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06 April 2016

Deepening EMU – Round-up of Key Events – March 2016

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The UK Government published two reports on the process for withdrawing from the EU and the possible alternatives to EU membership. The CBI and the City of London Corporation made the case for staying In. The EU Council published the Annual Growth Survey and several documents of conclusions on taxes.

By Paula Martín Camargo, Editor

Graham’s articles, comments and speeches

Graham Bishop analysed the responses to the Commission’s Call for Evidence on the EU Financial Services Regulation; in his view, some clear trends emerged from the submissions by the trade associations, while ECON and the ECB called for a much more comprehensive and continuous review process. Bishop also wrote that ‘FinTech’ payments may revolutionise the financial system far more than can be imagined easily today.  


The UK Government published two papers aimed at shedding light on the process for withdrawing from the European Union, and at explaining the possible models for the UK outside the EU. One of the most important conclusions is that the process would lead to “up to a decade or more of uncertainty.”  

The BoE’s Mark Carney wrote to Andrew Tyrie, chair of the Treasury Select Committee, saying that "EU membership reinforces the dynamism of the UK economy" in response to a request for the Bank's view on David Cameron's renegotiation settlement. The BBA’s survey among the banking sector found that a majority of respondents believe their business would suffer a “negative impact” in the event of a Brexit.  

Commissioner Hill explained the next steps of the CMU Action Plan in a speech and talked about the benefits of the Single Market for the UK, underlining that "if the UK were to vote to leave, it's a fantasy to suggest it could quickly secure access to the single market on the same terms as it has today."  

This is a widespread idea, with City of London Corporation pointing out how access to the single market in financial services provides significant benefits for the UK financial services industry and for consumers.  Chairman Mark Boleat wrote in City AM defending the City of London Corporation position in favour of EU membership. TheCityUK published its practitioner's guide to Brexit to address the practical questions businesses need to be aware of in the event of Britain withdrawing from the European Union.

The CBI will finally make the economic case to remain in the EU after 80% of its members voted that being in EU is best for their business. A new PwC analysis commissioned by the Confederation concluded that leaving Europe would cause a serious shock to the UK economy, with a potential cost to the national GDP of £100 billion.  

Several leading figures supported the Remain side, with John Major writing in The Telegraph that “voting to leave will poison Europe and divide West”; Alan Johnson writing in The Guardian that “the idea of Brexit is pure Project Fantasy, but the dangers are very real”; and Peter Mandelson saying that Leave campaigners are "trying to sell people a fantasy" on the issue of trade. In this line, Open Europe published a sober assessment of the recently signed EU-Canada trade deal – after seven years of intense negotiations.    

Voices across the world warn of the economic dangers a Brexit would entail: BlackRock, the world’s largest asset manager, said a vote to leave the EU would make British equities, sterling and the London property market all likely to suffer.  Analysts from Swiss bank UBS also warned of the hit for the Sterling after a Brexit vote, saying it would fall to parity with the euro in the aftermath of a majority of ‘Noes’.

VoxEU issued an analysis on the implications of Brexit for the rest of the EU, arguing that the economic and financial frictions could be limited, but political considerations might result in a far more damaging outcome, not just for the UK. Besides, it wouldn’t be the last and decisive referendum in the UK, according to Tim Oliver’s ‘Why the EU referendum will not be the end of story’. Dr Oliver mapped out how future referendums on UK-European relations would be triggered after the June 23rd vote in a major paper published by the Federal Trust.

Graham Bishop gave his informed view in the matter in a speech at the Institute of Economic Affairs, saying supporters of free markets should back Britain’s continuing membership of the EU.



The Basel Committee proposed a consultative document on its measures to reduce the variation in credit risk-weighted assets. The EBF responded to the second BCBS consultation on the revision of the Standardised Approach for Credit Risk saying it improves certain aspects of the first paper following a quick but thorough analysis.   

The EBA published the report on SMEs and the SME supporting factor, while Reuters reported the ECB's chief supervisor saying that the European Central Bank will apply new European Commission guidelines on bank capital that raise the bar for stopping lenders from paying bonuses, dividends and discretionary coupons.  

