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ESAs propose to amend bilateral margin requirements to assist Brexit preparations for OTC derivative contracts
November 29, 2018--The European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA), together the European Supervisory Authorities (ESA), have today published a final report with draft regulatory technical standards (RTS) proposing to amend the Commission Delegated Regulation on the risk mitigation techniques for OTC derivatives not cleared by a CCP (bilateral margin requirements) under the European Market Infrastructure Regulation (EMIR).
The draft RTS propose, in the context of the United Kingdom's (UK) withdrawal from the European Union (EU), to introduce a limited exemption in order to facilitate the novation of certain OTC derivative contracts to EU counterparties during a specific time-window.
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Source: ESMA
BOE-Financial Stability Report November 2018
November 28, 2018--The House of Commons Treasury Committee has requested that the Bank of England publish analysis of how leaving the European Union (EU) would affect its ability to deliver its objectives for monetary and financial stability.1
Brexit is unique. Large negative supply shocks are relatively rare, and there is no precedent of an advanced economy withdrawing from a trade agreement as deep and complex as the European Union.
As the United Kingdom's (UK) trading relationship with the EU changes, the reduction in openness will act to reduce the UK economy's productive capacity and in most scenarios its rate of growth in the short term. Leaving the EU abruptly, without a withdrawal agreement and implementation period, would amplify these effects.
view the Bank of England EU withdrawal scenarios and monetary and financial stability-A response to the House of Commons Treasury Committee November 2018
Source: Bank of England
BOE-Financial Stability Report and Stress Test results-November 2018
November 28, 2018--The 2018 stress test shows the UK banking system is resilient to deep simultaneous recessions in the UK and global economies that are more severe overall than the global financial crisis and that are combined with large falls in asset prices and a separate stress of misconduct costs.
In the 2018 stress-test scenario, UK GDP falls by 4.7%, the UK unemployment rate rises to 9.5%, UK residential property prices fall by 33% and UK commercial real estate prices fall by 40%. The scenario also includes a sudden loss of overseas investor appetite for UK assets, a 27% fall in the sterling exchange rate index and Bank Rate rising to 4%.
Major UK banks have continued to strengthen their capital positions. They started the 2018 stress test with an aggregate common equity Tier 1 (CET1) capital ratio nearly three and a half times higher than before the global financial crisis.
Despite facing loss rates consistent with the global financial crisis, the major UK banks' aggregate CET1 capital ratio after the stress would still be twice its level before the crisis.
view the Bank of England Financial Stability Report November 2018
Source: Bank of England
Bank of England says 'disorderly' Brexit worse for UK than global financial crisis
November 28, 2018--The Bank of England has published its 2018 U.K. bank stress tests and Brexit report.
Earlier, the U.K. government admitted that all Brexit scenarios would slow the economy.
The Bank of England has claimed that a "disorderly" exit from the European Union would plunge the U.K. economy into a worse economic contraction than that experienced after the global financial crisis of 2008.
The BOE made the claim in its assessment of different scenarios related to the U.K.'s withdrawal agreement from the EU, published Wednesday.
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Source: CNBC.com
Monday Morning Memo: European Investors sell-off Long-Term Mutual Funds in October
November 26, 2018--European investors pulled further away from long-term mutual funds as the market environment and general sentiment remained negative. As a consequence October was the sixth month in a row posting net outflows from long-term mutual funds after 16 consecutive months showing net inflows.
Real estate funds (+€0.3 bn) and commodity funds (+€0.2 bn) enjoyed net inflows, while all the other asset types in the segment of long-term mutual funds witnessed net outflows: bond funds (-€40.7 bn), equity funds (-€31.2 bn), alternative UCITS funds (-€11.4 bn), and mixed asset funds (-€9.1 bn), as well as ”other” funds (-€0.9 bn).
These fund flows added up to overall net outflows of €92.8 bn from long-term investment funds for October. ETFs contributed inflows of €0.7 bn to these flows.
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Source: Detlef Glow, Head of EMEA Research, Lipper
Fixed-income hedging set to climb as rates rise
November 25, 2018--Trading in European fixed-income derivatives is rising rapidly but still only covers half the amount of fixed-income assets that may need to be hedged as investors prepare for rises in interest rates.
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Source: FT.com
Managing risks of a no-deal Brexit in the area of central clearing
November 23, 2018--The European Securities and Markets Authority (ESMA) is publishing this Public Statement to address the risks of a no-deal Brexit scenario in the area of central clearing. The ESMA Board of Supervisors supports the continued access to UK CCPs to limit the risk of disruption in central clearing and to avoid negatively impacting EU financial market stability.
ESMA therefore welcomes the communication Preparing for the withdrawal of the United Kingdom from the European Union on 30 March 2019: a Contingency Action Plan, published on 13 November 2018 where the EC stated that it will act, to the extent necessary, to address financial stability risks in the EU arising from the withdrawal of the UK without any agreement.
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Source: ESMA
ECB-Account of the monetary policy meeting of the Governing Council of the European Central Bank
November 22, 2018--Held in Frankfurt am Main on Wednesday and Thursday, 24-25 October 2018
1. Review of financial, economic and monetary developments and policy options
Financial market developments
Mr Cœuré reviewed the latest financial market developments.
Since the Governing Council's meeting on 12-13 September 2018, a continued rise in ten-year US Treasury yields had been observed. While US Treasury yields had initially also pulled euro area risk-free rates higher, the spillovers had remained relatively contained overall.
A decomposition of the increase in nominal ten-year US Treasury yields into the break-even rate and the real component indicated that the recent rise reflected, by and large, a rise in real yields.
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Source: ECB
he Juncker Plan at work: bringing investment back on track in Europe
November 22, 2018--In a Communication published today, the Commission reveals how the Investment Plan for Europe-the Juncker Plan-has helped bring investment back to a sustainable level in Europe, four years after its launch.
The Investment Plan has exceeded its initial target and expectations and has now mobilised €360 billion worth of investments, two-thirds of which come from private resources
Thanks to the backing of the European Fund for Strategic Investments (EFSI), 850,000 small and medium businesses are set to benefit from improved access to finance. Estimates show that the EFSI has already supported more than 750,000 jobs, while 1.4 million jobs are set to be created by 2020, generating positive impact in millions of European homes.
The Juncker Plan has already increased EU GDP by 0.6%, a figure set to reach 1.3% by 2020.
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Source: European Commission
STOXX Introduces ESG-X Version of STOXX Europe 600 Index
November 21, 2018--STOXX Ltd., the operator of Deutsche Boerse Group's index business and a global provider of innovative and tradable index concepts, has launched the STOXX(R) Europe 600 ESG-X Index. The index was developed based on feedback of asset owners, in order to accommodate their need for a version of Europe's key benchmark that is in line with the exclusion criteria of their responsible-investing policy.
The STOXX Europe 600 ESG-X includes a product involvement screening for controversial weapons, tobacco and thermal coal as well as a norm-based screening that follows the United Nations Global Compact principles of human and labor rights, the environment, business ethics and anti-corruption. STOXX cooperates with the ESG data provider Sustainalytics for the screening.
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Source: Deutsche Börse Group
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