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18 December 2019
18 December 2019
To be held on Tuesday, 14th January, 2020, 8.30-10.00am
With support from the CISI
Well, that’s that… We will (unless there is divine intervention) leave the EU on January 31, no ifs or buts. However, even enthusiasts for the sunlit uplands of Brexit-land must accept that the December 31 date for a final, final trade agreement is extraordinarily tight. It is inevitably going to mean a rather sketchy deal that will leave quite a lot of the detail undone. And how will we (particularly the City) handle relations with our former colleagues in the meantime? After all, the EU won’t simply stop dead until our own new relationship is fully sorted. Indeed, the new Commission is going to plough ahead – on IP and digital rights, on competition and, of course, on all the various reviews that were already on the schedule.
As usual, Graham Bishop – perhaps a tad crestfallen, but still deeply committed to the European idea – is our guide, sorting wheat from chaff, and charting a course through what looks like a legislative and regulatory minefield. This month, he gets back-up from Allie Renison, head of EU and Trade Policy at the Institute of Directors, which she joined in April 2014, having previously been Research Director at Business for Britain. She leads on the IoD’s efforts to represent members’ interests in both Westminster/Whitehall and Brussels, where she is a major voice for UK business.
Many thanks,
Andrew Hilton
Director
CSFI
PS: Two requests: first, we would like to start on time at 8.30. Second, have some sort of photo ID to show to security at the front desk.
5 December 2019
[...]The new Commission is now in office – but without a UK Commissioner. The Commission has issued proceedings against the UK that specify all the steps taken to persuade the UK to make an appointment. Hopefully, the situation will have been regularised - one way or the other – before there is an opportunity to challenge the legitimacy of the new Commission. [...]
The ECB’s Financial Stability Report and the EBA’s report on Risks and Vulnerabilities make sombre reading. Yes – NPLs are still falling and are at reasonable levels apart from Greece and Cyprus; and capital is high, though perhaps at a plateau. But profitability is low and now falling again. [...]
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27 November 2019
We are delighted to announce that Graham Bishop has been re-elected to the National Council of the European Movement (UK) for a fourth term.
6 November 2019
Organised by the Centre for the Study of Financial Innovation (CSFI), hosted by CISI and with co-presenters Sir David Liddington MP, John Rega (Politico) and Helen Thomas (BlondeMoney). This blog complements the subsequent Brussels 4 Brunch 30-minute CISI webinar that is also available to Friends of GrahamBishop.
Participants discussed the snap general election, progress on the new European Commission, the latest ECB changes, developments aimed at bringing closer a Capital Markets Union and a Banking Union in Europe, and new trends in FinTech and ESG.
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8 October 2019
Organised by the Centre for the Study of Financial Innovation (CSFI), hosted by CISI and with co-presenter Jacques Lafitte (Avisa).
Brexit
Clearly Brexit was the elephant in the room and, as the meeting finished, the news came through that Chancellor Merkel had declined to accept the UK Government’s proposals so negotiations were effectively over.
Commissioner hearings by the European Parliament
For financial services, the key hearing is that of Commissioner Dombrovskis and that was taking place as we talked. No-one expected he would have any problems – unlike Commissioner Goulard where there were concerns that – despite her undoubted expertise – she might fall victim to political payback for France vetoing the EPP’s Spitzenkandidat. The voting down of the Hungarian and Romanian candidates was felt to be an appropriate use of Parliament’s safeguard role.
The Green Deal
The UVL Commission will bring forward a `green deal’ within 100 days with a view to achieving a 50-55% reduction in EU emissions by 2030 and net zero by 2050. The Commission’s communication reported a Eurobarometer survey showing more than 90% of EU citizens in favour of such goals. The European Parliament elections results also illustrated a strong swing in views – even of not quite that magnitude!
As a concrete step, the Council greenlighted the passage of its position on the taxonomy regulation. As the Parliament had given it a first reading in March, trialogue may now begin on what is certain to be a hugely complex piece of legislation. This will include a border `carbon tax’ and some Central and Eastern states may oppose the whole process as they seek energy independence from Russia. [...]
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18 September 2019
Organised by the Centre for the Study of Financial Innovation (CSFI), hosted by CISI and with co-presenters Sir John Redwood and Brian Polk (PWC).
The new European Commission
Ursula von der Leyen (UVL) laid out her political guidelines in a 24-page manifesto that was just sufficient for her to be elected by the European Parliament with 383 votes. 327 were cast against her – underlining the complexity of the battles ahead to get Parliamentary approval for proposals. I highlighted the “greening” of policy – including the green commitment of the newly-appointed ECB President Lagarde. For the audience, perhaps the key is the continuity in the push to complete Banking Union, capital markets union and boost the global role of the euro. Commissioner Dombrovskis was also tasked to keep the EU together on crypto-currencies and create a new, comprehensive approach to AML.
