Welcome to our weekly e-mail                                                                    Follow us on  

My highlights of the week: The imminent demise of LIBORcontinues to trigger a torrent of comments by regulators so that market participants cannot be in any doubt! The Commission proposed a new Consumer Credit Directive, but was immediately criticised for lack of ambition. AFME pointed to the illogicality of enforcing the buy-in provisions next year while announcing a review of those provisions. Remarkably, EU Member State Malta has just been added to FATF’s `grey list’ for AML. The UK looks to have secured a carveout for financial services from the new global tax plan it negotiated.

Financial Brexit may have been a bit quiet recently but that seems to be about to end: Yes – the EU granted an equivalence ruling for data protection BUT only for four years and withdrawable at any time. The EU granted a one-year extension for bank capital requirements on non-EU CCPs – so it ends around the time the CCP stress test results will appear. SSM’s Enria told ECON about SSM’s difficulties in overseeing “third-country” bank branches in the EU under the current rules. Finally, Chancellor Sunak is scheduled to announce a sharpening of the City of London’s competitive edge.

 Graham Bishop

---

Articles from 25 June - 1 July

General Financial Policy

ECB's de Guindos: Euro area banks in the recovery : Banks have weathered the pandemic and the economic outlook is now brightening

EURACTIV: Commission to ease state aid straitjacket as recovery fund kicks in : The European Commission will present in the second half of this year a wide-ranging review of its state aid rules to facilitate public funding to strategic areas, as member states await the first transfers of the EU’s recovery funds.

BIS: Annual Economic Report : BIS annual report by chapter: A bumpy pandexit; Covid and beyond; The distributional footprint of monetary policy; CBDCs: an opportunity for the monetary system

Banking Union

SSM's Enria: Hearing at the European Parliament’s Economic and Monetary Affairs Committee : "..banks have proven to be resilient so far. They have robust capital positions and their profitability recovered in the second half of 2020 and the first quarter of 2021. However, there is still some uncertainty about how the pandemic will evolve..." 

EBA data shows a deterioration in asset quality of the most affected sectors : CET1 ratio increased slightly and leverage ratio contracted quarter-on-quarter (QoQ); Strong rise of forborne loans, but stable forbearance ratio amid a similar rise in total loans and advances; Return on equity rose strongly QoQ, not least due to declining cost of risk.

European Council:Non-performing loans: provisional agreement on selling credit to third parties : EU ambassadors today confirmed a provisional agreement reached between the Council presidency and the Parliament on a new directive harmonising rules for credit servicers and credit purchasers of non-performing loans issued by credit institutions.

JOINT PUBLIC STATEMENT: Forthcoming cessation of all LIBOR settings : The European legislative framework regulating financial benchmarks (Regulation (EU) 2016/10111) has been recently amended granting the European Commission powers to accompany the transition away from LIBOR in the European Union. Nevertheless, significant reliance on any of the LIBOR settings at the time of their discontinuation or loss of representativeness may have an impact on the functioning of the European financial system. 

MEP Giegold: Malta placed on FATF "grey list" for money laundering and terrorist financing : Malta was placed on the FATF’s list of jurisdictions under increased monitoring, better known as the ‘grey list’. It is the first time that an EU Member State has been placed on this list due to increased and persistent money laundering and terrorist financing risks.

European Commission: New proposal for a Directive on consumer credits repealing and replacing the Consumer Credit Directive (2008/48/EC) : A REFIT Evaluation2in 2018-2019 found thatthe 2008 Directive’s objectives.. are still relevant in the context of a regulatory landscape that is significantly fragmented across the EU and have been only partially met. 

Capital Markets Union

Financial stability: Commission adopts final one-year extension of the transitional regime for capital requirements for non-EU central counter parties : The European Commission has today extended – by one additional year –the current transitional regime regarding the capital requirements that EU banks and investment firms must maintain when exposed to non-EU central counterparties (‘CCPs'). This transitional regime will therefore continue to apply until 28 June 2022.

EBA consults on technical standards on risk retention requirements under the Securitisation Regulation : The European Banking Authority (EBA) launched today a public consultation on draft Regulatory Technical Standards (RTS) specifying the requirements for originators, sponsors, original lenders and servicers related to risk retention, in line with the Securitisation Regulation. 

AFME calls for action on mandatory buy-in rules : “It is helpful that the Commission has stated its intention to consider amendments to the mandatory buy-in regime, subject to an impact assessment. Given that amendments may now be made at a later date, it does not make sense for the current rules to be implemented and enforced on 1 February 2022.

FSB seeks feedback on its policy proposals to enhance money market fund resilience : The proposals form part of the FSB’s work programme on non-bank financial intermediation (NBFI).

Environmental, Social, Governance (ESG)

Council adopts European climate law : The Council adopted its position at first reading on the European climate law, ending the adoption procedure and setting into legislation the objective of a climate-neutral EU by 2050.

IOSCO consults on sustainability-related regulatory and supervisory expectations in asset management : 

IFAC Supports IOSCO’s Vision for a Global Baseline of Investor-Focused Sustainability Standards : The International Federation of Accountants (IFAC), which represents more than 3 million professional accountants globally, welcomes IOSCO’s new report in which it elaborates on its vision and expectations for the IFRS Foundation’s work toward a global baseline of investor-focused sustainability standards. View Article

 

IASB: Is there a path to global sustainability standards? : Erkki Liikanen, Chair of the IFRS Foundation Trustees, talked about its work to meet the information needs of investors and other capital market participants by creating a proposed new board that would develop a global baseline of sustainability-related disclosures focused on enterprise value

IOSCO elaborates on its vision and expectations for the IFRS Foundation’s work : towards a global baseline of investor-focussed sustainability standards to improve the global consistency, comparability and reliability of sustainability reporting

Strengthening corporate governance should be a priority to boost economic recovery, says OECD : The COVID-19 pandemic has exacerbated existing structural weaknesses in the corporate sector and capital markets.

Fin Tech Regulation

Insurers welcome EC proposals for Data Act, highlight need for level-playing field on access to data : Insurance Europe welcomes the Act’s overall objective of creating a single market for data, where data from public bodies, businesses and citizens can be used safely and fairly for the common good.

Economic Policies Impacting EU Finance

FT: Financial services sector set for carve-out from new global tax rules : UK due to secure exemption for City of London banks from regulations brokered at OECD

Brexit

Bloomberg: Sunak Promises to Sharpen City of London’s Competitive Edge : Plan to emphasize focus on green finance and technology; Mansion House speech comes day after green gilt announcement

Bloomberg: City of London Drew Fewer Foreign Investors in 2020, Report Says : U.K. narrowly ahead of France in 2020, according to EY survey; Square Mile has been hampered by years of Brexit uncertainty

Reuters: Paris gets new JPMorgan trading hub in post-Brexit push : French President Emmanuel Macron inaugurated JPMorgan's (JPM.N) new trading hub in Paris on Tuesday, as France pitches for more banking jobs and tries to lure finance workers looking to leave London after Brexit.

Federal Trust: Brexit: So little said, so much to say. : In a new video, our Director Brendan Donnelly criticises British political parties for their reluctance to talk about Brexit. He thinks this reluctance stems primarily from calculations of political advantage. These calculations may however be mistaken. It is not a foregone conclusion that the Conservative Party will win the next General Election.