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Please find some selected news from Banque de France’s office in Singapore:

Looking up to achieve a Financing Union, Eurofi

Paris, 23 February 2022, Speech by François Villeroy de Galhau, Governor of the Banque de France

A few days ago, on 7 February, we celebrated the thirtieth birthday of the European Union and of the Maastricht Treaty. (…) We have successfully established a monetary Eurosystem, however a real financial Eurosystem must now develop. Let me therefore share some proposals on the Banking Union and the Capital Markets Union (CMU), which are the two cornerstones for such a financial Eurosystem. We are all aware the Banking Union is for 19 countries, and tomorrow 21, while the CMU is for 27. But allow me to mix them today with a common core – the euro area – and a common purpose – the right funding of our economies.

After a strong initial impulse which quickly gave birth to an effective first pillar – supervision –, the Banking Union has been on hold for several years due to lengthy and not very productive discussions, in particular on the third pillar (deposit insurance scheme). When it comes to the CMU, its first action plan back in September 2015 had already identified a number of improvements that are still valid today; its main weakness was not in its content but in the lack of implementation.

In this early 2022 nevertheless, there are at least four reasons to believe that we can breathe new life into Banking Union and CMU:

  • There is growing awareness that European strategic autonomy matters and that financial sovereignty is part of it. This shift started with the Covid crisis but it is being underlined even more starkly now by geopolitics.   
  • The two “great transformations” ahead of us, digital and ecological, will require massive investments. This calls for common financing from not only public but also private sector. We should rebrand the CMU in a way that better reveals its goals: financing our two major transformations. I proposed some time ago to rebrand it “Financing Union for Investment and Innovation”, or “Financing Union for Sustainable Investment” – Christine Lagarde suggested a “Green Capital Markets Union”. At the inception of the single market in 1986, the genius of Jacques Delors and the Commission was to hoist over a collection of 300 technical texts the banner of the four freedoms of movement – goods, services, persons and capital. This banner gave a meaning and a purpose to the single market. I am convinced that the success of CMU, in particular, will not depend on an ever-improving technical agenda, but on a much stronger political ownership and impetus, from all European authorities.
  • We need an enhanced “private float” to stabilise the Economic and Monetary Union. Fiscal and monetary policies have done a lot to support the economy since 2020, and can no longer be the only tools used to tackle these challenges.
  • Recent openings in the position of several countries – especially along the Rhine, but also across the Alps – could hopefully offer the possibility to reach agreements.  

In my view, we have to renounce a fully-fledged EDIS as a prerequisite – which is the main deadlock – and opt for an alternative set-up where national guarantee schemes would bring one another liquidity support, and where subsidiaries across the EU could be affiliated to the home deposit guarantee scheme. Other pragmatic steps are possible in a parallel approach. Resolution tools could be used for small and medium banks too, without increasing the size of the Single Resolution Fund. We could significantly improve the coordination between Supervision and Resolution, and better incorporate the cross-border dimension in our requirements for MREL (which are still significantly higher than the TLAC international rule). Having found workable solutions for worst-case scenarios, we will be able to focus on further moving beyond home/host issues in normal times. Banks should be able to make broader use of cross-border liquidity waivers, as currently allowed by the regulation. New waivers for capital requirements should be envisaged as well.

(…) the Eurosystem warmly welcomed the launch of a new CMU action plan by the Commission in September 2020. Its sixteen legislative and non-legislative initiatives will help turn Europe into a genuine single financing market. The main issue now is to ensure the concrete implementation of the CMU. We still need to better prioritise our actions ex ante, and monitor them ex post. The CMU will not be implemented overnight and remains a long-term project. Developing a monitoring framework with selected priorities and indicators is therefore warranted, especially as the CMU enters an important legislative phase in 2022. As part of the CMU, we have another major financial stability issue to tackle over the next few years: European banks’ overreliance on third-country CCPs for the clearing of financial derivatives. Around 80% of interest rate swaps denominated in euro are still cleared in the UK; this situation cannot continue forever. For fear of market disruption, the Commission recently decided to extend equivalence for UK CCPs until end June 2025. However, Commissioner Mairead McGuinness made it crystal-clear that this extension was the last one, and that the three next years were to be used specifically for a rebalancing of clearing to the EU. I could not agree more. The public consultation launched by the Commission is a unique opportunity to put forward constructive proposals, on both sides of the coin: on the demand side, through well-calibrated prudential incentives for market participants; and on the supply side, notably with the extension of the scope of clearing, for products and entities. We have a collective responsibility to reduce systemic risk and we have to act now.

Looking up to achieve a Financing Union 


The ACPR publishes its first report on the governance of climate change risk in the insurance sector

This report, which mobilised twenty-one insurance and reinsurance groups as well as three professional federations, summarises the industry’s best practices to address climate change risks. It underlines the progress made since a first analysis was conducted in 2019 and provides institutions with a working base to better integrate climate change risks.

Report on the governance of climate change risk in the insurance sector


An article on French insurers’ investments: adapting to the crisis and the latest challenges

Despite a context moulded by the health crisis, at the end of 2020, insurers’ investments in France had risen by EUR 39 billion year-on-year to EUR 2,852 billion. French insurers continued to favour high quality securities. The low interest rate environment further encouraged insurers to move into diversification assets with real estate and structured securities, for example, accounting for almost 15% of their investments. Lastly, green, socially responsible and solidarity-labelled instruments amounted to almost 5% of investments.

The trend seen during the final three quarters of 2020 continued during the first half of 2021, with both net investments and valuations on the rise.

French insurers’ investments: adapting to the crisis and the latest challenges


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