We are focussed on the big themes for the next legislative period and are targeting the interaction of the driving forces of politics and economics as they force the required changes in over-arching financial regulation, thus promoting greater financial integration in Europe. Naturally, these factors include ESG and Fin Tech. Details of these services are here

The 158th Brussels 4 Breakfast was particularly rumbustious as the expert audience tried to pin down the UK's negotiation team and wish-list - in contrast to the clartiy about to be provided on the EU side. The notes are here and the video of the 49th Brussels 4 Brunch at CISI will be uploaded next week. Unusually, I recorded my opening comments explaing the process of creating a trade deal with the EU -  the podcast will also be available next week.

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Articles from 9 January 2020 - 16 January 2020

 

General Policy

ESMA report values EU Alternative Investment Funds at €5.8 trillion : ESMA study found that the EU AIF sector in 2018, as measured by Net Asset Value, amounted to €5.8tn or nearly 40% of the total EU fund industry. View Article

Banking Union

EBA: EU banks’ face a further contraction of profitability : The European Banking Authority published its Risk Dashboard and the results of the Risk Assessment Questionnaire. While the capital position of EU banks remained strong and asset quality improved further, profitability contracted in Q3 2019, with a negative outlook from both banks and analysts. View Article

Financial Times: European banking, bonds versus deposits edition : The relationship between bank deposits and bank bonds was a major part of the financial crisis. Because senior bonds were often ranked alongside deposits, they were protected. Government bailouts benefited owners of these bonds, as well as bankers. This month, a new European Central Bank working paper has some insights that, while not exactly counterintuitive, have implications for the direction that banking regulation has taken post-crisis. View Article

Financial Times: Italy emerges as biggest obstacle to eurozone banking union : The new ESM treaty is being held up because the Italian opposition, led by Matteo Salvini, is agitating against it on the grounds that it will force losses on Italians who put their savings in government bonds. View Article

Bank of England: Working paper: Impact of IFRS 9 on the cost of funding of banks in Europe : IFRS 9 increases credit loss (impairment) charges and reduces after-tax profits of banks. This makes retained earnings and hence capital resources lower than what they would be under IAS 39. To maintain their capital ratios under IFRS 9, banks could elect to hold higher levels of equity capital. View Article

ECB working paper: The impact of the ECB’s targeted long-term refinancing operations on banks’ lending policies: the role of competition : This paper assesses the impact of the Eurosystem’s TLTROs on the lending policies of euro area banks. Authors first present a simple model of oligopolistic competition in the banking sector in which two banks compete in the loan and deposit markets. One of the banks, with high funding costs, participates in the TLTROs, while the other one, with low funding costs, does not.  View Article

ECB publishes supervisory banking statistics for the third quarter of 2019 : Capital ratios for significant institutions were up slightly in the third quarter, with the total capital ratio rising to 18.05% from 18.00% in the second quarter. NPL ratio was down further to 3.41%, the lowest level since the time series was first published in 2015.  View Article

EBA report identifies key challenges in the roll out of big data and advanced analytics : The EBA published a Report on the recent trends of BD&AA in the banking sector and on the key considerations in the development, implementation and adoption of BD&AA. The aim of this assessment is to share knowledge among the stakeholders and, in particular, to ensure regulators and supervisors are well informed on the developments, in an effort to support technological neutrality across the regulatory and supervisory approaches. View Article

ECB: Working paper: Firm or bank weakness? Access to finance since the European sovereign debt crisis : This paper studies the role that ?rm and bank weakness played in the evolution of the access to external ?nance of euro area ?rms, with a particular focus on small and medium size ?rms, during and after the European sovereign debt crisis.  View Article

FCA becomes AML and CTF supervisor of UK cryptoasset activities : The FCA is now the anti-money laundering and counter terrorist financing (AML/CTF) supervisor for businesses carrying out certain cryptoasset activities under the amended Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (MLRs). View Article

Capital Markets Union

Financial Times: Traders across Europe face up to the cost of failure : Banks and asset managers will soon be grappling with a revolution in European securities markets that could push up the cost of trading by billions a year. View Article

ESMA announces key priorities for 2020-22 : The plan sets out ESMA’s future focus and objectives and reflects its expanded responsibilities and powers following the ESAs Review, and EMIR 2.2, which increases its focus on supervisory convergence, strengthens its role in building CMU and gives it with more direct supervision responsibilities. View Article

EIOPA publishes the technical specifications for the Market and credit Risk Comparative Study YE2019 : The MCRCS is an annual Europe-wide comparative study on the modelling of market and credit risk. Its main objective is to compare risk charges for a selection of asset portfolios to be used as a tool for the supervisory review of internal models.  View Article

EFAMA response to the ESA’s joint consultation paper concerning amendments to the PRIIPS KID : EFAMA provides its views and comments to the ESAs for their work and continued efforts in putting forward solutions on this targeted and technical Level 2 review of the PRIIPs Regulation.  View Article

Insurance Europe: ESAs proposals on PRIIPs: going from bad to worse : Insurance Europe has serious concerns about the review currently being undertaken of the PRIIPs Regulatory Technical Standards (RTS). Proposals put forward in a consultation by the Joint Committee of the European Supervisory Authorities (ESAs) on changes to the PRIIPS RTS would make things worse for both consumers and insurers. View Article

The European repo market at 2019 year-end - an ICMA European Repo and Collateral Council Briefing Note : The report focuses on the euro, sterling, and USD markets, and given the significant attention on the USD repo market since September 2019 and in the build-up to year-end, this is the starting point for the 2019 review. View Article

AFME recommends further improvements to the EU equivalence framework : The paper considers last year’s European Commission Communication and recent developments in the EU equivalence framework. View Article

