This week in "Brussels"
10 January 2019
Updated EBA Risk Dashboard, ECB's Angeloni warns of rise in banking contagion risks, temporary administrators appointed for Banca Carige, EB's report on the impact&implementation of IFRS 9, EIOPA Financial Stability Report, EFAMA and AMIC joint report on liquidity stress tests in investment funds.
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Articles from 20 December 2018 - 10 January 2019 |
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Banking Union |
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Updated EBA Risk Dashboard shows EU banks have further improved their resilience but profitability remains weak
The EBA published its Risk Dashboard, which summarises the main risks and vulnerabilities in the EU banking sector using quantitative risk indicators. Together with the Risk Dashboard, the EBA published the results of its Risk Assessment Questionnaire, which includes the opinions of banks and market analysts on the risk outlook collected in autumn 2018. View Article |
Financial Times: Eurozone is learning to deal with failed banks, regulator says
Elke König calls Single Resolution Board a ‘game changer’ but wants more firepower. As the eurozone official in charge of shutting down failed banks, Elke König is leading a revolution in how Europe handles financial catastrophe. View Article |
Bloomberg: ECB's Angeloni sees possible rise in banking contagion risks
European Central Bank official Ignazio Angeloni sees a possible inversion of the economic cycle that could slow 2019 growth while banking contagion risks may rise, according to an interview. View Article |
ECB appoints temporary administrators for Banca Carige
The European Central Bank appointed three temporary administrators and a three-member surveillance committee to take charge of Banca Carige and replace its Board of Directors. The decision came after the majority of board members of Banca Carige resigned. View Article |
EBA´s first observation report on the impact and implementation of IFRS 9
Following the first application date/period of IFRS 9 in the EU, the EBA is scrutinising the effective implementation of the standard by EU institutions and its impact as initially observed. View Article |
EBA provides preliminary assessment on post-implementation impact of IFRS 9 on EU Institutions
This exercise is mainly based on data extracted from institutions' supervisory reporting. The initial observations from this exercise are consistent with the forecasts of the second EBA impact assessment report. The report also identifies some areas for ongoing scrutiny and further work from an EBA perspective. View Article |
ECB: Work group on euro risk-free rates seeks market feedback on transition from EONIA to ESTER and ESTER-based term structure methodologies
The working group on euro risk-free rates is calling on market participants and all other interested parties to comment on its technical analysis of the paths available for transitioning from the EONIA to the euro short-term rate (ESTER), as well as on its recommendation of the preferred transition option. View Article |
BoE: UK withdrawal from the EU: Further changes to PRA Rulebook and Binding Technical Standards and Resolution Binding Technical Standards
The UK’s withdrawal from the European Union requires changes to be made to UK legislation to ensure that it remains functional. This Consultation Paper contains two consultations to fix deficiencies arising from the UK’s withdrawal from the EU. View Article |
ECB publishes consolidated Guide to assessments of licence applications
This text combines the content of the first guide published in March 2018 and that of Part 2, the public consultation for which ended on 25 October 2018. The consolidated guide is intended as a practical tool to support those involved in the process of authorisation and to ensure a smooth and effective procedure and assessment. View Article |
EBA reports on crypto-assets
The EBA published the results of its assessment of the applicability and suitability of EU law to crypto-assets. The EBA recommends that the European Commission carry out further analysis to determine the appropriate EU-level response. The EBA also identifies a number of actions that it will take in 2019 to enhance the monitoring of financial institutions' crypto-asset activities and consumer-facing disclosure practices. View Article |
EBF recommendations for an EU framework of experimentation
To support the ongoing attention of supervisors and regulators on testing frameworks in Europe, the EBF has developed a list of detailed recommendations for the development of an EU harmonised framework for experimentation. View Article |
EPC: Publication of the SEPA Proxy Lookup (SPL) scheme rulebook
The EPC has published the first version of the SEPA Proxy Lookup (SPL) scheme rulebook which consists of a set of rules, practices and standards that makes it possible to operate, join and participate in the SPL scheme. View Article |
BIS paper: Proceeding with caution – a survey on central bank digital currency
A survey of central banks shows that a majority are collaboratively looking at the implications of a central bank digital currency. Although many have reached the stage of considering practical issues, central banks appear to be proceeding cautiously and few report plans to issue a digital currency in the short or medium term. View Article |
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Capital Markets Union |