The Green Finance agenda
The greening of finance will be the hallmark of the next legislative period and the Commission’s 2018 proposals are now grinding their way through. These cover the framework for sustainable investment – including the key taxonomy of definitions; corporate disclosures; green bonds and green benchmarks. The difficulties in creating a taxonomy of conditions to be fulfilled to avoid “greenwashing” triggered much discussion about the difficulties inherent in such a ground-breaking exercise. The Technical Expert Group (TEG) has produced its first recommendations and it became apparent how wide-ranging these will be as banks will soon find that it becomes a part of their SREP supervision to show how their loans are helping to meet the targets. Importantly, Europe may get the first-mover advantage by developing these standards first – though in consultation with other global authorities. [...]
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3 July 2019
Highlights from the “Brussels for Breakfast” meeting
The extraordinary turns of events at the European Council’s `jobs summit” took up most of the discussion – but there were also a number of key items for EU finance.
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14 May 2019
Highlights from the “Brussels for Breakfast” meeting
Brexit fatigue may have set in, but the flow does not stop – as evidenced by FCA chief Andrew Bailey giving speeches. What should be the City’s relationship with the EU after Brexit (assuming it happens)? First, any customs union will not help banks, so we fall back on the much-discussed questions of mutual recognition and/or equivalence. Bailey highlighted the strong need to come to a common agreement on the rules of the game – and the European Shadow Financial Regulatory Committee was in strong agreement. But the question is what rules? Bailey seemed to be advocating a more principle-based system with the outcome used as the test of equivalence. But he went on to say that British regulation unfettered by the EU would probably differ from the current system.
However, participants pointed to the UK habit of gold-plating more liberal EU directives. The financial conduct regulators might be able to agree but the prudential regulators may take a very different of inadequately capitalised branches on their territory. The debate has a long way to run! [...]
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30 April 2019
Graham Bishop is honoured that the European Commission has recently awarded him a contract to study "Factors driving investor demand for European sovereign bonds.
29 April 2019
The Government has held a re-negotiation of our relationship with the EU that promises - at least in the short run – to make everyone worse off, less secure, and diminished in the eyes of the world. Emotionally, we have already `left’ the EU, so the pro-Europe campaign must set out a positive case to answer the question of why we want to `join’ Europe.
Whatever the result of the Third Referendum, a formal decision would then be made by Parliament within a few days to Leave OR, to revoke the Article 50 notice of intention to leave. That would end the damaging uncertainty immediately.
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10 April 2019
Graham Bishop was quoted on a Reuters piece in which he explained his proposal for a Temporary Eurobill Fund.
[...]A proposal for short-dated euro Treasury bills was first aired in 2011 by Graham Bishop, a consultant on European Union (EU) financial regulation who had been appointed in 2013 by then Commission President Jose Manuel Barroso to an expert group advising on possible joint issuance of debt. The group was dissolved in 2014.
Bishop said the short-term nature of his proposal, which involves setting up a new body, dubbed the Temporary Eurobill Fund, made it an ideal testing vehicle. Under his proposal, a common bill with a maturity of two years would be issued. He is working on another version with a maturity of six months.
“Simply, governments have to commit their short term funding under two years via the fund – perhaps by treaty commitment,” said Bishop, vice chair of the European Movement in Britain, a group which campaigns for greater European integration and for reform of the EU.
“The bill is made up from a pool of bills from the euro area and then reissued.”
Under Bishop’s proposal, member states which break EU fiscal rules would be excluded from the Fund and member states would not be liable for the debt obligations of others.
Analysts said euro Treasury bills made sense, particularly for banks, which need high grade sovereign debt to fund their operations and are concerned about a dwindling supply as Germany and the Netherlands, both triple A rated sovereigns, issue less.
“Given the political opposition to a euro bond, a safe euro zone bill full stop would be seen as a good step in the right direction,” said David Owen, chief European economist at Jefferies in London. [...]
Bishop said the idea of a euro bill would be easier to sell to skeptical states now than it was 10 years ago because the yields of short-dated bills have converged, so the cost of participating for the likes of Germany, whose Bunds are considered the safest European assets of all, would be low. [...]
