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03 June 2015

Deepening EMU – Round-up of Key Events – May 2015

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UK elections and Brexit were the main topics, also discussed in the 110th Brussels for Breakfast. CMU plays a greater and greater role in EU, and many EU institutions, associations and banks responded to the European Commission’s Green Paper.

Graham Bishop’s comments

Graham Bishop wondes if the time is ‘ripe’ for Eurobills. He has developed a detailed plan for a Temporary Eurobill Fund (TEF) that explicitly provides a “concrete mechanism for stronger economic policy coordination, convergence and solidarity”. This aligns with the Four Presidents Report – due to be presented to June’s European Council on “Preparations for Next Steps on Better Economic Governance in the Euro Area” -. Eurogroup President Dijsselbloem explained how it is being drafted, working on “ways to improve economic governance within the EMU, making the euro area economies more competitive and the euro area, as whole, more resilient, more shock proof for future shocks”. 

His comments came after the11 May Eurogroup meeting:He also made some remarks on Greece, Ireland and the Spring Economic forecast, which shows that economic tailwinds from low oil prices to steady global growth strengthen Europe's economic recovery.

The 110th Brussels for Breakfast featured Graham Bishop and Raoul Ruparel from Open Europe. They talked about Brexit, increasing financial integration, Denmark and Banking Union, PSD2, Capital Market Union and MiFID impacts on research and CPD obligations.

A new service is available for Graham Bishop Friends: Continuing Professional Development "CPD", offering to keep investment professionals up-to-date with relevant developments in the regulatory field.

The focus was on the UK: ‘After the UK election: what chance of Brexit?’ Graham Bishop wrote about David Cameron’s victory and on The Times revelation that Cameron wants the rest of the EU to radically change its economic policy structure. Probable failure would loose the referendum and split the UK.

The FT’s Wolfgang Münchau discussed what David Cameron’s electoral victory means for Europe, and argued that the real divide is not between Labour and the Conservatives, but between the UK and Europe. CEPS produced a commentary on Britain’s Political Earthquake, analysing the aftershocks for Europe and the UK. British Influence’s Menon feared that Brexit talkswouldundermineUK influence as a decision-maker in the EU, while the BBA is concerned about the uncertainty around the EU referendum that might make banks leave the country.  It will therefore lead a review into the competitiveness of the UK on behalf of the banking industry.

Cameron has already started talks towards a EU reform: Open Europe suggested 30 potential reform proposals that the UK might wish to seek in the forthcoming EU negotiations. European Movement published a review of the Balance of Competences between the UK and the EU the government had lead but not given publicity. It would produce a complete landscape for Cameron to check “where the EU helps and where it hampers”.

On Greece, CEPS explained ‘Why Greece is different’, arguing that “Greece’s government should focus its attention on stimulating exports rather than only discussing the budget”.


The European Commission published its Country-specific recommendations for 2015 – 2016, warning that further efforts are needed to support a robust recovery. ECB’s Draghi said that there is a large untapped potential in the euro area for substantially higher output, employment and welfare. Eurozone countries should also find a way to deal with the high public debt built up during 2008-2012, Commissioner Moscovici said.

European tax systems have been an important subject as well, with European Commission preparing an Action Plan for fairer and more growth-friendly tax systems in EU, and Commissioner Moscovici describing the future of tax policy as “focused on fairness, transparency and a truly single market”.


Banking union may be put at risk as Bloomberg reported that the EU push for bank-structure rules faltered as Parliament rejected a version of the draft law put forward by Rapporteur Hoekmark. European institutions strongly back banking union, with speeches like ECB’s Danièle Nouy, on the banking union and financial integration.

Bruegel published an essay on Europe’s radical banking union, taking stock on its current status of implementation and prospects. Denmark announced a plan to join EU banking union, after a new report concluded the country won't be giving up sovereignty by becoming a member.

On banking supervision, the FSB published a thematic review on supervisory frameworks and approaches since the financial crisis, in particular for global systemically important banks (G-SIBs). Deutsche Bank’s Sylvie Matherat gave a CFS lecture explaining the implications of new regulatory rules such as Basel III or TLAC, for large international banks.

EBA published a series of documents: final Guidelines on triggers for the use of early intervention measures, final guidance on recovery indicators, final Guidelines on triggers for the use of early intervention measures, guidelines on triggers for resolution, guidance on the implementation of resolution tools. The EBA also consulted on the valuation of derivatives in resolution.

ECON updated payment service rules which still need to be endorsed by Parliament as a whole and the Council. EBF issued a response to the conclusion of EU trialogue talks on PSD2.

