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Euro area monthly balance of payments: October 2023
December 20, 2023-- Current account recorded €34 billion surplus in October 2023, up from €31 billion in previous month
Current account surplus amounted to €218 billion (1.5% of euro area GDP) in the 12 months to October 2023, after a €56 billion deficit (0.4%) one year earlier
ESMA presents methodology for climate risk stress testing and analysis of the financial impact of greenwashing controversies
December 19, 2023--The European Securities and Markets Authority (ESMA), the EU's financial markets regulator and supervisor, today published two articles, one outlining an approach to modelling the impact of asset price shocks from adverse scenarios involving climate-related risks, the other exploring the use of ESG controversies for the purpose of monitoring greenwashing risk.
Risk article: Dynamic modelling of climate-related shocks in the fund sector
The article presents a methodological approach to modelling climate-related shocks in the fund sector, which includes dynamic impacts, such as inflows and outflows from investors and portfolio rebalancing by managers. The analysis focuses on the overall direction of these effects, finding that investor outflows can worsen falls in fund values following an initial shock.
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Source: ESMA
The average cost of retail investment products declines but significant differences across EU Member States remain
December 18, 2023--The European Securities and Markets Authority (ESMA), the EU financial markets regulator and supervisor, today publishes its sixth market report on the costs and performance of EU retail investment products. In this annual report ESMA finds that the average costs of investing in key EU retail financial products has declined by the end of 2022. However, cost heterogeneity persisted across EU Member States.
The key findings in the report are:
UCITS Costs: Costs have declined, but investors should continue to consider fund fees carefully in their investment decisions. Despite costs of active equity funds decreasing, this category of funds remained more expensive than passive funds and ETFs, such that their net performance was on average lower in comparison.
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Source: ESMA
Are new EU data market regulations coherent and efficient?
December 18, 2023--Technical restrictions on access to and re-use of data may result in failures in data markets and data-driven services markets. Th is paper examines three new EU data regulations (the European Health Data Space, the Data Act and the Digital Markets Act) that vary substantially in mandatory access measures intended to overcome these market failures.
It applies three economic criteria, economies of scope in re-use and in aggregation of data, and data supply-side failures, to assess the effi ciency of these regulations in overcoming market failures and coherence across regulations. Variations might be justified by particular sectoral market conditions.
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Source: bruegel.org
IMF Staff Country Report-Ireland: Selected Issues
December 18, 2023--A. Savings Funds in Ireland
Evolution of Public Finances
1. Sound fiscal policies have contributed to healthy public finances and put Ireland in a good position to weather shocks. The solid fiscal position of recent years has enabled the authorities to conduct countercyclical fiscal policy in the face of the Covid and energy price shocks and contributed to a fast decline in public debt.
Ireland’s path of primary surpluses, except for during the GFC, is not out of line with that in some peer countries. Some countries, like Korea and New Zealand, have also established sovereign wealth funds (SWF).
2. Ireland's healthy fiscal position has been supported in recent years by a fast increase in CIT revenues, which have grown beyond what would be implied by economic fundamentals. Ireland's share of CIT in total revenue (almost 1/3) is much larger than the average of European countries in the OECD (about 6 percent) and CIT has become the second largest source of tax revenues. While
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Source: imf.org
ESMA proposes changes and updates timeline for its Guidelines on funds' names
December 14, 2023--The European Securities and Markets Authority (ESMA), the EU's financial markets regulator and supervisor, today provides an update on the status of ESMA's guidelines on ESG and sustainability-related terms in fund names, including details on the timing of their publication.
Since the launch of the work on the guidelines, the AIFMD and UCITS Directive reviews have progressed. ESMA has decided to postpone the adoption of the Guidelines to ensure that the outcome of these reviews may be fully considered.
In particular, the text of the provisional agreement resulting from the interinstitutional negotiations contains two new mandates for ESMA to develop guidelines specifying the circumstances where the name of an AIF or UCITS is unclear, unfair, or misleading.
