Welcome to our Gold Friends weekly e-mail.

My highlights from the summer holidays: The tide may be turning on Russia’s barbaric invasion of the Ukraine but the economic and political fallout in the EU is only just starting – with Italian election in three weeks perhaps a first signal. The consultation on the Benchmark Regulation Review (BMR) has stirred strong feelings that `something needs to be done’. However, a summer of extreme heat and drought has supercharged feelings about the ISSB’s proposed global sustainability standards of disclosure, as well as the EU standards being proposed by EFRAG. Participants from every corner of the financial markets seem united in calling for an alignment of global standards – and that they be practical and thus useful for investors to hold companies to account. The UK is about to get a new Prime Minister, but the leading candidate has dug an exceptionally deep hole in UK-EU relations. Moreover, the newly published Financial Services and Markets Bill seems to `take back control’ from Parliament and give it to the regulators – enabling serious divergence from evolving EU rules.

Graham Bishop

Articles from 21 July - 1 September

Policy impacting Finance

 FONDATION ROBERT SCHUMAN: The right-wing parties, led by Giorgia Meloni, favourite for the 25 September parliamentary elections in Italy : On 21 July 2022, the President of the Italian Republic, Sergio Mattarella, dissolved parliament andcalled early parliamentary elections in Italy for 25 September. This decision followed the refusal ofsome coalition parties to endorse Council President Mario Draghi View Article

 BusinessEurope: Examples of Single Market barriers for businesses : In the letter addressed to Commissioner Breton on 22 September 2021, BusinessEurope stressed that the success of the revised Industrial Strategy in bringing us closer to the objectives of the green and digital transition significantly relies on the resource efficiency and consumer choice in the Single Market without barriers. View Article

Banking Union

 EBA updates data on deposit guarantee schemes across the European Economic Area : From 2020 to 2021, the amount of available financial means held by the Deposit Guarantee Schemes (DGSs) across the European Economic Area (EEA) significantly increased by 19 %. This means that DGSs hold more resources to protect depositors in case of banking failure.DGSs are gradually increasing their funds raised from the industry with the aim of reaching the harmonised minimum target level of 0.8 % of covered deposits by July 2024.  View Article

 Euromoney Interview with Edouard Fernandez-Bollo, Member of the Supervisory Board of the ECB : One of the structural challenges facing European banks is their lower profitability compared with, for example, US banks, or even – to a lesser degree – UK banks. So further integration clearly offers potential gains in efficiency.  View Article

 EBF Response to the European Commission’s call for evidence on Open Finance : Open Finance must be considered as part of the data economy as a whole .. there must be a careful reflection of what policy option to pursue which,... empowers and delivers new opportunities for customers and, on the other, stimulates innovation in the financial sector and data economy as whole. View Article

 Capital Markets Union

ESMA response to the EC consultation on the BMR review 2022 : Should those TC administrators not apply for recognition or endorsement ...by the end of the transition hundreds of thousands of benchmarks will not be accessible anymore to EU supervised entities and thus for use in the EU, which could be detrimental to the functioning of the EU financial markets View Article

ISDA's O'Malia: A Constructive Approach to the EU Benchmarks Regulation : Under the BMR and its UK equivalent, users of a wide range of interest rate, credit, FX, equity and commodity benchmarks could suddenly lose access to those benchmarks at the end of transition periods that are due to expire at the end of 2023 in the EU and 2025 in the UK. View Article

ISDA: Public Policy Reforming the EU Benchmarks Regulation: Updated Recommendations : Fundamental flaws in its [BMR] conception mean that without significant reform, the BMR could expose benchmark users in the EU to the threats that BMR was intended to protect them from, putting them at a competitive disadvantage to users of benchmarks in other jurisdictions. View Article

FESE Views on the ECON Draft Report on the MiFIR Review : Proposals to include pre-trade data in an equity consolidated tape, along with insufficient market structure protections, threaten to fragment markets further View Article