12 March 2019
History is probably being made today as there is not much road left for the Prime Minister to kick the can down. So debate turned to the scope for delaying Brexit – assuming the other 27 all agree and President Macron (amongst others) has suggested there needs to be a good reason. The EU 27 seems to have a settled opinion that if the UK is a member of the EU when the European Parliament elections are held on May 23-26, then the UK must also hold elections. However, UK commentators seem to wilfully ignore this view. So we debated the possibilities of a technical delay up to say mid-May versus anything longer – and especially up to 2021 (being the end of the transition phase).
The EP elections are very important to financial services as the Parliament is a co-legislator in our field. Assuming Brexit, the number of MEPs will fall to 705. On current projections from Parliament’s own services, the EPP will fall to 174 seats and S&D to 135 so around 50 seats short of a majority. ALDE is currently projected to hold 68 seats – so a three-way grand collation would hold the majority. But the Greens current projection of 45 seats would not provide a majority. Eurosceptic parties could win 250 seats – well short of a majority even in the very unlikely event that they could agree to co-operate. [...]
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13 February 2019
Paula Martín Camargo
Officials in Brussels were appalled to see the deal they have been toiling on for two years crushed by MPs in the heaviest defeat for a government in UK parliamentary history, only to be brought back to life by a slim margin after PM Theresa May caved in to Brexit hardliners’ demand that she goes back to Brussels in search of changes to the Irish backstop – the most loathed part of the deal. May was condemned in Brussels as untrustworthy and, what’s worse, willing to put her party unity above her country’s interest.
The PM made her way back to Brussels with nothing to offer in return except a bleak threat of a crude divorce in just over a month - an ‘atomic bomb’ Brexit “everybody dreads”, as the Maltese Finance Minister recognised.
The EU didn’t play ball. Top EU Brexit broker Michel Barnier said firmly that the backstop was needed “as it is”, while Donald Tusk said the core parts of the agreement were “not open for renegotiation”. The European council president Donald Tusk’s remarks that there should be a “special place in hell” for those who promoted Brexit without a concrete plan drew Brexiteer’s outrage, but for the first time he sounded reconciled to the fact the divorce would happen. He recognized that there’s “no effective leadership for Remain.” Barnier praised Labour’s leader Jeremy Corbyn’s letter offering May Labour’s support for her Brexit deal if she made five binding commitments, including joining a customs union – the PM declined the offer but asked for a meeting soon with the opposition leader, in what has been seen as aimed at quelling another rebellion within Tory ranks.
A sci-fi solution to the Irish border conundrum remains an impossible task on which the EU will not budge, but officials are considering offering May a plan on technological fixes to their proposal in order to avert a cliff-edge Brexit that might be blamed on the Irish issue – something’s got to give!, Barnier said. Whatever the insurance solution against a hard border on Irish soil, MEPs warned they would veto a Brexit deal without a backstop. A world leading expert on customs reminded that checks on both sides of the Irish border would be ‘mandatory under a no-deal Brexit’, which could spur an Irish unity poll, several cabinet ministers told the BBC. The push could jeopardize UK trade talks with the US, officials at Washington warned. [...]
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12 February 2019
As the UK Parliament agonises over Brexit, a sombre mood descended on the Breakfast as it became ever-more clear that irreversible damage has already been done to the City. ESMA published various notices on dealing with CCPs, CSDs and trade reporting continuity via MoUs with the Bank of England. But the drumbeat of news about yet more billions of euros of trading books moving out of the UK underlined that the profitability of the residual UK operations would come under pressure – inevitably leading to job losses. However, the more immediate hit to the UK may come from the removal from the UK of the foreign exchange revenues flowing from these books. Moreover, the SSM is already the world’s largest bank regulator and the swelling numbers of supervised banks will only re-enforce its role in international fora.
For the future of UK trade with EU, analysis of the newly in-force EU/Japan trade deal makes depressing reading. It underlines the EU’s intention to set the tone of international trade deals – to preserve its values and rules. For financial services, there is a specific article on the “prudential carve out” that maintains the ability of a receiver of financial services to refuse them if the other party’s rules are deemed inadequate.
The European Parliament elections in late May are likely to be a pivotal moment as the new Parliament will meet on July 2nd. If Brexit has been delayed, will the UK be obliged to hold elections so that UK MEPs can influence the choice of the next Commission President etc? Will the extreme `populists’ of left and right be able to combine to thwart business? [...]
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24 January 2019
Graham Bishop - Vice Chairman European Movement UK
1. Set up a Parliamentary Commission of the whole of Parliament to examine in full detail all the implications of each option that commands any reasonable support in the House of Commons. If there is no clear `winner’ in the House voting, then Parliament should ask the people to choose between the top two options – having sent each elector a summary of the Parliamentary Commission’s comparison of the two options.