ESMA plans to adopt the Guidelines shortly after the date of entry into force of those amended legal texts and is publishing this statement to highlight the key content of the guidance that it intends to provide in the forthcoming Guidelines.
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Source: ESMA
IMF Working Papers-Feeling Rich, Feeling Poor: Housing Wealth Effects and Consumption in Europe
December 8, 2023-Summary:
Households across Europe are struggling with a double crisis-the worst inflation shock since the World War II and a sudden correction in house prices. There is a rich literature on how housing price cycles affect consumer spending, finding mixed results with a wide range of consumption responses to changes in housing wealth.
In this paper, using quarterly data on 20 countries in Europe over the period 1980-2023, we analyze the dynamic relationship between inflation-adjusted housing wealth and consumer spending and obtain statistically significant and economically intuitive results.
Household consumption responds positively and swiftly to changes in real house prices and gross disposable income as expected. Using the estimated coefficients, we can deduce that the average quarter-on-quarter decline of -1.96 percent in real house prices in the first quarter of 2023 in Europe could dampen consumer spending by about -0.51 percentage points in real terms on a cumulative basis over a horizon of eight quarters.
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Source: imf.org
ESAs put forward amendments to sustainability disclosures for the financial sector
December 4, 2023--The three European Supervisory Authorities (EBA, EIOPA and ESMA-ESAs) are today publishing their Final Report amending the draft Regulatory Technical Standards (RTS) to the Delegated Regulation supplementing the Sustainable Finance Disclosure Regulation (SFDR).
The ESAs propose adding new social indicators and streamlining the framework for the disclosure of principal adverse impacts of investment decisions on the environment and society.
The ESAs also suggest new product disclosures regarding "greenhouse gas emissions reduction" targets.
Additionally, the ESAs propose further technical revisions to the SFDR Delegated Regulation:
Improvements to the disclosures on how sustainable investments "Do No Significant Harm" (DNSH) to the environment and society;
Simplification of the pre-contractual and periodic disclosure templates for financial products; and
Other technical adjustments concerning, among others, the treatment of derivatives, the calculation of sustainable investments, and provisions for financial products with underlying investment options.
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Source: ESMA
IMF Working Papers-Geoeconomic Fragmentation: What's at Stake for the EU
December 1, 2023-- Summary:
Geoeconomic fragmentation (GEF) is becoming entrenched worldwide, and the European Union (EU) is not immune to its effects. This paper takes stock of GEF policies impinging on-and adopted by-the EU and considers how exposed the EU is through trade, financial and technological channels.
Motivated by current policies adopted by other countries, the paper then simulates how various measures-raising costs of trade and technology transfer and fossil fuel prices, and imposition of sectoral subsidies-would affect the EU economy.
Due to its high-degree of openness, the EU is found to be exposed to GEF through multiple channels, with simulated losses that differ significantly across scenarios. From a welfare perspective, this suggests the need for a cautious approach to GEF policies. The EU's best defence against GEF is to strengthen the Single Market while advocating for a multilateral rules-based trading system.
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Source: imf.org
The ESAs provide clarity and tips to consumers on sustainable finance
November 30, 2023--The three European Supervisory Authorities (EBA, EIOPA and ESMA-ESAs) today published an interactive factsheet that answers consumers' most frequently asked questions about sustainable finance. The factsheet provides tips to consumers considering buying financial products with sustainability features, including loans, investments, insurances and pensions.
The factsheet provides answers to frequently asked questions and steps consumers can take to understand how their financial choices could contribute to a more sustainable future.
In addition, the factsheet provides four tips consumers should take into account before choosing financial products with sustainability features. Consumers are encouraged to:
decide how important sustainability is for them and what financial goals they want to achieve before they choose a product;
pay attention to the conditions and the sustainability features, to avoid being misled by 'greenwashing';
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Source: ESMA