 AFME comments on Draft MiFIR report : "To ensure the continued functioning of these markets, the MiFIR Review must preserve the diversity of trading mechanisms serving different investor needs. " View Article

 CPMI and IOSCO publish a discussion paper on CCPs’ practices for addressing non-default losses : CPMI and IOSCO seek input on discussion paper focusing on central counterparty (CCP)practices to address non-default losses (NDLs), such as losses from cyber attacks. View Article

Review of ELD must not undermine availability of insurance or growth of environmental liability insurance market : Insurance Europe has responded to a consultation conducted by the European Commission on the review of the Environmental Liability Directive (ELD) View Article

 GFIA responds to IAIS consultation on comparability of Aggregation Method to ICS : GFIA welcomed the launch of the consultation but indicated that it would not be possible to submit a response to the detailed questions in the consultation, in light of the different views that remain between jurisdictions on the Insurancec Capital Standard (ICS) project. View Article

 European insurers call for greater clarity and improvements to draft IAIS criteria on comparability of Aggregation Method and ICS : While Insurance Europe supports the aim to take a quantitative approach to the comparability assessment, a number of key elements must be changed or clarified before the criteria are finalised and the comparability assessment begins.  View Article

Environmental, Social, Governance (ESG)

 EURACTIV: EU urged to align corporate climate reporting rules with global standards : The European Union should align its policies with international corporate climate reporting rules in order to simplify life for companies and save time in the long run, a global standard setting board said on Wednesday (31 August). View Article

 ISSB receives global response on proposed sustainability disclosure standards : The International Sustainability Standards Board (ISSB) has received more than 1,300 comment letters on its two proposed sustainability disclosure standards. View Article

 PensionsEurope comments on the EFRAG'S exposure draft on the Draft European Sustainability Reporting Standards : PensionsEurope welcomes the opportunity to comment on the EFRAG’s exposure draft on the DraftEuropean Sustainability Reporting Standards. PensionsEurope supports the introduction of an EU-level sustainability reporting framework.  View Article

 EBF Responses to EFRAG consultation surveys : The EBF supports EFRAG’s extensive efforts to build European sustainability reporting standards (ESRS) reflecting the EU’s ambition in tackling sustainability issues. Improving the quantity, quality, and reliability of sustainability disclosures in the EU will only be possible in the presence of efficient and harmonised reporting standards.  View Article

EFAMA highlights that alignment and interoperability with global standards are key : “As key users of company sustainability reports, asset managers recognise the vital importance of high-quality, standardised and relevant sustainability disclosures from companies they invest in, which is what EFRAG is aiming to achieve with their European Sustainability Reporting Standards (ESRS)" View Article

 ICMA responds to draft European Sustainability Reporting Standards proposed by EFRAG : ICMA has responded to the draft European Sustainability Reporting Standards proposed by EFRAG. View Article

 ICMA responds to consultation on ISSB’s first two exposure drafts for general requirements and climate-related disclosures :  View Article

 IFAC: Companies, investors and professional accountants add their voices to the call for global alignment between sustainability reportings : 65 organizations today endorse a joint statement calling for stronger alignment of regulatory and standard-setting efforts around sustainability disclosure. They encourage major actors, including the International Sustainability Standards Board (ISSB), the US Securities Exchange Commission (SEC) and the European Financial Reporting Advisory Group (EFRAG) to continue to work closely together.  View Article

EBF consultation response on the International Sustainability Standards Board (ISSB) Exposure Drafts : The EBF welcomes the International Sustainability Standards Board’s (ISSB) efforts to develop a commonly accepted global baseline for sustainability disclosures.  View Article

Accountancy Europe: European sustainability reporting standards: shaping EU’s green future : Clear and pragmatic sustainability reporting standards will be paramount to achieving the EU Green Deal’s ambitions and help turn Europe into the first climate neutral continent by 2050. View Article

