Welcome to our Gold Friends weekly e-mail.
My highlights of the week: `ESG’: Bloomberg spotlights “socially conscious” investing in companies controlled by a state accused of barbaric war crimes – shutting Russia out of mainstream investing for a generation? EBA reports limited direct impact on EU banks from Russia, but Botin calls for a `green lending’ definition to cut dependence on Russian fuel. The Commission and ECB discuss EU financial integration. Both ECOFIN and McGuiness underline the necessity of action to cut over-reliance on UK CCPs. The new ISSB proposed comprehensive sustainability disclosures. The Commission consults on the legal aspects of making digital euro the single currency – should it be required – even as the ECB does not rush to introduce a retail CBDC. The UK now plans to become a global hub for cryptoassets… just as the rest of the world realises the AML/CFT risks?
Graham Bishop
Articles from 1-7 April 2022
General Financial Policy
Economic and Financial Affairs Council, 5 April 2022 : Dombrovskis "...the implementation of the OECD agreement concerning the Pillar 2 of global taxation: We regret that agreement was not possible ... commend the French Presidency's outstanding work and commitment to make sure that there is consensus and agreement on this important file. View Article
Commissioner McGuinness at the ECB/European Commission Conference on European financial integration, 'An EU financial system : ..one of the main ways we can [build a financial system is by deepening the Capital Markets Union, which also means building up key financial infrastructures within the European Union, in particular our central counterparties. View Article
ECB's de Guindos: An EU financial system for the future : "...progress achieved on financial integration since the start of Economic and Monetary Union (EMU) has helped to increase the resilience of the EU financial sector ... a further deepening of EMU can help tackle the current and future challenges that come our way." View Article
Pandemic did not impair financial integration in the euro area, ECB report shows : Combined fiscal and monetary response kept financial fragmentation in check during pandemic; Resilient financial integration vital for euro area economy and financial sector; EU equity markets need further promotion to finance green and digital transformations View Article
IMF blog: First Global Bank Stress Test Highlights Increased Financial Resilience : The world’s banking systems saw significant capital increases ahead of the pandemic and are resilient to very large shocks. View Article
VOX Brunnermaier, James, Landau: Sanctions and the international monetary system : The freezing of Russian foreign exchange reserves will have long-term and systemic consequences. This column argues that the dominant role of the dollar as a reserve currency will be unaffected. No other country can provide.. a large, liquid government bond market and a fully open capital account. View Article
LSE: Russia’s invasion of Ukraine: A turning point for European integration? : The war in Ukraine has helped foster solidarity between EU states, who have united to impose sanctions on Russia. Uwe Wunderlich assesses what this new spirit of cooperation might mean for the future of the integration project. View Article
ACCA: Accountants’ confidence edges higher in Q1 2022, but cost concerns reach a record high : Finance professionals identify the biggest risks ahead - supply chain volatility and renewed Covid restrictions. View Article
Banking Union
EBA Risk Dashboard indicates limited direct impact on EU banks from the Russian invasion of Ukraine but also points to clear medium-term ris : - First-round risks stemming from the Russian invasion of Ukraine are not a fundamental threat to the stability of the EU banking system, but second-round effects may be more material- EU bank capital and liquidity ratios remained strong View Article
SSM's Andrea: Hearing at the European Parliament’s Economic and Monetary Affairs Committee : The ECB is closely monitoring the impacts of current developments on the banking sector. View Article
SRB Bi-annual reporting note to Eurogroup (EG) : This note is aimed at reporting to the Eurogroup of 4 April 2022 on (1) the recent resolution cases, (2) SRB progress and priorities in 2022, and (3) an update on the Single Resolution Fund (SRF), including the common backstop and the SRB consultation process on ex-ante contributions to the SRF. View Article
FSB welcomes smooth transition from LIBOR : The end of 2021 marked a major milestone in the transition away from LIBOR and the FSB welcomes the smooth transition to robust alternative rates across global markets, primarily overnight risk-free or nearly risk-free rates (RFRs). View Article