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The Economist: The EU’s unbundling directive is reinforcing the power of scale
Predictions that the directive would squeeze research spending and brokers’ revenues, and hasten market concentration, look broadly correct, The Economist's editorial says. View Article |
ESMA updates its Q&As on MiFID II and MiFIR commodity derivatives topics
These Q&As provide clarification on issues related to the MiFID II/MiFIR regime for commodity derivatives, including on position limits, position reporting and ancillary activity. View Article |
ESMA updates its Q&As on MiFID II and MiFIR transparency topics
ESMA updated its Questions and Answers regarding transparency issues under the Market in Financial Instruments Directive (MiFID II) and Regulation (MiFIR). View Article |
Financial Times: MiFID II has thrown up several unintended consequences
The article affirms that new rules have put a strain on relationships between analysts and fund managers. View Article |
ESMA provides standards on supervisory cooperation under the Securitisation Regulation
ESMA’s RTS clarify how CAs and the ESAs should cooperate with each other in the field of securitisation transactions. View Article |
Capital Markets Union: Common EU rules on securitisation will apply as of 1 January
New rules to revive the EU's securitisation market will lead to more investment opportunities and increased lending to households and businesses. View Article |
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Clients Union |
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Audit&Risk: Public trust in business ethics rises, but more still to be done
Tax avoidance and executive pay continue to rank highest in the list of public concerns about business ethics, but environmental responsibility has risen sharply to joint second place, according to the latest survey for the Institute of Business Ethics. View Article |
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Insurance |
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EIOPA outlines key financial stability risks
The European Insurance and Occupational Pensions Authority published its December 2018 Financial Stability Report of the (re)insurance and occupational pensions sectors in the European Economic Area. View Article |
EIOPA: Digital technologies in insurance and pensions continue to grow alongside cross-selling practices and the sale of add-on insurance
The European Insurance and Occupational Pensions Authority published its seventh Consumer Trends Report outlining key developments in the insurance and pensions sectors impacting European consumers. View Article |
EIOPA publishes Opinion on non-life cross-border insurance business of a long-term nature
The Opinion is addressed to National Competent Authorities (NCAs) and outlines EIOPA’s expectations on the calculation of technical provisions and the governance for cross-border business. View Article |
Insurance Europe: Europe’s largest reinsurers explain the supervisory benefits of using internal models
A group of Europe’s largest reinsurers, the Insurance Europe Reinsurance Advisory Board (RAB), has published an overview of the benefits of insurers’ use of internal models, titled Internal models: a reinsurance perspective. View Article |
EIOPA publishes third annual report on the use of limitations and exemptions from reporting under Solvency II
The report addresses the proportionality principle on the reporting requirements, from which the limitations and exemptions on reporting - as foreseen in Article 35 of the Solvency II Directive - are just one of the existing proportionality tools. View Article |
EIOPA publishes second annual report on the use of capital add-ons under Solvency II
The objective is to contribute to a higher degree of supervisory convergence in the use of capital add-ons between supervisory authorities in the different Member States and to highlight any concerns regarding the capital add-ons framework. The analysis is based on 2017 year-end Solvency II data. View Article |
EIOPA calls for input on Solvency II reporting and disclosure requirements
The EIOPA launched a call for input on Solvency II reporting and disclosure requirements as part of the 2020 Solvency II review. EIOPA will review these requirements with the aim to assess if they remain fit-for-purpose and particularly if they allow for a risk-based and proportionate approach. View Article |
EIOPA reports on group supervision and capital management of insurance and reinsurance undertakings
The EIOPA published a Report on Group Supervision and Capital Management of (Re)Insurance Undertakings and on specific topics related to Freedom to Provide Services (FoS) and Freedom of Establishment (FoE) under Solvency II Directive. View Article |
EIOPA: Bankruptcy of Qudos Insurance A/S – Equal treatment of European policyholders
Upon request of the Danish Financial Supervisory Authority (Finanstilsynet), the Danish Maritime and Commercial High Court declared the bankruptcy of Qudos Insurance A/S. The EIOPA has been in close contact with the Finanstilsynet to ensure equal treatment of policyholders throughout Europe. View Article |
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Asset Management |
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Investment firms: Council agrees position on new regulatory and supervision framework
The Council is making the rules applicable to investment firms more proportionate and more appropriate to the level of risk which they take. View Article |