The AMF publishes a study assessing its action regarding the complexity of structured products : The study measures the impact of a policy published jointly with the Autorité de Contrôle Prudentiel et de Résolution (ACPR) in 2010 and updated in 2016 which has the objective of limiting the complexity of structured products offered to the public in France. View Article

EBA Board of Supervisors selects Gerry Cross as new EBA Executive Director : The Board of Supervisors (BoS) of the European Banking Authority (EBA) nominated yesterday Gerry Cross as the new Executive Director of the Authority. Gerry Cross was selected from a shortlist of candidates compiled by the EBA Selection Committee. View Article

Environmental, Social, Governance (ESG)

European Commission: Financing the green transition - The European Green Deal Investment Plan and Just Transition Mechanism : The EU is committed to becoming the first climate-neutral bloc in the world by 2050. This requires significant investment from the EU and the national public sector, as well as the private sector. The European Green Deal's Investment Plan - the Sustainable Europe Investment Plan - will mobilise public investment and help to unlock private funds through EU financial instruments, notably InvestEU, which would lead to at least €1 trillion of investments. View Article

POLITICO: Brussels’ green cash credentials questioned : The European Commission got a rude awakening from its green dreams as critics assailed its financial plans to tackle climate change. The Commission foresees some of the Just Transition Mechanism cash coming from money given to national governments for cohesion funding, meant to reduce inequalities within the EU. View Article

Bruegel: European green finance is expanding, a discount on bank capital would discredit it : If EU banks are to mobilise a greater share of loans for sustainable projects they will need a reliable policy framework, clear internal performance targets and the relevant skills. A discount on bank capital underlying such assets is neither justified nor likely effective. A comprehensive review of how climate risks are reflected in prudential regulation is nevertheless in order. View Article

BusinessEurope: Sustainable Europe Investment Plan should close investment gap : The European Commission published its communication on a Sustainable Europe Investment Plan. BusinessEurope highlighted that the transition towards a climate-neutral economy must be well-designed. View Article

Global Reporting Initiative: A vision for business to accelerate progress on the SDGs : Business and policy representatives from around the world have shared their views on the changes needed to ensure companies can actively contribute to the UN Sustainable Development Goals (SDGs) – and how reporting and partnerships supports this process. View Article

FRC: Improved governance and reporting required to promote sustainability and trust in business : Companies need to improve their governance practices and reporting if they are to demonstrate their positive impact on the economy and wider society, according to a new report from the FRC. View Article

Protecting Customers

ESMA publishes responses to its consultation on MiFID II review report on position limits : ESMA published the responses received to its consultation on MiFID II review report on position limits and position management. View Article

Fin Tech Regulation

IMF: Regulation of crypto assets : The rapid growth of crypto assets has raised questions about the appropriate regulatory perimeter and the ability of the existing regulatory architecture to adapt to changing conditions. Effective regulation of financial services promotes long- term economic stability and minimizes the social costs and negative externalities from financial instability.  View Article

IMF: Institutional arrangements for fintech regulation and supervision : Fintech developments are shaking up mandates within the existing regulatory architecture. It is not uncommon for financial sector agencies to have multiple policy objectives. When it comes to fintech, countries differ to some extent in the manner they balance the objectives of promoting the development of fintech and regulating it.  View Article

Friends' Standard Services

158th Brussels for Breakfast – CPD Notes : Organised by the Centre for the Study of Financial Innovation (CSFI), hosted by CISI. This blog complements the subsequent 49th Brussels 4 Brunch 30-minute CISI webinar that is also available to Friends of GrahamBishop. View Article

Christine Lagarde - ipropup

Economic Policies Impacting EU Finance

LSE: Taking stock of Christine Lagarde’s challenges at the ECB : Lorenzo Codogno and Mara Monti argue that Christine Lagarde’s challenges at the helm of the ECB remain daunting, despite smooth sailing during her first press conference and a notably different communication style.  View Article

ECB: Christine Lagarde: Interview with “Challenges” magazine : Interview with Christine Lagarde, President of the ECB, covering topics such as Brexit's impact on the EU, green finance, negative interest rates and its impact on savers and banks or cryptocurrency. View Article

Vox EU: Riding through the storm: Lessons and policy implications for policymaking in EMU : In December 2019, Marco Buti left the position of Director General for Economic and Financial Affairs at the European Commission at the end of a rough journey through the crisis and its aftermath. In this column, he draws the main lessons out of five key moments in the crisis for the completion of EMU and the appropriate policy mix in the euro area. View Article

Bank of England: Mark Carney speech: A framework for all seasons? : Mr Carney reviews the conduct and performance of inflation targeting during his time as Governor. This period, which roughly coincides with the post-crisis recovery and which has seen more than its share of shocks and structural developments, provides some insights to the ability of inflation targeting to deliver price stability and support macroeconomic outcomes.  View Article

Basic Enconomic Indicators

Euro area international trade in goods surplus €20.7 bn : The first estimate for euro area (EA19) exports of goods to the rest of the world in November 2019 was €197.7 billion, a decrease of 2.9% compared with November 2018 (€203.7 bn).  View Article

EU28 current account surplus €69.4 bn : The EU28 seasonally adjusted current account of the balance of payments recorded a surplus of €69.4 billion (1.7% of GDP) in the third quarter of 2019, up from a surplus of €43.5 billion (1.1% of GDP) in the second quarter of 2019. View Article

 

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UK government formally rejects calls for a second Scottish independence referendum to be held this year bbc.in/383LgHL
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My notes on the latest #B4B debate are out! With the hottest topics of 2020: #Brexit #ESG #GreenFinance #ESM reform and the upcoming @ecb 's paper on Central Bank Digital Currency ow.ly/5Enf50xV1S6