2. Begin the national healing: identify the areas where EU migration has deprived the indigenous population of proper access to public services; start a crash programme of sorting it – funded by a temporary `solidarity’ tax surcharge until 2020 (Note: 1p on income tax for four years = £20 billion).
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11 January 2019
Paula Martín Camargo
The UK Parliament started the New Year taking back the driver’s seat of the Brexit battle in Britain after a series of raucous parliamentary skirmishes that have laid bare the strength of the opposition to a cliff-edge withdrawal from the EU among lawmakers. An extension of the official departure date seems now a plausible option and has been floated to EU officials, who are open to the idea but dismiss further concessions that would make the plan more palatable to British Parliament members.
MPs managed to pass a key amendment which will force PM Theresa May to come back to Parliament with an alternative plan just three sitting days after the deal she agreed in Brussels last month is rejected next Tuesday – as it is widely expected to be. This controversial tweak limits May’s supposed strategy to run down the clock right to Brexit eve so MPs are left with the binary choice of staring right into the no-deal abyss or voting the PM’s proposal.
The clash is therefore set for next week with a vote on the 15th that will most probably see May’s deal rejected – the deadline for May’s alternative motion would then be January 21. The Tory leader will then have to propose a motion that will be amendable, which could see MPs testing options such as a so-called Norway plus model or even a second referendum – a People’s Vote on the final deal the majority of Britons now want, as shown in the widest poll on the issue to date. The whole Brexit process could ultimately be cancelled if a majority in Parliament or a landslide popular vote calls for it: the EU top judge ruled that the UK can unilaterally withdraw Article 50. [...]
The EBA published its annual report on risks and vulnerabilities in the EU banking sector, which found further improvements in EU banks resilience but highlights challenges connected to profitability, funding and operational risk. The Banking Authority’s updated risk Dashboardshowed that EU banks have further improved their resilience, but profitability remains weak. It will run its next EU-wide stress test in 2020, in line with its previous decision to aim for a biennial exercise.
The impact and implementation of IFRS 9 was thoroughly assessed by the EBA in its first observation report, while the Chair of the IASB Hans Hoogervorst addressed financial industry concerns that the new accounting model might exacerbate procyclicality and discussed current risks in the global financial system.
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 European Central Bank used these powers - Graham Bishop assessed whether Carige is a foretaste of a new dimension of the slow-burning EU banking crisis, and if this is the first bank where, paradoxically, the final nail in the coffin may be IFRS 9. The ECB announced that it will directly supervise 119 banks this year. [...]
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10 January 2019
As political history unfolds at Westminster, it was inevitable that Brexit took up much time. News from the ECJ topped the agenda as the Court moved at lightning speed to rule that the UK could indeed unilaterally withdraw its Art 50 notice --- BUT it must be done in a proper constitutional manner and must “not involve an abusive practice”. The European Council met in its Art 50 formation and reconfirmed its November conclusions about the agreement but “It is not open for renegotiation.”
The Commission has started its process of implementing its “no deal” planning with just 14 measures. These include a strictly limited equivalence decision of 12 months for CCPs and 24 months for CSDs. There was also a regulation for 12 months to facilitate novation for OTC contracts moving into EU 27 from the UK. This was announced at the very last moment to forestall announcements about giving notice to UK contracts. The tight time frames triggered a surprising discussion about Switzerland’s troubles with the EU that resulted in a 12 month equivalence decision for the Swiss stock exchange. However, this was extended for a further 6 months even after the Swiss government postponed their decision on the EU’s “institutional framework” proposal. [...]
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8 January 2019
On the first working day of the New Year, the ECB announced that it has appointed temporary administrators to the troubled Banca Carige – Italy’s tenth largest bank – to safeguard the bank’s financial stability. This was the first time the ECB used these powers so is Carige a foretaste of a new dimension of the slow-burning EU banking crisis? Is this the first bank where, paradoxically, the final nail in the coffin may be IFRS 9 – the accounting standard designed to be the solution to lax accounting before the Great Financial Crash (GFC)? Is the cure worse than the disease? Or is Carige’s new round of problems just an uncomfortable part of the transition to the new world where no bank is too-big-to-fail?
Carige’s lack of profitability puts it at the extreme end of the spectrum in the EU. However, the EBA Transparency Exercise continues to report for the whole banking EU system that “Profitability remains low on average and has not yet reached sustainable levels.” Shareholders may look nervously at the way that Carige is treated and wonder whether they should throw good money after bad at other banks. According to Reuters, the 27.6% owners – the Malacalz family - has invested more than €400 million since 2015. That is now worth little and the family has baulked for the moment at contributing to a further €400 million – the specific trigger for the ECB’s decision. [...]
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