EFAMA and AMIC publish joint report on liquidity stress tests in investment funds
The report highlights the role of stress tests as an important risk management tool which allows the fund manager to assess the impact of different market stresses at the portfolio level. Moreover, it outlines the long-standing standard practices in the fund industry and the existing comprehensive requirements foreseen by European and national laws. View Article |
Investment & Pensions Europe: EU Council scraps IORP II delegated acts from green finance proposal
The EU Council has dropped a disputed amendment to the IORP II directive, which would have allowed the European Commission to issue rules relating to how pension funds take into account environmental, social and corporate governance (ESG) risks. View Article |
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Corporate Governance/Accounting |
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IASB: New standard on leases now effective
IFRS 16 Leases was issued in January 2016 and is effective for annual reporting periods starting on or after 1 January 2019. It replaces IAS 17 Leases and related Interpretations. View Article |
ECA´s report on Single Resolution Board’s, European Commission’s and Council’s contingent liabilities
The SRB and the Commission should continuously assess their financial risks and accounting thereof, arising from contingent liabilities related to bank-resolution lawsuits as from their 2018 accounts, according to a new report by the ECA. View Article |
EBA/ISDA: Responses to paper on financial instruments with characteristics of equity
EBA and ISDA´s Accounting Committee have published their comment letters to the IASB on the discussion paper DP/2018/1: Financial Instruments with Characteristics of Equity. View Article |
IVSC: Consultation on valuation of non-financial liabilities
The IVSC has launched a consultation on new standard IVS 220 covering valuation of non-financial liabilities. View Article |
Financial Times: UK stewardship code in line for significant overhaul
The UK stewardship code, which dictates how fund managers hold to account the companies in which they invest, may be abolished if a planned reform is insufficiently far-reaching. The FRC is looking to overhaul the code with a consultation expected to open on January 30. View Article |
ECIIA: Boards face greater risks
Boards of directors are exposed to a wider range of risks and carry more accountability than they did only a decade ago, according to a recent webinar hosted by the directors’ body Ecoda “Mitigating risks at board level”. View Article |
IFAC: Accountants must seize opportunity to drive effective enterprise risk management
Professional accountants have a meaningful opportunity to enable more effective Enterprise Risk Management (ERM) within their organizations, according to a report published by IFAC. View Article |
Harvard Law School Forum: Stock exchanges and shareholder rights - a race to the top, not the bottom?
The shared interests between institutional investors and exchanges suggest the importance of the investment and stock exchange communities maintaining and building mutual understanding to address common interests, such as overcoming short-termism in financial markets, writes ICGN Policy Director. View Article |
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Anti-Money Laundering |
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Anti-money laundering: EFAMA welcomes Council agreement on enhanced EBA powers
EFAMA welcomes the agreement reached in the Council on enhanced EBA powers in order to reinforce consistent implementation of the EU AML legislative framework and monitoring of the risks posed to the financial sector by money laundering activities. View Article |
Financial Times: Brussels seeks tougher anti-money laundering controls
Brussels is seeking tougher European-level enforcement of anti-money laundering rules after a spate of scandals that have shaken faith in the bloc’s ability to keep dirty money out of its financial system. View Article |
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Financial Services Policy |
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ECMI - Keeping up with Innovation: Designing a European Sandbox for Fintech
The authors show how EU financial regulation may stifle the innovation of financial services. Using the example of automated investment advice, so-called robo-advisors, they show how a proper balance between regulatory objectives could be achieved through establishing a ‘guided’ regulatory sandbox. View Article |
ESAs publish joint report on regulatory sandboxes and innovation hubs
The report sets out a comparative analysis of the innovation facilitators established to date within the EU. The ESAs also set out best practices for the design and operation of innovation facilitators. View Article |
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Consultation Deadlines |
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FCA: Brexit: further proposals to prepare the UK's regulatory regime
The FCA published two consultations to prepare for the UK’s exit from the EU: proposals to introduce the financial services contracts regime (FSCR) as well as proposed fees for regulating securitisation repositories. View Article |
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Grahams Articles, Comments & Speeches |
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Banca Carige: an inauspicious start to 2019?
