The financial fragmentation in the euro area that occurred at the start of the coronavirus (COVID-19) pandemic was reversed relatively quickly, the European Central Bank (ECB)’s latest report on Financial Integration and Structure in the Euro Area shows. Once pre-pandemic levels of integration were regained, financial integration increased further and remained resilient to pressure from further waves of infections. The most influential policy interventions that initially kept fragmentation contained, and then brought integration back to pre-pandemic levels, were the series of ECB monetary policy measures and the European Union (EU) agreement on a sizeable coronavirus recovery fund. Continue reading…

Akshata Murthy, the wife of British finance minister Rishi Sunak, said on Friday that she would stop avoiding British tax on her foreign income — bowing to pressure which her husband had earlier dismissed as a political smear. The public anger over Murthy’s tax status has been heightened by her husband’s decision to increase payroll taxes at a time when surging inflation leaves Britons facing the biggest cost-of-living squeeze since records began in 1956. Murthy, an Indian citizen, is eligible for so-called “non-domiciled” status in Britain, something available to foreign nationals who do not regard Britain as their permanent home. That in turn allowed her to opt to pay UK tax only on income she earned in or transferred to Britain. Continue reading…

The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has on 28 March published its Final Report on the European Union Carbon Market (EU carbon market). The Report’s analysis did not find any current major deficiencies in the functioning of the EU carbon market based on the data available. However, ESMA’s analysis of the market has led it to put forward a number of policy recommendations to improve market transparency and monitoring. Continue reading…

Authorities from France, Germany and Luxemburg carried out extensive measures to freeze EUR 120 million worth of assets linked to the investigation of a money laundering case in Lebanon, during an action day on 25 March. Five properties in Germany and France were seized as well as several bank accounts. Eurojust supported the judicial cooperation by setting up a joint investigation team (JIT) and organising three coordination meetings.

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Agustín Carstens, General Manager at the Bank for International Settlements, recently delivered a speech on the topic of inflation at the International Center for Monetary and Banking Studies Geneva on 5 April 2022. Being the BIS’s General Manager, it will not come as a surprise to you that I have decided to devote my presentation to the issue that is top of mind for policymakers around the world, namely the return of inflation. After more than a decade of struggling to bring inflation up to target, central banks now face the opposite problem. The shift in the inflationary environment has been remarkable. If you had asked me a year ago to lay out the key challenges for the global economy, I could have given you a long list, but high inflation would not have made the cut.  Continue reading…

Banks are increasingly exploring opportunities for using artificial intelligence and machine learning (AI/ML). AI/ML technology is expected to increase banks’ operational efficiency and also facilitate improvements in risk management. While significant opportunities are emerging from the increasing use of AI/ML in many areas of banking, there are also risks and challenges associated with these techniques. Banks are still in the process of developing best practices for risk management. Given the increasing adoption of this technology as well as the potential risks, the Committee is analysing banks’ use of AI/ML and potential implications for bank supervision. Continue reading…

Yannis Stournaras, Governor of the Bank of Greece, made a speech at the EUROFI High Level Seminar 2022, Paris on 28 February 2022. What we observe today is mostly supply-side inflation. In fact, the acceleration of inflation mainly reflects two interrelated supply-side shocks: One comes from the pandemic. Actually, we had a series of pandemic shocks, then we had an energy shock, and finally we have the invasion of Russia in Ukraine, which, regarding its economic implications, is also a supply-side shock. In the short term, its implications are stagflationary, but, in the medium term, the implications are deflationary, depending of course on the resolution of the uncertainty. We do not know much about the resolution of the Ukrainian crisis at this moment, so we have to be cautious. Continue reading…

by Lieve Lowet & Lorenz Van Roosbroeck

Early February, the Actuarial Association of Europe (AAE) hosted a webinar entitled Sustainability and Climate Change – what does it mean for risk management in Insurance and Pensions? The webinar centered around issues of sustainability and the climate crisis. Since the EU Commission officially endorsed ESG considerations in its 2017 sustainable finance package, reinforced by the priorities of the current Commission and the Green Deal in 2019, the discussions are proliferating — up until the point that it is nearly impossible to follow all developments. As such, clear and distinct frameworks which capture the essence of the challenges we face are needed. It is within this context that the aforementioned webinar sparked interest as one of the speakers introduced a concept and measurement tool from ‘down-under’. More specifically, Gregorio Gil de Rozas, Instituto de Actuarios Espanoles, introduced the specific case of The Australian Actuaries Intergenerational Equity Index or AAIEI. After some research, it appears that The Actuaries Institute — i.e. the professional body representing the actuarial profession in Australia — published a Green Paper under the same name as the presentation, entitled Mind the Gap — The Australian Actuaries Intergenerational Equity Index (AAIEI). Here, we bear emphasis on this topic of intergenerational equity for several reasons.
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Crypto-asset markets are fast evolving and could reach a point where they represent a threat to global financial stability due to their scale, structural vulnerabilities and increasing interconnectedness with the traditional financial system. This is the Financial Stability Board’s (FSB’s) updated assessment of risks to financial stability from crypto-assets, published on February 16th. The report examines developments and associated vulnerabilities relating to three segments of crypto-asset markets: unbacked crypto-assets (such as Bitcoin); stablecoins; and decentralised finance (DeFi) and crypto-asset trading platforms. It notes the close, complex and constantly evolving interrelationship between these three segments, which need to be considered holistically when assessing related financial stability risks. Continue reading…

The Governing Council of the European Central Bank (ECB) has decided to gradually phase out the package of pandemic collateral easing measures in place since April 2020. The Governing Council has taken into account in a forward-looking manner the impact of this gradual phasing out on the collateral availability of Eurosystem counterparties, in particular with regard to their ability to continue mobilising collateral until the maturity of the outstanding targeted longer-term refinancing operations (TLTRO III). Moreover, it has considered the risk impact of each of these measures. This gradual phasing out allows ample time for the Eurosystem’s counterparties to adapt, and is scheduled to take place in the following three steps.
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