Martin Wolf wrote on the Financial Times that ‘Fintech’ could disrupt finance, what he sees as good news as banking is “currently inefficient, costly and riddled with conflicts.”  Payments may be the avant-garde of the application of new technologies to finances, as shown the rise of biometric banking or blockchain.

The EBA published its annual assessment of EU colleges of supervisors, which draws the attention of supervisors to NPLs and balance sheet cleaning, business model sustainability, conduct risk and IT risk.  

The BoE’s Senior Managers Regime for the banking sector and the Senior Insurance Managers came into force in the UK.  


Investors, issuers and other market participants represented by AFME, EFAMA, ICMA and InsuranceEurope united to support STS securitisation.  The FT published that securitised loans were and still are originated mainly by EU regulated banks and in line with prudentially established underwriting standards, and therefore securitisation does not deserve a toxic tag.

ICMA published a Q&A briefing note on the regulatory technical standards of Market Abuse Regulation, while ESMA's Maijoor wrote to the European Commission regarding its draft RTS on MiFID II.  

ESMA issued a report on risks and costs of CCP interoperability. The European Commission adopted a new set of rules that requires certain over-the-counter OTC credit derivative contracts to be cleared through central counterparties, and granted the US the equivalent regulatory regime for central counterparties as the European Union.  


The European Commission published an amendment to a delegated act under Solvency II that will make it more attractive and cheaper for insurers to invest in infrastructure projects.  But insurers are voicing concerns over regulators’ plans to develop a single, global framework for the insurance industry as reported by Commercial Risk Europe and the Financial Times.

Insurance Europe put in motion an initiative for improving young people’s financial literacy and understanding of insurance, which it believes is key to ensuring growth and stability in the European economy.  

Asset Management

EIOPA’s stress test have been criticised by PensionsEurope – the association said that the results show that the holistic balance sheet methodology does not work – and the Dutch Pensions Federation, which affirmed that EIOPA’s use of the holistic balance sheet for stress tests has led to confusing results.  These opinions might prove determining: the Commission is mulling whether to continue developing a personal pension product and wants to have “an informed view” by year-end.  

The Financial Times suggested the Commission delegated supplementing Regulation No 596/2014 of the EP and of the Council may hurt The City and asset managers, since it tears up working practices across European financial centres.

Corporate Governance/Accounting

IPE reported that MEPs of the ECON have launched a stinging attack on the IFRSs and the IASB. The IAASB released a publication highlighting the audit issues arising from the shift to Expected Credit Loss models when accounting for loan losses.

Financial Services Policy

The European Commission’s Green Paper on Retail Financial Services consultation received responses by EFAMA, the EPC and Insurance Europe.  


The ECB added the corporate sector purchase programme to the APP and also decided to adjust the parameters of the public sector purchase programme (PSPP). ICMA published a briefing note on how it intends to respond to the CSPP, and to help ensure that it achieves its objective without compromising resilient and well-functioning European corporate bond markets.  

The Governor of Banque de France said at a Bruegel event that the lack of economic coordination has a high growth cost for euro area citizens, and that full coordination can only be achieved by setting up a legitimate decision-making institution, embodied by a Finance Minister of the euro area.  

The European Council published its conclusions on jobs, growth and competitiveness in the Annual Growth Survey and set up its June meeting goals on EMU, CMU, and the Single Market. In response to this, the LSE issued a paper saying that “economic surveillance and coordination mechanisms won’t work without proper scrutiny by national parliaments.”

The Council adopted its conclusions on the fiscal sustainability report, on the code of conduct on business taxation, and on corporate tax avoidance. Insurance Europe supported the Council’s objective of tackling tax avoidance and abusive tax practices, and the creation of a level playing field for all businesses, but warned that exceeding the OECD tax avoidance recommendations could harm EU competitiveness.

The Draft Budgetary Plans for 2016 put the spotlight on higher deficit levels in the euro area as a whole than was projected, and on increased risks that some budgets do not comply with obligations under the SGP in 2016.  

Graham Bishop launched his CPD courses with a lecture at Cass Business School - organised by The CISI. This was the first of a series of ten online lectures as his bold plan to explain how and why the current system of financial services regulation has come into existence across the EU.  

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