Leak: These are the five priorities for the next finance Commissioner

Commissioners Valdis Dombrovskis and Jyrki Katainen present the CMU mid-term review in June 2017. This issue will absorb most of the time for their successors. [European Commission]

A new strategy for the capital markets union, fintech, financial stability, sustainable economy and Brexit are the priorities listed for the next financial services Commissioner, according to the memo drafted by European Commission officials and seen by EURACTIV.com.

Commission services are finalising narratives and briefing notes for the upcoming college of commissioners, expected to take over in November. 

The next Commissioner in charge of financial services will play a fundamental role given the outstanding issues, including the completion of the banking union or the capital markets union, and the risk of a new recession hitting a financial system still suffering from structural challenges, such as the fragmentation and the low profitability. 

Despite the challenges ahead for the next five-year mandate, and the difficulties to advance in some areas like the European Deposit Insurance Scheme (EDIS), Commission’s Directorate General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA) wants to transmit an upbeat tone to the new finance commissioner.

EU claims stronger role for its currency despite flawed monetary union

The European Commission presented on Wednesday (5 December) a strategy to strengthen the international role of the euro days after member states continued to drag their feet to complete the economic and monetary union.

When it comes to describing the priorities, “make a reference to growth, competitiveness and opportunities to provide more optimism, turning some of the challenges into opportunities”, the document recommends.

The financial sector likes to champion guidelines and code of conducts to keep regulators at arms’ length. Despite the Commission acknowledges the role of self-regulation, the institution stresses “the need to increase enforcement and monitoring efforts” of legislation, including assessing the implementation of past rules and carrying out evaluations.

For the next term, these are the five priorities DG FISMA highlighted for its next political boss:

Ambition for the capital markets union: EDIS and the ongoing work on setting up a safe asset for the euro area are important outstanding initiatives in the field of the economic and monetary union. But it will be the capital markets union [CMU] the most absorbing priority. 

“The new strategy [for the CMU] would need to combine a targeted set of ambitious actions to produce long-term impact”.

For legislative initiatives “more politically sensitive”, such as the longstanding attempt to harmonise national insolvency procedures, the eurocrats recommended to issue recommendations instead of rules to avoid the risk of failure.

In a long list of actions, the Commission includes tax and prudential incentives for institutional investors that support small and medium sized companies [SMEs], and will consider single listing rules and authority for significant companies (with a capitalisation above €1 billion). 

In addition, the EU executive wants to test the waters for establishing a European investor protection scheme or agency, that would coordinate national supervisory actions in relation to retail investor protection rules.

Europe moves towards a common approach to regulate cryptoassets

European decision-makers and regulators are progressing towards an EU approach for dealing with cryptoassets, digital assets that use cryptography such as Bitcoin and represent a booming market still viewed with concern by financial supervisors.

Tech, tech, tech: The EU executive has various initiatives in the pipeline when it comes to fintech (tech-driven financial services). These include a possible legislative framework for crypto assets, to address the legal status of these digital assets, requirements for initial coin offerings, or investor protection requirements. As a first step, the Commission will launch a consultation and draft an impact assessment.

The Commission will also consider new rules to ensure open finance, to cover not only payment and banking services, but also savings and investment accounts or insurance products.

DG FISMA also wants a European financial sector cybersecurity act. This initiative would establish requirements where they don’t exist and strengthen the existing ones. In this case, the Commission will start with a consultation and impact assessment too, and will take into account the G7 and the emerging international standards in this field.

Financial stability: this priority includes banking and non-banking sectors, with a lot of preparatory work ahead, and new proposals on the radar screen, including guarantee schemes and recovery and resolution for the insurance sector.

Decoupling economic growth from greenhouse gas emissions

In a world already impacted by climate change, the global community still falls short of meeting the Paris Agreement’s goal on curbing climate change under the well-below 2°C target. Countries gathered at the COP24 will have to roadmap how to shift trillions of euros to turn the economy from brown to green. 

Transitioning to a more sustainable economy: despite the importance given to ‘green finance’ to fight against global warming, the list of priorities in this field is very limited at this stage. It includes primarily the launch of Commission’s international network for sustainable finance, to strengthen the international collaboration and promote a coherent approach in regards to private funding for ‘green’ projects.

Brexit: The UK’s departure from the EU will bring new challenges to the European financial sector. The Commission officials recommend to look into the right balance between the EU and non-EU financial services. This would include the monitoring of the recognition of non-EU financial frameworks (equivalence decisions).

The EU executive will also assess the autonomy of the EU financial infrastructure and key European financial players.

Brexit 'not imminent risk to financial stability', says bank watchdog 

Despite the volatility that would trigger the UK’s departure from the EU, Brexit does not represent an “imminent risk” to financial stability, according to Single Resolution Board President Elke König.

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