Capital Markets Union
European Commission adopts additional equivalence decisions for US exchanges : As a result, derivatives traded on these US exchanges will now be treated as exchange-traded derivatives under EU law. View Article
Better Finance: EIOPA looks into costs and past performance of insurance and pension products : BETTER FINANCE welcomes the fourth report on insurance and pension products' costs and past performance published by the European Insurance and Occupational Pensions Authority (EIOPA). View Article
ICMA: ICMA Quarterly Report for the Second Quarter of 2022 : The transition from LIBOR in the bond market; Russia-Ukraine: sanctions effects on markets; CSDR mandatory buy-ins: v 2.0; The GMRA: marking 30 years of ongoing service; Ensuring the usability of the EU Taxonomy; Diversity and inclusion measures at the Banque de France View Article
IOSCO seeks feedback on market liquidity issues affecting corporate bond markets under stress and good practices concerning ETFs. : Feedback will inform IOSCO’s ongoing review of the sector and future consideration on ways to improve market functioning and the resilience of liquidity supply under stress. View Article
ESMA: ESG funds provided better returns for investors in 2020 : A new finding this year is that UCITS with an environmental, socialand governance (ESG) strategy (including equity, bond and mixed funds) outperformed their non-ESG peers, and were also overall cheaper. View Article
Environmental, Social, Governance (ESG)
Bloomberg: ESG Rating Firms Reeling as War Exposes Russian Blind Spot : Regulators calling for rethink of how ESG ratings system works; An estimated 600-plus standards, rankings, frameworks exist View Article
European Commission: Targeted consultation on the functioning of the ESG ratings market in the European Union: ESG ratings generally assess the impact of environmental, social, and governance factors on a company and a company’s impact on the outside world. View Article
ALFI responds to the ESMA call for evidence on ESG ratings : The aim of the consultation was to gather information about the size, structure, resourcing, revenues and product offerings of the different ESG rating providers operating in the EU. View Article
EIOPA launches climate stress test for the European occupational pension sector : Sustainability and the management of environmental risks have become key considerations for long-term investors and in particular for European institutions for occupational retirement provision (IORPs). View Article
IFRS: ISSB delivers proposals that create comprehensive global baseline of sustainability disclosures : The International Sustainability Standards Board (ISSB), established at COP26 to develop a comprehensive global baseline of sustainability disclosures for the capital markets, today launched a consultation on its first two proposed standards View Article
IFRS: ISSB communicates plans to build on SASB’s industry-based Standards and leverage SASB’s industry-based approach to standards developme : As the IFRS Foundation Trustees committed when launching the ISSB, it will build on the work of existing investor-focused reporting initiatives to become the global standard-setter for sustainability disclosures for the financial markets. View Article
IFAC Congratulates the ISSB on Publication of its First Two Proposed Standards Addressing Climate and General Sustainability-Related Disclos : Encourages global accountancy profession to provide feedback View Article
Three key steps for EFRAG’s Sustainability reporting pillar before the end of April : The organisation of its Sustainability reporting pillar; The finalisation of a first set of exposure drafts; andThe launch of the public consultation on the exposure drafts. View Article
Reuters: Botin urges EU to define green lending to reduce dependence on Russian energy : The chairman of Spanish bank Santander called for the European Union to define what kind of lending is considered consistent with a net zero energy policy, to help hasten moves to reduce dependence on Russian oil and gas. View Article
CER: The EU emissions trading system after the energy price spike : The economic recovery from the pandemic has led to an energy crunch, and war in Ukraine has contributed to increasing energy prices and complicated the politics of carbon pricing. This policy brief discusses how to make a higher and more comprehensive EU carbon price both effective and politically feasible. View Article