 EuropeanIssuers calls for further prioritisation and clarity in its response to the EFRAG public consultation on the Draft European Sustainability Standards : Whilst the draft sustainability standards are important, EuropeanIssuers notices that, in their current form, they require excessive complexity, length and extreme level of detail and granularity that need to be addressed in order to make the indicators more useful and practicable. View Article

 BETTER FINANCE response to the EFRAG Consultation on Draft European Sustainability Reporting Standards : BETTER FINANCE notes that the gap between users’ information needs and the sustainability information reported by undertakings is growing. Academic research demonstrates however that companies are reporting more often on aims and intentions rather than on actual actions and performance. View Article

ESBG: International Sustainability Standards Board consultation on Sustainability Disclosures : The purpose of the consultation is to develop a comprehensive global baseline of sustainability disclosures designed to meet the information needs of investors in assessing enterprise value. View Article

InsuranceEurope: European Sustainability Reporting Standards are welcome but need refining and phasing in : In a joint response to a consultation by the European Financial Reporting Advisory Group (EFRAG) on its draft European Sustainability Reporting Standards (ESRS), Insurance Europe and the CFO Forum have made a number of recommendations including the urgent need for a phased introduction.  View Article

 IAIS welcomes global climate-related financial disclosure standards : IAIS members aim for insurers to continue to improve the level and quality of disclosure in the clear direction as set by the new ISSB standard. View Article

Ethical Boardroom: Convergence of global sustainability reporting standards : But it is precisely the growing focus on sustainability that has thrust sustainability reporting into the spotlight, with several game-changing developments in 2021 – which carry on into 2022. View Article

IRSG: IRSG Comment letter – ISSB consultation on a comprehensive global baseline of sustainability disclosures (IFRS S1 and IFRS S2) : The IRSG welcomes the opportunity to contribute a comment letter in response to the ISSB publication of the exposure draft consultations. View Article

IMF: Achieving Net-Zero Emissions Requires Closing a Data Deficit : High-quality, reliable, and comparable gauges are lacking. Here’s how to close the gap. View Article

IOSCO: Education on sustainable finance helps protect investors against fraud and greenwashing : IOSCO identifies recent developments in investor education on sustainablefinance, with a view to enhancing investor education and protection and supporting the sounddevelopment of this growing financial market. View Article

Finance Watch: Basel approach not sufficient to address climate-related risks : This approach largely ignores the fact that climate-related financial risks differ from “traditional” types of risk in that they grow with time of inaction and lead to non-linear and irreversible changes that will affect the economy and financial system. View Article

ESAs issue report on the extent of voluntary disclosure of principal adverse impact under the Sustainable Finance Disclosure Regulation : The Joint Committee of the three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) published the first annual report on the extent of voluntary disclosure of principal adverse impact under the Sustainable Finance Disclosure Regulation (SFDR) – Article 18 of Regulation (EU) 2019/2088. View Article

EIOPA publishes application guidance on how to reflect climate change in ORSA : The European Insurance and Occupational Pension Authority (EIOPA) published today the final version of the application guidance on climate change materiality assessments and climate change scenarios in the Own Risk and Solvency Assessment (ORSA). View Article

Net-Zero Asset Owner Alliance Statement on the draft European Sustainability Reporting Standard E1 Climate change : The UN-convened Net-Zero Asset Owner Alliance, a group of 74 leading investors with $10.6 trillion in assets, supports and warmly welcomes the climate change Exposure Draft from the European Financial Reporting Advisory Group (EFRAG). View Article

GRI: Demystifying ESG raters and rankers : ESG benchmarking has to be based on comparable sustainability data that reflects impacts as well as risksWhat is the role of the ESG ratings industry, do they actually determine whether companies are sustainable or not – and how will future changes in the world sustainability reporting affect them? View Article

