Members of the Organization for Economic Co-operation and Development (OECD) / G20 / Inclusive Framework worked on a global consensus-based solution to reform the international corporate tax framework. The discussion focused on two broad work streams: Pillar One, the partial re-allocation of taxing rights, and Pillar Two, the minimum effective taxation of profits of Multinational Enterprises (MNEs). Pillar One aims to adapt the international rules on how the taxation of corporate profits of the largest and most profitable MNEs is shared amongst countries, to reflect the changing nature of business models, including the ability of companies to do business without a physical presence. Pillar Two will set a floor to excessive tax competition. It aims to ensure that multinational businesses are subject to a minimum effective level of tax on all of their profits each year.
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The European Banking Authority (EBA) has recently published a Report on the treatment of incoming third country branches (TCB) under the national law of Member States. The Report, which is addressed to the European Parliament, the Council and the Commission, illustrates the results of a stock-taking exercise conducted with competent authorities about their national regulatory law/regulations and supervisory practices and a mapping of the TCBs established in the Member States. Considering the increased volume of activities carried out by TCBs in a context of regulatory fragmentation across the EU, the Report lays down 14 high-level policy recommendations for further harmonisation of EU law. Continue reading…

The uneven economic impact of the pandemic means that financial stability risks are concentrated in specific sectors and countries, often with higher pre-existing vulnerabilities, concludes the May 2021 Financial Stability Review (FSR) of the European Central Bank (ECB). “As the euro area emerges from the third wave of the pandemic, risks to financial stability remain elevated and have become more unevenly distributed. A higher corporate debt burden in countries with larger services sectors could increase pressure on governments and banks in these countries,” said Luis de Guindos, Vice-President of the ECB. “Extensive policy support, particularly for corporates, could gradually move from being broad-based to more targeted,” he added. Continue reading…

The EU will come forward with a proposal in the WTO focusing on:

clarifying and facilitating the use of compulsory licences in crisis times like this pandemic;
supporting the expansion of production;
trade facilitation and limiting export restrictions.

All G20 members also acknowledged the need to address the funding gap of the ACT-Accelerator, a global collaboration to accelerate development, production, and equitable access to COVID-19 tests, treatments, and vaccines, and launched by the WHO, the European Commission, France and the Bill & Melinda Gates Foundation. And agreed to extend its mandate to the end of 2022.
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Charles Randell, Chair to the Finance and Leasing Association, recently delivered a speech at the Finance and Leasing Association Industry Gathering on 22 April 2021. It’s now more than a year since we all started our extraordinary new ways of living and working with coronavirus. Last summer, three months into the first lockdown, I made a speech about the consequences of coronavirus and the financial system we would need for the recovery. I said that the recovery would be determined more by decisions about public health and fiscal and monetary policy than by financial conduct regulation, but I noted that the pandemic had exposed some stark truths: that we have too much debt; that we don’t save enough; and that when people do save, they are too often persuaded to buy unsuitable investments. I said that the financial conduct regulator we need for the recovery is one that fundamentally changes this picture. Continue reading…

The European Securities and Markets Authority, the EU’s securities markets regulator, recently published advice to the European Commission related to data reporting service providers (DRSP). The advice focuses on the fees, fines and penalties applicable to DRSPs subject to EU supervision as well as the criteria determining whether certain DRSPs may be exempted from ESMA supervision (derogation criteria). It aims to provide a simple and clear framework by leveraging on the existing frameworks for Trade Repositories and Securitisation Repositories and by streamlining the approach for the assessment of the derogation criteria. Following the ESAs’ Review, authorisation and supervision of authorised reporting mechanisms (ARMs) and approved publication arrangements (APAs) will transfer from competent authorities to ESMA. Continue reading…

The European Commission has approved the prolongation of an existing Greek scheme aiming at supporting the reduction of non-performing loans of Greek banks on the basis that it remains free of any State aid. The existing asset protection scheme (known by the name of ‘Hercules’), was approved by the Commission in October 2019, for an initial duration of 18 months. Greece notified the Commission of its plan to prolong the scheme for another 18 months, until October 2022.
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The European Securities and Markets Authority (ESMA), the EU securities markets regulator, recently published its second risk dashboard for 2020 which sees a continued risk of decoupling between asset valuations and economic fundamentals. During the third quarter of 2020, EU financial markets have continued their recovery and equity market valuations have edged up further. There are increasing signs of strong geographical and sectorial differentiation across financial markets with fixed income markets seeing large-scale valuation increases across various segments such as emerging markets, investment grade and high yield. Credit rating downgrades have been slowing and investment funds recorded inflows across asset classes, especially for bond funds.

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Financial markets largely recovered from March’s acute stress, according to the third BIS Quarterly Review1 of 2020.This was supported by both monetary and fiscal policy, and investor sentiment arising from better than expected economic indicators in the initial aftermath of the lockdown phase of the pandemic. However, the Review indicates that the economy’s upturn has been uneven and corporate balance sheets remain fragile. The associated concern of stretched valuations being disconnected from underlying economic prospects, most notably in some segments of the equity and corporate credit markets, has since been reflected in the recent stock market sell-off.  Continue reading…

The Commission has recently adopted a proposal for a Council Recommendation to ensure that any measures taken by Member States that restrict free movement due to the coronavirus pandemic are coordinated and clearly communicated at the EU level. The Commission’s proposal sets out four key areas where Member States should work closer together:

Common criteria and thresholds for Member States when deciding whether to introduce travel restrictions; Mapping of common criteria using an agreed colour code; A common framework for measures applied to travellers from high-risk areas; Clear and timely information to the public about any restrictions.

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