Capital Market Union plays a greater and greater role in EU: Graham Bishop published an article on the “Progress on financial integration: the scoreboard on the way to CMU”  and Part 3 of “Shaking the structure of financial markets: Unbundling research costs and execution”, remarking that a key building block is already planned to come into force on 3 January 2017: MiFID II /MiFIR.

Many EU institutions, associations and banks responded to the European Commission’s Green Paper: ECB said CMU should aim to enable EU economic actors to access the best-suited financing options possible, while safeguarding financial stability; BoE strongly supports the initiative, ESMA argued that increasing the role of the non-banking sector and diversifying sources of funding should also help in making a shift from debt to more equity funding; TheCityUK highlighted five key priorities to deliver a single market for capital that benefits the whole of the EU, and demanded no further empowerment of the ESAs; ICMA focusedon specific questions relating to fixed income; AFME called for the European Commission to unlock the potential of EU capital markets; EBF said banks are ready for a pivotal role in a new growth ecosystem under CMU; The Investment Association’s response focusedon Europe’s need for increased investment capital to drive sustainable economic growth; FESE believes that a fundamental reorientation of European policies is needed to serve the original goals of the Single Market; EVCA submitted recommendations that should help €12 trillion of capital held by institutional investors to flow into European businesses; PensionsEurope urged the EU to work together with pension funds in delivering the CMU; ALFI suggested the development of tools to match demand and supply, and of a “digital passport"; EFAMA reiterated its support for CMU; ACCA aimed at identifying ways to knock down barriers to the single market for capital from the bottom up and called for consistency between the various initiatives; FEE explained how the European accounting profession can be a constructive partner in developing a CMU.

French Finance Minister Sapin requested a report which outlined 25 Investing and financing recommendations for CMU. Developing this union will foster European SMEs and start - ups in particular, according to the signatories of the joint declaration on the CMU - AFME, BAE, EBAN, EBF, EBN, ECN, EUROCHAMBRES, and EuropeanIssuers. ACCA opined it would maximise the Capital Market opportunity for SMEs and Start-ups. However, EFAMA warned that the MMFR report was at odds with Capital Markets Union’s policy focus to promote alternative sources of financing to the economy.


The Commission publisheda consultation on EMIR: OTC derivatives, CCPs and trade repositories.  PensionsEurope responded to it, callingto ensure EMIR rules do not jeopardise long-term investment in the EU. ESMA published its opinion on the composition of the CCP Colleges, aiming to clarifywhich authorities - especially the ECB - qualify as a college member under EMIR following the establishment of the SSM and the resulting voting rights.

Commissioner Hill and CFTC’s Massad will continue their discussions on a possible equivalence decision by the European Commission for central counterparties (CCPs) that are regulated and supervised by the CFTC.

Insurance Europe published its response to public consultation on an EU framework for “simple transparent and standardised securitisation”, sayingit supports the use of good securitisations to help fund the European economy. PensionsEurope did so, arguing that a new EU securitisation framework should be internationally consistent, and that the harmonisation of regulatory frameworks in the EU could enable a level-playing field for investors and issuers in European securitisations.  ALFI responded that a high-quality EU securitisation framework will promote further integration of EU financial markets, help diversify funding sources and unlock capital, making it easier for banks to lend to households and businesses.  AFME thinks the consultation is a clear indication that the Commission recognised the positive benefits of securitisation for the functioning of the financial markets and supports the rehabilitation of “qualifying securitisation” so it can play a key role in CMU; finally The Investment Associationsupports the EU framework and examined how existing regulatory requirements could be amended to eliminate disincentives to investment.

A third EC consultation – on the Prospectus Directive– received responses from EuropeanIssuers, that suggested itshould also be revised with respect to requirements applicable to large companies; FEE, explained that the quantitative criteria, which are included in the Directive, should not be used in isolation, and proposed a proportionate application of IFRS; AFME, advocated makeng the process for issuing new securities less costly and complex and help corporates in Europe get better access to financing on the capital markets; and The Investment Association, argued that there is scope to improve the timeliness and quality of information available to potential investors at the time a Prospectus is issued.

EIOPA launched its first stress test for IORPs and a quantitative assessment of further work on solvency of IORPs. It also estimated its resource needs for fulfilling its duties for Solvency II implementation.  AAE said that informing about pension arrangements  themselves, rather than IORPs liabilities is the key to avoiding social unrest in future. The NAPF regretedEIOPA’s decision to press ahead with stress tests and that there is no support for reviving solvency requirements within IORP II.

MEPs backed a draft law empowering shareholders to vote on directors’ remuneration, so as to ensure proper transparency and tie their pay more closely to their performance. ACCA took note of this vote and issued a response. Finally, the European Parliament approved new rules on insolvency for struggling companies.


© Graham Bishop

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