UNEP-FI: Investor Climate Action Plans & net zero targets: Opportunities for progress in 2022 : This blog highlights the need for high-level climate pledges to be accompanied by net-zero targets and detailed climate action plans and suggests ways for investors to turn bold pledges into action in 2022. View Article
ECGI: Dual Class Shares in the Age of Common Ownership : Dual class shares and the anticompetitive effects of common ownership are two of the most discussed corporate governance issues of our time. In this Article, we identify a hidden connection between them, which allows us to derive policy implications that are relevant for both. View Article
Better Finance: Compensation for Wirecard Investors : Wirecard AG’s bankruptcy is likely one of the biggest economic scandals in German history. Within no time it became clear that the high-tech hopes for online payments were nothing but a colossal fraud scheme. View Article
Fin Tech Regulation
European Commission: Targeted consultation on a digital euro : For a digital euro to be used as the single currency, concurrently with euro banknotes and coins, it would require a Regulation of the co-legislator, upon a proposal by the Commission, on the basis of Article 133 TFUE. View Article
UK Government sets out plan to make UK a global cryptoasset technology hub : Stablecoins to be brought within regulation paving their way for use in the UK as a recognised form of payment. View Article
BDB: Digital euro must strengthen Europe’s sovereignty and that of the private sector : It would be a mistake to think of the ECB’s digital euro as merely being legal tender for consumers. View Article
PYMNTS: ECB, Fed, BoE Work on an Interoperable CBDC : The ECB is not rushing to introduce a retail CBDC in the economy, although it is conducting pilot programs to understand people’s needs. View Article
European Parliament: Crypto assets: new rules to stop illicit flows in the EU : Crypto-assets’ transfers would need to be traced and identified to prevent their use in money laundering, terrorist financing, and other crimes. View Article
Economic Policies Impacting EU Finance
ALFI comments on the proposed Council "Unshell" Tax Directive : Draft Unshell Directive - Fighting the use of shell entities and arrangements for taxpurposes View Article
CEPS: Fiscal rules and the macroeconomic constraint : The need to revise the eurozone fiscal rules now seems widely accepted and many amendments are being discussed. View Article
Brexit and the City
ECOFIN: Council Conclusions on the EU’s economic and financial strategic autonomy : RECALLS against this backdrop the Communication of the Commission of 19 January 20212,whereby the Commission sets out how the EU can reinforce its open strategic autonomy in the macro-economic and financial fields; highlights 3rd country CCPs View Article
IRSG response to HM Government Financial Services Future Regulatory Framework: Proposals for reform : The IRSG are supportive of the proposals set out in the consultation but believe there may be too large a gap between the high-level legislation that sets the overall objectives of UK policy and the specific rules applying to products or markets.. View Article
Reuters Analysis: Banks tiptoe into EU tussle over reining in foreign lenders : Banks have begun quietly trying to persuade the European Union to tone down proposals to toughen scrutiny of non-EU lenders to ensure the planned measures don't also curb companies' access to international finance. View Article
Airmic: Brexit threatening London Market’s influence in the insurance industry : Airmic, the UK association for risk and insurance professionals has said that Brexit is threatening the London Markets influence in the global industry. View Article
Brexit
UKTPO podcast - Reviewing the UK's first post-Brexit trade deal: UK-Australia : It’s certainly an ambitious Agreement, for one thing it will remove practically all tariff protection for imports of agricultural products – something which the EU would be very unlikely to have countenanced. View Article
UK in a Changing Europe: UK-EU regulatory divergence tracker: third edition : This is the third edition of the UK in a Changing Europe’s UK-EU regulatory divergence tracker, covering 27 cases of divergence since December 2021. View Article
UK in a Changing Europe: EU corporate sustainability rules mean new due diligence for UK companies : Although mainly aimed at EU businesses, the directive will also affect UK and other non-EU businesses which either have sufficiently large EU activities, have EU parents or are involved in EU supply chains. The costs involved may be significant. View Article
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