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ESMA TRV Risk Analysis
Artificial intelligence in EU securities markets
February 7, 2023--The use of artificial intelligence (AI) in finance is under increasing scrutiny from regulators and supervisors interested in examining its development and the related potential risks.
This article contributes by providing an overview of AI use cases across securities markets in the EU and assessing the degree of adoption of AI-based tools.
Research: UK official holdings of international reserves: January 2023
February 3, 2023--This release details movements in the international reserves of gold and assets held by the UK Government.
ESMA reviews the scope of clearing and derivatives trading obligations
February 1, 2023--The European Securities and Markets Authority (ESMA), the EU's financial markets regulator and supervisor, has today published its final report on the clearing (CO) and derivative trading (DTO) obligations to accompany the benchmark transition.
The report sets out proposed draft Regulatory Technical Standards (RTS) amending the scope of the CO and DTO for over-the-counter (OTC) interest rate derivatives (IRD) denominated in EUR, GBP, JPY, and USD.
The report is part of the transition away from EONIA and LIBOR and onto alternative benchmarks, primarily Risk-Free Rates such as €STR, SOFR, SONIA and TONA.
ESMA's proposed amendments aim to ensure a smooth benchmark transition while maintaining an effective scope for these obligations, in line with the G20 objectives. The proposals include:
for the CO-introduce the TONA OIS (with maturities up to 30 years) class and extend the SOFR OIS class (up to 50 years); and
for the DTO - introduce certain €STR OIS classes.
BlackRock pushes to attract more retail investors to ETFs
January 31, 2023--World's largest asset manager offers new ETFs savings plans with neobroker Bux
BlackRock has joined forces with the neobroker Bux to offer low-cost savings plans that use exchange traded funds in a push by the world's largest asset manager to encourage more retail investors across Europe to adopt ETFs.
Investors will be able to build investment portfolios of up to 10 BlackRock iShares ETFs in a so-called savings plan that will cost a flat fee of just €1 per month on the Bux platform. Investors will be able to make portfolio trades that can adjust the allocations across all of the ETFs they hold for a €1 commission fee and the minimum required investment has been set at just €10 per month to appeal to younger savers.
IMF-France: Selected Issues
January 30, 2023--SPENDING EFFICIENCY AND REFORMS1
The trend increase in primary current spending over the last three decades leaves France with the highest spending ratio in Europe. France will need to reverse this trend through structural spending reforms to rebuild fiscal buffers that have been further eroded by the large fiscal response to successive shocks over 2020-22.
This paper identifies areas where scope for savings or efficiency gains exist based on an analysis of public spending on key categories and related outcomes relative to peers. Reform of social protection, health, education, and civil service should preserve or improve outcomes while generating savings that would help meet medium-term adjustment needs. In parallel, rationalizing
costly, distortive, or inefficient tax expenditures would allow for base broadening and partially offset
permanent revenue losses from the rebalancing of revenues away from labor and production taxes.
ECB-Monetary developments in the euro area: December 2022
January 27, 2023-Annual growth rate of broad monetary aggregate M3 decreased to 4.1% in December 2022 from 4.8% in November
Annual growth rate of narrower monetary aggregate M1, comprising currency in circulation and overnight deposits, decreased to 0.6% in December from 2.4% in November
Annual growth rate of adjusted loans to households decreased to 3.8% in December from 4.1% in November
Annual growth rate of adjusted loans to non-financial corporations decreased to 6.3% in December from 8.3% in November
Components of the broad monetary aggregate M3
The annual growth rate of the broad monetary aggregate M3 decreased to 4.1% in December 2022 from 4.8% in November, averaging 4.7% in the three months up to December.
New Equity ETF from Amundi on Xetra: access to largest Swiss equity companies
January 27, 2023--A new exchange-traded fund issued by Amundi Asset Management has been tradable on Xetra and via the trading venue Börse Frankfurt since Friday.
The Amundi MSCI Switzerland UCITS ETF gives investors the opportunity to track the performance of a portfolio consisting of the largest and highest-turnover companies on the Swiss equity market.
The underlying index is currently composed of 43 companies such as Nestle, Roche Holding and Novartis, which together account for 85 per cent of the Swiss market capitalisation. The largest sectors include healthcare (35 per cent), consumer staples (24 per cent) and financial services (16 per cent). The base currency of the fund is the Swiss franc.
Name: Amundi MSCI Switzerland UCITS ETF-CHF
Asset class: Equity ETF
ISIN: LU1681044993
ESMA publishes data for the quarterly liquidity assessment of bonds
January 27, 2023--The European Securities and Markets Authority (ESMA), the EU's financial markets regulator and supervisor, has published its new quarterly liquidity assessment of bonds. Due to a technical error, the data was published earlier than the usual publication date (1 February 2023). This does not have any impact on the application date.
The transparency requirements for bonds deemed liquid will apply from 16 February 2023 to 15 May 2023.
For this period, there are currently 1,010 liquid bonds subject to MiFID II transparency requirements.
Carbon Policy Surprises and Stock Returns: Signals from Financial Markets
January 27, 2023--Summary:
Understanding the impact of climate mitigation policies is key to designing effective carbon pricing tools. We use institutional features of the EU Emissions Trading System (ETS) and high-frequency data on more than 2,000 publicly listed European firms over 2011-21 to study the impact of carbon policies on stock returns.
After extracting the surprise component of regulatory actions, we show that events resulting in higher carbon prices lead to negative abnormal returns which increase with a firm's carbon intensity. This negative relationship is even stronger for firms in sectors which do not participate in the EU ETS suggesting that investors price in transition risk stemming from the shift towards a low-carbon economy. We conclude that policies which increase carbon prices are effective in raising the cost of capital for emission-intensive firms.
ECB-Euro area economic and financial developments by institutional sector: third quarter of 2022
January 27, 2023--Euro area net saving decreased to €678 billion in four quarters up to third quarter of 2022, compared with €731 billion one quarter earlier
Household debt-to-income ratio declined to 94.7% in third quarter of 2022 from 96.0% one year earlier
Non-financial corporations' debt-to-GDP ratio (consolidated measure) decreased to 77.6% in third quarter of 2022 from 79.4% one year earlier
Total euro area economy
Euro area net saving decreased to €678 billion (6.5% of euro area net disposable income) in the four quarters to the third quarter of 2022, as compared with €731 billion one quarter earlier. Euro area net non-financial investment increased to €667 billion (6.4% of net disposable income), as investment by all four main sectors of the economy, namely households, general government, and non-financial and financial corporations, increased.
Euro area net lending to the rest of the world decreased to €39 billion (from €214 billion in the previous quarter), as net saving decreased and non-financial investment increased.
