ESMA is seeking input from stakeholders on a potential review of its Regulatory Technical Standards (RTS) with the aim of harmonising the existing APC margin measures for CCPs as well as specific anti-procyclicality tools. View Article
ESMA recommends clearing obligation for pension funds to start in June 2023 : ESMA, following its assessment, concludes that PSAs are, to a large extent, operationally ready to clear their OTC derivatives but they should be given sufficient time before a clearing obligation for PSAs takes effect. View Article
ICMA has published, ‘Optimising settlement efficiency - An ERCC discussion paper’ : While ICMA and the ERCC have been supportive of cash penalties, we believe that these should be supplemented by a broader industry effort to support settlement efficiency, focusing on existing tools and processes. View Article
ICMA has developed FAQs and Best Practice Recommendations for CSDR penalty regimes : The FAQs and best practice cover a range of issues, such as scope, invoicing and billing, restitution, as well as the confirmation and allocation process under Article 6 of CSDR. View Article
ESMA makes new bond liquidity data available and publishes data for the systematic internaliser calculations : ESMA has published the latest quarterly liquidity assessment for bonds available for trading on EU trading venues. For this period, there are currently 513 liquid bonds subject to MiFID II transparency requirements. View Article
ESMA publishes supervisory briefing on the use of tied agents under MiFID II : ESMA’s monitoring of the activities of market participants from the United Kingdom (UK) in the EU has shown that such a briefing will contribute to the development of a convergent EU supervisory culture. It will also foster improved investor protection. View Article
EIOPA: Risk Dashboard shows unchanged risk levels for European insurers : The results show that insurers’ exposures to macro risks remain at a high level while all other risk categories, such as insurance as well as profitability and solvency risks stay at medium levels. View Article
EIOPA: Follow-up survey on the Pan-European Personal Pension Product : The aim of this survey is to gauge and better understand the potential take-up of PEPP by eligible providers (asset managers, insurance undertakings, IORPs and credit institutions, including banks). View Article
GFIA: Global insurers set out high level principles on the use of supervisory technology : As within the insurance sector itself, using technology for insurance supervision has the potential to streamline processes, reduce costs and lead to better-quality services. At the same time, new technology can also create new risks and unintended outcomes. View Article
Environmental, Social, Governance (ESG)
Remarks by Commissioner McGuinness at the press conference on the EU Taxonomy Complementary Climate Delegated Act : We said when we adopted the first Delegated Act that we would return to some of the more difficult elements, and that's why we are here today. View Article
EURACTIV: Austria, Luxembourg to take green label for nuclear and gas to EU courts : The EU’s sustainable finance rules presented on Wednesday will award a “green” label to gas and nuclear power, which has prompted Austria and Luxembourg to announce a lawsuit. View Article
POLITICO: Green bust or green flush: Figuring out the impact of the EU’s new investment rules : The financial taxonomy creates a ‘common language’ for green investing. View Article
EIOPA publishes third paper on methodological principles of insurance stress testing climate risks : The methodological paper focuses on the climate change component and is a further step in enhancing EIOPA’s stress testing framework. View Article
ECB Banking Supervision launches 2022 climate risk stress test : Stress test to be learning exercise to assess banks’ climate-risk preparedness; Aggregate results to be published in July 2022; No direct capital impact on banks from exercise View Article
IPE: Joint effort delivers template for pension funds’ TCFD duties : The Investment Association (IA), Pensions and Lifetime Savings Association (PLSA) and the Association of British Insurers (ABI) have produced a template to help UK pension schemes deliver on new climate change reporting-related requirements they face. View Article
Protecting Customers
ESAs publish thematic repository on financial education and digitalisation initiatives of National Competent Authorities : The repository contains 127 national initiatives that provide consumers with helpful information on how to improve their financial literacy. In addition, the EBA also published the second edition of its general repository of national education initiatives in the banking sector, which contains another 200 initiatives. View Article
EIOPA consults on its proposals on Retail Investor Protection : The Commission's Call for advice relates to the implementation of the European Commission’s Capital Markets Union Action Plan and, more specifically, its Retail Investment Strategy, which aims to improve consumer outcomes and increase consumer participation in capital markets. View Article
Fin Tech Regulation
Finance Watch: Facebook’s digital currency plans: frozen for good or merely on ice? : But regulators and citizens cannot afford to grow complacent. With thousands of crypto-assets in circulation, and dozens more being launched every day, others may follow where Facebook sought to lead. View Article
OECD: Why Decentralised Finance (DeFi) Matters and the Policy Implications : The growing application of Decentralised Finance or DeFi and its increasing interconnectedness with traditional markets presents an urgent challenge for policy makers, as DeFi applications give rise to important risks and challenges for participants and the markets. View Article
Oliver Wyman's Elliott: Are Cryptoassets Tulips or Dot-coms? : Our new paper suggests the answer may lie somewhere in the middle, and could lead to more effective policy responses View Article
Friends' Standard Services
CSFI: 179th Brussels 4 Breakfast with Tilman Lueder - DG FISMA : Tilman Lueder gives a fascinating insight into the Commission's work programme, covering its priorities in the securities/markets area. View Article
Economic Policies Impacting EU Finance
Jacques Delors Centre: How to make the marriage work: Wedding the Recovery and Resilience Facility and European Semester : A year into its existence, the Recovery and Resilience Facility finds itself closely wed to the European Semester. It is a difficult marriage, but it is a marriage made to last. View Article
SUERF: Pledge or pretext? Lessons from the Fiscal Compact : Since inception, enforcement of the EU’s Stability and Growth Pact has been a challenge. Unless member states concluded on their own that following EU rules would be to their advantage, the effect of external constraints has been limited. View Article
Brexit and the City
Reuters: EU ropes in pension funds to boost post-Brexit clearing capacity : Mandatory clearing of derivatives contracts by pension funds in the European Union should start in June 2023, helping the bloc to cut reliance on London, the EU’s securities watchdog said on Tuesday. View Article
CITY AM: Brexit financial services regulation bonfire set to be in next Queen’s Speech : An overhaul of the UK’s financial services regulation is set to be included in the next Queen’s Speech as the government speeds up its push to make the City more competitive post-Brexit. View Article
UK Finance responds to Treasury Committee inquiry on post-Brexit financial services : "The UK’s position as a world-leading financial centre post-Brexit is central to our economic and social prosperity. It is crucial that the government, Parliament, regulators and the industry all work closely together to preserve it." View Article
City of London: Our global offer to business: London and the UK’s competitive strengths in a critical time : As financial centres across the world respond and adapt to significant challenges and change, the UK continues to be the only centre to perform well across all five dimensions: innovation, reach of financial activity, resilient business infrastructure, people, and business environment. View Article
Bloomberg: Paris Wants to Become the Mayfair of Europe for Hedge Funds : EU access and Macron’s tax cuts entice Millennium and Citadel; Talented French graduates are another big pull for U.S. firms View Article
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