The ECB announcement that it has appointed temporary administrators to the troubled Banca Carige to safeguard the bank’s financial stability was the first time the ECB used these powers - Graham Bishop assesses whether Carige is a foretaste of a new dimension of the slow-burning EU banking crisis. View Article |
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Political |
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Main results - General Affairs Council
The Council focused on the priorities of the Romanian presidency and plans for negotiations on the next long-term EU budget. Ministers also exchanged views on disinformation. View Article |
POLITICO: Michel Barnier back pushing his vision for EU’s future
The EU’s Brexit negotiator continues to sound like a candidate-in-waiting for an EU top job. View Article |
SPIEGEL: Europe's right wing takes aim at the EU
Right-wing populist parties in Europe have been gaining strength for years. Now, they hope to use European Parliament elections in May as a springboard for gaining greater influence in the EU. Surveys indicate they may be successful. View Article |
Paul N. Goldschmidt: The “Yellow Jackets” and the European elections
More than ever the ideas propagated by the Yellow Jackets and the stakes of the European elections are closely linked, writes Paul N. Goldschmidt. Next May, every citizen will be called to exercise his responsibility as an elector and to fully accept the verdict of the poll. View Article |
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Financial |
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ICAS: Can the world handle another financial crisis?
The global financial system is bound to face another severe test some time soon, but is it ready? Ian Fraser investigates in the first of a three-part series. View Article |
Financial Times: Challenging times lie ahead for the eurozone
The FT warns that stronger tools are needed to ensure success in the event of a new crisis. View Article |
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Economic |
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ECB's De Guindos: Fostering resilience and convergence in Economic and Monetary Union
Luis de Guindos, Vice-President of the European Central Bank, draws some lessons from Latvia's experience within the euro area to consider what specific steps can be taken to ensure the long-term success of the euro. View Article |
EurActiv: ECB sees global economic slowdown in 2019
The global economy is set to slow down in 2019 and stabilise thereafter, the European Central Bank said, while still expecting prices to rise. View Article |
Financial Times: EU’s wilful blindness to sovereign risk adds to eurozone danger
Patrick Jenkins warns that the fiction of zero risk-weighted sovereign bonds threatens a eurozone ‘doom loop’. View Article |
ECB: Lautenschlaeger sees possible 2019 rate hike on inflation
The European Central Bank may increase interest rates next year if inflation picks up, executive-board member Sabine Lautenschlaeger said in an interview with Deutschlandfunk radio. View Article |
BIS working paper: A key currency view of global imbalances
This working paper contributes to a growing body of work that breaks free of the "triple coincidence" often assumed in international finance. A currency's domain does not coincide with the borders of the jurisdiction that issues it. Instead, key currencies enjoy global use. A key currency perspective can change how global imbalances look to economists, policymakers and market participants. View Article |
Chatham House: How Europe will try to dodge the US–China standoff in 2019
European countries share some of America’s concerns about China, but a hawkish stance from the US will push them to develop a more independent approach, writes Chatham House Director Robin Niblett. View Article |
Bloomberg: The EU is taking an important step toward a new US trade deal
The European Union’s executive arm is preparing to ask the bloc’s governments for the green light to start negotiations with the U.S. on a free-trade deal, highlighting hopes of keeping at bay the threat of American tariffs on foreign cars. View Article |
Euro area unemployment at 7.9%
The euro area (EA19) seasonally-adjusted unemployment rate was 7.9% in November 2018, down from 8.0% in October 2018 and from 8.7% in November 2017. This is the lowest rate recorded in the euro area since October 2008. View Article |
December 2018: Economic Sentiment decreases markedly in both the euro area and the EU
In December 2018, the Economic Sentiment Indicator (ESI) decreased markedly in both the euro area (by 2.2 points to 107.3) and the EU (by 2.0 points to 107.6). View Article |
Volume of retail trade up by 0.6% in euro area
In November 2018 compared with October 2018, the seasonally adjusted volume of retail trade increased by 0.6% in the euro area (EA19) and by 0.7% in the EU28, according to estimates from Eurostat. View Article |
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Graham's tweets |
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© Graham Bishop
Banking Union