The European Commission has today proposed a new €1 billion macro-financial assistance (MFA) operation for Ukraine as the first part of the exceptional MFA package of up to €9 billion announced in the Commission’s communication of 18 May 2022 and endorsed by the European Council of 23-24 June 2022.
Today’s proposal is part of the extraordinary effort by the EU, alongside the international community, to help Ukraine to address its immediate financial needs following the unprovoked and unjustified aggression by Russia. It will complement the support already provided by the EU, including a €1.2 billion emergency MFA loan paid out in the first half of the year. Taken together, the two strands of the programme would bring the total MFA support to Ukraine since the beginning of the war to €2.2 billion, and could reach up to €10 billion once the full package of exceptional MFA to Ukraine becomes operational.
Under the proposal, MFA funds will be made available to Ukraine in the form of long-term loans on favourable terms. The assistance will support Ukraine’s macroeconomic stability and overall resilience in the context of Russia’s military aggression and the ensuing economic challenges. In a further expression of solidarity, the EU budget will cover the interest costs on this loan. As for all previous MFA loans, the Commission will borrow funds on international capital markets and transfer the proceeds on the same terms to Ukraine. This loan to Ukraine will be backed for 70% of the value by amounts set aside from the EU budget.
As soon as the European Parliament and the Council approve today’s proposal and the corresponding Memorandum of Understanding and Loan Agreement with the Ukrainian authorities are signed, the Commission will swiftly make available the amount of €1 billion to Ukraine.
This financial assistance comes in addition to the unprecedented support provided by the EU to date, notably humanitarian, development and defence assistance, the suspension of all import duties on Ukrainian exports for one year or other solidarity initiatives, e.g. to address transport bottlenecks so that exports, in particular of grains, could be ensured.
Members of the College said:
President Ursula von der Leyen said: ”The EU continues standing by Ukraine and its brave people. Today, we propose a €1 billion tranche of the new macro-financial assistance package for Ukraine. This first part of the assistance announced in May will allow us to give an immediate answer to the urgent needs of Ukraine. The EU will keep on providing relief to Ukraine and in the longer-term support its reconstruction as a democratic and prosperous country”.
Valdis Dombrovskis, Executive Vice-President for An Economy that Works for People said: “This latest financial assistance and first part of the €9 billion financial support package again demonstrates the EU’s firm commitment to support Ukraine and its people in the face of Russia’s continued illegal aggression. These loans will allow Ukraine to meet more of its immediate massive financing needs, with the EU showing further solidarity by covering the interest costs.”
Josep Borrell, High Representative/Vice-President for a Stronger Europe in the World said: “Putin’s unjustified war against Ukraine is putting massive economic pressure on the Ukrainian people. The European Union is acting with great speed to support Ukraine’s financial stability and assist it in rebuilding its future within the European family. With this emergency package, we are sending a strong message: The European Union continues to stand with Ukraine and its people.”
Johannes Hahn, Commissioner for Budget and Administration, said: “With this proposal, we continue to make best use of the EU budget to support our neighbour and ally Ukraine under the current extremely challenging circumstances. We count on rapid agreement by the European Parliament and Council which would enable us to make the first payment to Ukraine swiftly faced with urgent funding needs.”
Paolo Gentiloni, Commissioner for Economy, said: “The European Commission is committed to supporting Ukraine in shoring up its finances as the country continues to defend itself against the Russian aggressor. This proposal marks another concrete step in making good on that commitment, making available €1 billion that can be rapidly disbursed to Ukraine. We will in parallel continue to work swiftly on a proposal for the second part of the exceptional macro-financial assistance, as announced in May.”
Background
The EU has already provided significant assistance to Ukraine in recent years under its MFA programme. Since 2014, the EU has provided over €5 billion to Ukraine through five MFA programmes to support the implementation of a broad reform agenda in areas such as the fight against corruption, an independent judicial system, the rule of law, and improving the business climate. In addition, earlier this year the Commission granted an MFA emergency loan of €1.2 billion, for which the Commission raised funds in two private placements in the first half of 2022. On 18 May, the Commission set out plans in a Communication for the EU’s immediate response to address Ukraine’s financing gap, as well as the longer-term reconstruction framework.
To finance the MFA, the Commission borrows on capital markets on behalf of the EU, in parallel to its other programmes, most notably NextGenerationEU and SURE. The possible borrowing for Ukraine is foreseen in the Commission’s funding plan for the second half of 2022.
