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Welcome to our Friends weekly e-mail.Highlights of my week: Franco-German proposals for a four-speed Europe – amidst more discussion about widening or deepening – underline the EU’s task for the remainder of the decade. But how will that play out with fiscal union and associated ramifications for EDIS and banking union? The EBA reported that EU banks are close to full compliance with Basel III and launched the 2023 transparency exercise with perhaps 10,000 data points per bank. PCS sent in its response to the FSB’s call for evidence about the European securitisation market – will that trigger meaningful change to revive what should be a key part of CMU? The BIS waded into the debate on CBDC by asking for clarity on its legal position – but the EU has already seized the first-mover advantage. Might Poland’s election pivot on the issue of joining the euro as the means to rebuild its political institutions? Apparently good news from ICMA’s bond trading data: the UK retains about 50% of bond trading BUT 70% (of the large trades) is in the hands of Systematic Internalisers (SIs) so a handful of profit-maximising private entities could change the picture quickly and radically. The BoE and Sweden’s Riksbank re-affirmed their joint oversight of LCH but was there a subliminal message to the EU about CCP oversight?
Graham Bishop
During the autumn, I will be doing several videos to discuss my recent paper: Has the City of London benefitted from Brexit as the golden days continue to fade? 1. Federal Trust - 19 September: link to video 2. London 4 Europe - 28 September at 18.45. TONIGHT Registration is free 3. Financial Services Club - 9 November at 11.00 with Professor Alderman Mainelli. (Registration details to follow)
Articles from 22-28 September 2023
Policy impacting Finance ECB President Lagarde: Hearing of the Committee on Economic and Monetary Affairs of the European Parliament : The amount of excess liquidity has decreased by more than one trillion euros over the past twelve months, for two main reasons. First, the repayments of the third series of targeted longer-term refinancing operations (TLTRO III)...second, the reduction of the securities under the APP. View Article
LSE's Smolenska/Tokarski :The elephant in the room in Poland’s election? Joining the euro : Poland committed to joining the euro as part of its EU accession, but progress has stalled over the last decade. Ahead of the country’s next parliamentary election on 15 October, Agnieszka Smolenska and Pawel Tokarski argue it is time to reopen the issue of Poland’s membership of the Eurozone. View Article
POLITICO: France and Germany back four-speed Europe : Reform proposals are intended to prepare the EU for enlargement. Franco-German experts unveiled a proposal for sweeping structural reforms to the European Union as pressure builds to bring in new member countries by the end of the decade. View Article
PubAffairsBruxelles: The EU Needs Fiscal Union : EU's need for closer fiscal union/cohesion in tackling looming challenges is now widely recognized. But until policymakers follow through with reforms to bring about these outcomes, EU fiscal and monetary policies will continue to do harm, potentially killing the patient before the cure arrives. View Article
EPC's Cameron: The perennial question: To widen or to deepen? : Ever since the founding of the EU, there has been a constant debate about the priority between enlargement and strengthening the institutions. In reality, they go hand in hand, hence the importance of starting a further discussion before the accession of any new members. View Article
Banking Union BCBS: Basel III Monitoring Report : Highlights of the Basel III monitoring exercise as of 31 December 2022: After their downturn at end-June 2022, initial Basel III capital ratios increase and rise above pre-pandemic levels; Liquidity Coverage Ratio declines but remains above pre-pandemic levels View Article
The EBA second mandatory exercise on Basel III full implementation shows a significantly reduced impact on EU banks with shortfalls: At EUR 0.6 billion of additional Tier 1 capital required for the entire EU banking sector, the estimated capital shortfall to comply with the Basel III reform has been practically eliminated. View Article
FSB identifies frictions from data frameworks that pose challenges to enhancing cross-border payments : Report highlights fragmentation in data frameworks as a main contributor to increased cost and inability to automate cross-border payments. By early 2024, the FSB will develop recommendations... for promoting alignment and interoperability across data frameworks applicable to cross-border payments. View Article
EBA launches 2023 EU-wide transparency exercise : The EBA expects to release around 1 million data points, up to 10,000 data points per bank. As in the previous years, the data will cover capital positions, profitability, financial assets, risk exposure amounts, sovereign exposures and asset quality. View Article
Capital Markets Union Trustworthy Investment Markets: BEUC’s recommendations on the Retail Investment Strategy : The Commission has presented a proposal that improves the situation but is not ambitious enough to solve the issue at its core: the conflict of interest caused by kickbacks paid to advisors. View Article
ICMA publishes the third semi-annual report that provides detailed data on EU and UK bond market trading activity : ICMA commits to updating this report on a semi-annual basis in order to be able to track long-term trends in secondary bond market structure and activity. View Article
PCS files its response to the Financial Stability Board's request for feedback : PCS' response deals with the impact of securitisation regulations in Europe, including both the European Union and the United Kingdom View Article
FESE: REMIT Review: Market access barriers for third country firms : Regulation of Wholesale Energy Market Integrity and Transparency (REMIT).. we are strongly convinced that it is disproportionate to require third country firms to declare an office in the EU from which they carry out their principal activities, as proposed by the European Parliament.. View Article