ALFI responds to the public consultation of the European Commission on the proposed EU Directive on DEBRA : ALFI responds to the public consultation of the European Commission on the proposed EU Directive on a debt-equity bias reduction allowance (DEBRA).  View Article

BDB: EBA discussion paper on the role of environmental risk in the prudential framework : The German Banking Industry Committee (GBIC) provided comments on the European Banking Authority’s discussion paper on the role of environmental risk in the prudential framework. In particular, the GBIC advocates for a risk-based approach. View Article

 Protecting Customers

Better Finance: Letter to Commissioner McGuinness: "Towards “Bias-Free Advice” for Retail Investors" : Stressing the importance of individual investors' access to bias-free advice for the success of the Capital Markets Union and investor protection. In its letter BETTER FINANCE proposes a staggered approach. View Article

 Fin Tech Regulation

 BIS: Big Techs vs Banks : Large technology firms ("big techs") have access to massive amounts of data about firms that operate on their online platforms or use their QR-code payment systems. While this information can be harnessed to improve the assessment of a firm's credit risk,... View Article

SUERF: The optimal quantity of CBDC in the euro area : According to our analysis, the optimal amount of CBDC in circulation for the case of the euro area lies between 15% and 45% of quarterly GDP. Optimal CBDC rules are effective in mitigating the risk of bank disintermediation and induce significant welfare gains.  View Article

FSB's Domanski: Making the most of digital payments – a cross-border perspective :  View Article

 Brexit and the City

 UK Finance: What does the Financial Services and Markets Bill mean for UK capital markets? : The Financial Services and Markets Bill was laid in Parliament on 20 July. This Bill features a host of long-anticipated reforms and sets out the future architecture of financial services regulation in the UK. View Article

 IRSG Narrative - EU Strategic Autonomy : With this narrative we wish to make the following observations: Following the pandemic, and in the context of an uncertain geopolitical environment, we fully understand the rationale to consider the resilience and self-sufficiency of the EU economy. We also recognise that the UK departure from the EU creates a new context in which both the EU and UK will develop their own financial regulatory policy that is tailored to each jurisdiction’s specific needs.  View Article

 Brexit

Carnegie's Kellner: If Liz Truss Becomes Britain’s Prime Minister : Should she win the ongoing leadership race, Liz Truss will face a public divided over departing Prime Minister Boris Johnson. Honoring her predecessor may guarantee her the party’s support but will not help win back disillusioned voters. View Article

EPC: Time for a reset: Could a new prime minister repair the EU–UK relationship? : Brexit might not be as integral to the political identities of Liz Truss and Rishi Sunak as it has been for Boris Johnson. Still, the two leadership candidates are closely linked to Johnson’s administration. Even with new leadership, a radical reset of EU–UK relations is unlikely. View Article

EURACTIV: MEPs demand Brexit sanctions mechanism, lament ‘bitterly disappointing’ UK attitude : MEPs have urged the European Commission to have clear procedures allowing the EU to take retaliatory measures including sanctions against the UK if it refuses to implement the terms of the Brexit agreemen View Article

UK and EU: Should Macron be the UK's friend? : The current situation is indeed worrying. Relations between France and the UK have been stagnant since 2016. There have only been a few ministerial visits and other high-level contacts. The annual Franco-British bilateral summit has not met since January 2018 – a gap of more than four years. View Article

 Federal Trust video: Brexit brings out the worst in Truss and Sunak :  View Article

VoxEU's Coyle: Global Britain and national Britain : The Rise and Fall of the British Nation: A Twentieth Century History by David Edgerton - not every bit of its myth-busting is wholly persuasive View Article

The UK-Japan Comprehensive Economic Partnership Agreement: Lessons for the UK’s future trade agreements : Evaluating the UK-Japan Comprehensive Economic Partnership Agreement (CEPA) is important ..it will become a benchmark for the UK’s future Free Trade Agreement (FTA); CEPA failed to make any significant advances in areas, such as investment, the movement of natural persons, and audio-visual services. View Article

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