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Commission welcomes international condemnation of Russia for violation of aviation rules and EU sanctions

23 August 2022
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The Commission welcomes the decision by the International Civil Aviation Organisation (ICAO) to call on the Russian Federation to immediately cease its infractions of international aviation rules, in order to preserve the safety and security of civil aviation. The ICAO decision refers to the violation of Ukraine’s sovereign airspace in the context of Russia’s war of aggression, and to the deliberate and continued violation of several safety requirements in an attempt by the Russian government to circumvent EU sanctions. These actions include illegally double-registering in Russia aircraft stolen from leasing companies, and permitting Russian airlines to operate these aircraft on international routes without a valid Certificate of Airworthiness, which is the necessary safety certificate. Continue reading…

The FCA’s Consumer Duty will lead to a major shift in financial services

19 August 2022
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The Financial Conduct Authority (FCA) has confirmed its plans to bring in a new Consumer Duty, which will fundamentally improve how firms serve consumers. It will set higher and clearer standards of consumer protection across financial services and require firms to put their customers’ needs first. The Duty is made up of an overarching principle and new rules firms will have to follow. It will mean that consumers should receive communications they can understand, products and services that meet their needs and offer fair value, and they get the customer support they need, when they need it. Clarity on the FCA’s expectations and firms focusing on what their customers need should lead to more flexibility for firms to compete and innovate in the interests of consumers. Continue reading…

Inflation and the path to a soft landing

16 August 2022
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On 17 July 2022, Hyun Song Shin, Economic Adviser and Head of Research of the BIS, gave a speech at the G20 High-level Seminar “Monetary and financial sector policy to support stability and recovery”. For near-term macroeconomic stabilisation of the economy, we are accustomed to viewing the economy mainly through the demand side, with supply adjusting smoothly in the background. However, a more balanced approach between demand and supply is essential in addressing the current inflation challenge. Today, I use this perspective to assess the odds of a soft landing for the global economy by drawing on a BIS Bulletin released this week. Continue reading…

Bank of America becomes latest firm to face a $200m fine for ‘off channel communication’

12 August 2022

Financial firms are prioritising communications surveillance, but most are still failing to monitor Social Messaging i.e., text and WhatsApp communications, putting themselves at risk of regulatory scrutiny and fines like those levied against Bank of America this week, according to the latest data from RegTech leader SteelEye. SteelEye’s Compliance Health Check report surveyed 170 senior compliance professionals in financial services and found that just 15% of firms are monitoring WhatsApp at all, despite the continued levying of huge fines against those found to be failing to monitor the communications of regulated employees effectively. Even fewer are monitoring Slack (9%) and Signal (3%) – and even considering the more expected channels there remains significant work to be done, with just 40% capturing Microsoft Teams, 40% Bloomberg Chat and 25% Zoom. Continue reading…

Pieter Lakeman: “The Dutch Central Bank creates unneeded victims as a result of mandatory actuarial interest at pension funds”

08 August 2022
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by Michel Klompmaker

According to the chairman of the SOBI Foundation, Pieter Lakeman, De Nederlandsche Bank (DNB) is forcing pension funds to use incorrect actuarial interest rates. For their annual reports for 2021, the pension funds were obliged to use an actuarial interest rate of approximately 0.57%. If 4% had been used as the actuarial interest rate, which was done until 2007, the pension provisions would have been approximately 60% smaller at the end of 2021. It is clear that this is not a matter of several thousand euros. For example, the pension provision of PMT, the third largest pension fund, was over 95 billion euros on 31 December 2021. At an actuarial interest rate of 4%, this would be more than 55 billion euros less. In fact, this means that the equity capital is then understated by more than EUR 55 billion in the balance sheet. At an actuarial interest rate of 5%, the provision would even be approximately 70% smaller and PMT’s equity would amount to 65 billion euros. For the largest pension fund, the ABP, the equity is shown in the balance sheet as 54 billion euros via the actuarial interest rate prescribed by DNB, while in reality, with a somewhat more normal actuarial interest rate of 4%, it amounts to more than 370 billion.  Continue reading…