ISDA, S&P Global Market Intelligence and Linklaters | CreateiQ Launch Integration to Streamline End-to-End Negotiation of Derivatives Docume : Counterparty Manager allows users to exchange information when opening a trading relationship and includes ISDA Amend, an online tool that enables market participants to modify multiple ISDA Master Agreements and share regulatory representations with counterparties. View Article
AFME/PWC: Artificial Intelligence: Challenges and Opportunities for Compliance : For financial markets, AI offers opportunities in multiple areas from Front to Back Office. The adoption of AI, however, presents compliance officers with two main challenges. View Article
GFIA response to the IAIS consultations on ICS as a Prescribed Capital Requirement and ICPs 14 and 17 : GFIA supports the inclusion of internal models in the ICS and advocates for the IAIS not to introduce any provisions that would undermine their fundamentals; View Article
Insurance Europe and RAB respond to IAIS consultation on Insurance Capital Standard as a Prescribed Capital Requirement : Insurance Europe supports the ICS project's initial objective to create a high-quality and robust global insurance standard that promotes a sound and level global regulatory playing field...it highlights that the initial objective has been put into question by the changing nature of the project. View Article
Environmental, Social, Governance (ESG) IPE: GFANZ moves to define four types of transition finance : The Glasgow Financial Alliance for Net Zero (GFANZ) is asking the market for feedback on plans to create more detailed definitions for transition finance. View Article
DK Comments on Post-implementation Review IFRS 9 Financial Instruments Impairment : The expected credit loss (ECL) model under IFRS 9 generally leads to an earlier recognition of impairments than the incurred credit loss model under IAS 39. DK does not currently see any significant need for adjustment. View Article
DK Comments on the Commission proposal for a Regulation on ESG rating activities : The Regulation, as proposed, is a step in the right direction in regulating the ESG ratings market and improve the quality of ESG ratings. View Article
Fin Tech Regulation BIS' Carstens:Legitimacy, Privacy, Integrity, Choice: Towards a legal framework for central bank digital currencie : The important legal questions that must be addressed if central bank digital currencies (CBDCs) are to become a core part of monetary systems, whether in wholesale or retail form. View Article
CEPR's Niepelt: Retail central bank digital currency and the social costs of liquidity provision : It finds that a system based on a central bank digital currency can be a less costly alternative to the current two-tier regime, particularly after accounting for direct and indirect costs. Furthermore, it argues that the interest rate on the digital currency should differ from zero and from the rate of interest on reserves. View Article
InsuranceEurope: Insurance industry shares position on EU’s Artificial Intelligence (AI) Act : The EU’s Artificial Intelligence Act is one of the world’s first major regulatory packages to respond to this rapidly emerging technological market. As the trilogues begin, Insurance Europe has published its three key messages View Article
ESAs publish report on the landscape of ICT third-party providers in the EU : The analysis aims to map the provision of ICT services by TPPs to financial entities in the European Union and to support the ESAs’ policy making process in light of the European Commission’s call for advice to further specify the criteria for critical ICT TPPs and to determine oversight fees. View Article
Economic Policies Impacting EU Finance ALFI responds to EC consultation on a new EU Directive for a Faster and Safer Relief of Excess Withholding Taxes : ALFI has always been in favour of introducing rules which are as harmonised as possible at EU level and which would eliminate the legal uncertainties surrounding the procedures for relief at source or refund of excess withholding tax paid. View Article
Brexit and the City City Corporation: ‘Financial Services strategy critical to unlocking jobs and investment across the country’ : The City of London Corporation’s recent groundbreaking report, Vision for Economic Growth – a roadmap to prosperity underscores the importance of establishing a long-term financial and professional services strategy for the UK. View Article
Joint statement by Riksbank and Bank of England on continuity of the effective oversight cooperation in relation to LCH Ltd : The Riksbank and the Bank of England have today re-affirmed their existing strong commitment to effective oversight cooperation over London Clearing House Limited (LCH). View Article
UK Finance: Delivering a UK consolidated tape framework : As detailed in our June blog on this topic, an appropriately modelled and fairly licensed consolidated tape will accrue multiple benefits to market participants by primarily improving market integrity and by strengthening consumer protection and effective competition View Article
Brexit CER's Grant: A European strategy for Labour : Britain needs a better deal with the EU than that negotiated by Boris Johnson’s government: the economy is taking a hit, opinion polls show that most Britons want a closer relationship and the tense geopolitical situation highlights the value of greater co-operation with the EU. View Article
UK in Changing EU's Reland: Labour's Brexit policy faces hard collision with reality : Keir Stamer has said Labour would use the review of the UK-EU Trade and Cooperation Agreement (TCA) to deepen and expand the terms of the agreement. Joël Reland explains why this may be more difficult than expected View Article
Federal Trust VIDEO: Brexit – The UK Is So Vain… : In this Federal Trust video, our Chairman John Stevens and Director Brendan Donnelly discuss the recent report commissioned by the French and German governments on the future governance of the European Union. View ArticleAbout this email
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