Climate shocks can put financial stability at risk, ECB/ESRB report shows

05 August 2022

The European Central Bank (ECB) and the European Systemic Risk Board (ESRB) has on 26 July published a joint report on how climate shocks can affect the European financial system. The findings show that climate risks can quickly spread and harm companies and banks alike. The report adds further evidence on the systemic nature of climate risks and provides a foundation for a macroprudential policy response. The report identifies several amplifiers of climate risk across the financial system. Transition risks may be magnified because of economic and financial linkages between and across banks and companies. For example, a surge in carbon prices could increase the likelihood that the default of one company leads to the default of another. While this particularly applies to high-carbon companies, it could also affect their less carbon-intensive counterparties. Continue reading…

Commission proposes gas demand reduction plan to prepare EU for supply cuts

02 August 2022
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The European Union faces the risk of further gas supply cuts from Russia, due to the Kremlin’s weaponisation of gas exports, with almost half of our Member States already affected by reduced deliveries. Taking action now can reduce both the risk and the costs for Europe in case of further or full disruption, strengthening European energy resilience. The Commission has therefore on 20 July proposed a new legislative tool and a European Gas Demand Reduction Plan, to reduce gas use in Europe by 15% until next spring. All consumers, public administrations, households, owners of public buildings, power suppliers and industry can and should take measures to save gas. The Commission will also accelerate work on supply diversification, including joint purchasing of gas to strengthen the EU’s possibility of sourcing alternative gas deliveries. Continue reading…

Lieve Lowet

Lieve Lowet

EU Affairs consultant and lobbyist

The Solvency II review – Cooperation platforms and low risk undertakings and groups (Part 2)

20 July 2022
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Following changes in 2019 in the Solvency II directive, EIOPA has the power to set up and coordinate collaboration platforms to enhance collaboration between the relevant supervisory authorities where a (re)insurance undertaking carries out, or intends to carry out, cross-border activities based on the freedom to provide services or the freedom of establishment. For these platforms, the criterium is not significant cross-border activity from the point of view of the home supervisor, but relevance to the host Member State market. Around ten of these platforms have been set up since then. However, in several cases, according to the European Commission, supervisors have failed to reach a common view on how to address issues related to such cross-border business. Hence, the European Commission proposes to further enhance EIOPA’s role: the home supervisor must inform EIOPA and the relevant host supervisors if it identifies deteriorating financial conditions or other emerging risks which may have a cross-border effect. The host supervisor may notify EIOPA and the home supervisor if it has serious consumer protection concerns. The idea is to find a bilateral solution between home and host supervisors while EIOPA stands ready on the side Will that work? This is part two of Lieve Lowet’s latest blog on Solvency II (see related items for part 1). Continue reading…

Lieve Lowet

Lieve Lowet

EU Affairs consultant and lobbyist

The Solvency II review – How to safeguard the internal market in insurance? (Part 1)

18 July 2022
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Since the introduction of Solvency II, there have been very few failures in the insurance sector. Because some failures had cross-border consequences, there has been pressure to change the present regulatory regime in order to give more powers to host supervisors and to EIOPA. Although the functioning of the internal market in insurance can certainly be improved, care must be taken not to overload the barge and to respect the approach that was agreed in the nineties for all financial service operators, i.e. a single market with a single license (European passport) and home country control. Failures are in a way a proof that market mechanisms are working. But in the financial services area, failures are more undesirable than in the rest of the services sector, especially in a cross-border context exercised via the freedom of establishment or the freedom to provide services (FPS). Despite the fact that Solvency II was not conceived as a zero-failure regime and that few failures have occurred in practice, the European Commission, pushed by EIOPA, is proposing important amendments to the present regime for insurers that operate cross-border, justified by supervisory shortcomings and a varying degree of policyholder protection across the EU following these failures. This is part one of Lieve Lowet’s latest blog posts on Solvency II. Part 2 will be published this Wednesday. Continue reading…

FCA fines Ghana International Bank Plc £5.8m for failings in its anti-money laundering controls

14 July 2022

The FCA has fined Ghana International Bank Plc (GIB) £5,829,900 for poor anti-money laundering and counter-terrorist financing controls over its correspondent banking activities. GIB provided correspondent banking services to overseas banks. This allowed them to provide products and services they would not otherwise be able to, including making payments in different currencies and across borders. The FCA requires banks to do extra checks on their correspondent banking customers to reduce the higher risk of money laundering and terrorist financing associated with the service.  Continue reading…