Macro-financial assistance (MFA) operations are part of the EU’s wider engagement with neighbouring countries and are intended as an exceptional EU crisis response instrument. They are available to EU neighbourhood countries experiencing severe balance-of-payments problems. In addition to MFA, the EU supports Ukraine through several other instruments, including humanitarian aid, budget support, thematic programmes, and technical assistance and blending facilities to support investment.
Compliments of the European Commission.
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Posted on May 16, 2022 |
New Policies Will Strengthen Our Economic Partnership, and Update Rules of Global Economy
Read the U.S.-EU Joint Statement here.
The U.S.-EU Trade and Technology Council (TTC) held its second ministerial meeting in Saclay – Paris, France on May 15-16, 2022. U.S. co-chairs, Secretary of State Antony J. Blinken, Secretary of Commerce Gina Raimondo, and United States Trade Representative Katherine Tai were joined by EU Co-Chairs European Commission Executive Vice Presidents Margrethe Vestager and Valdis Dombrovskis to review progress, meet with a range of U.S. and EU stakeholders, and advance Transatlantic cooperation and democratic approaches to trade, technology, and security that deliver for people on both sides of the Atlantic.
Thanks to the close and enduring ties between the United States and the European Union, we have resolved long-standing bilateral issues, including disagreements on tariffs, and leveraged the strength of our partnership to counter non-market, trade distortive practices, and respond swiftly to Putin’s war with unprecedented sanctions and export control measures. Building on these successes, the United States and European Union, home to 780 million people who share democratic values and the largest economic relationship in the world, will advance the TTC agenda on a number of critical economic and technology policies and initiatives designed to strengthen our bilateral economies, meet current geopolitical challenges and update the rules of the global economy.
TTC working groups are deepening U.S.-EU cooperation by expanding access to digital tools for small- and medium-sized enterprises and securing critical supply chains such as semiconductors. They are collaborating closely on emerging technology standards, climate and clean tech objectives data governance and technology platforms, information and communications technology services’ (ICTS) security and competitiveness, and the misuse of technology threatening security and human rights. The TTC working groups are also coordinating on export controls, investment screening and security risks, and a range of global trade challenges, including countering the harmful impact of non-market, trade-distortive policies and practices on technological development and competitiveness in sectors of shared priority. To ensure that the government dialogues are informed by the broad perspectives of the U.S. and EU communities inform their work, the TTC working groups are continuing robust engagement with a diverse range of stakeholders, including those in industry, labor organizations, think tanks, non-profit organizations, environmental constituencies, academics, and other civil society members.
During their ministerial meeting, the U.S. and EU TTC co-chairs reviewed the outcomes generated by the joint working groups and announced key outcomes including:

Deeper information exchange on exports of critical U.S. and EU technology, with an initial focus on Russia and other potential sanctions evaders, coordination of U.S. and EU licensing policies, and cooperation with partners beyond the United States and the European Union;
Development of a joint roadmap on evaluation and measurement tools for trustworthy Artificial Intelligence and risk management, as well as a common project on privacy-enhancing technologies;
Creation of a U.S.-EU Strategic Standardization Information (SSI) mechanism to enable information sharing on international standards development;
An early warning system to better predict and address potential semiconductor supply chain disruptions as well as a Transatlantic approach to semiconductor investment aimed at ensuring security of supply and avoiding subsidy races;
A dedicated taskforce to promote the use of trusted/non-high-risk ICTS suppliers through financing for deployments in third countries;
A new Cooperation Framework on issues related to information integrity in crises, particularly on digital platforms, with a focus on ongoing issues related to Russian aggression, including Russia’s actions to manipulate and censor information;
A stakeholder-focused Trade and Labor Dialogue to discuss policy options to promote internationally recognized labor rights and to help workers and firms make successful digital and green transitions, remain globally competitive, and enjoy broad and inclusive prosperity;
An early dialogue on shared trade concerns regarding third-countries measures or initiatives and an early stage consultation mechanism regarding bilateral barriers that may disadvantage the transatlantic economy;
A policy dialogue aimed at developing responses to global food security challenges caused by Russian aggression in Ukraine; and
A U.S.-EU guide to cybersecurity best practices for small- and medium-sized companies, whose business is impacted disproportionally from cyber threats.

Compliments of The White House.
The post FACT SHEET: U.S.-EU Trade and Technology Council Establishes Economic and Technology Policies & Initiatives first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The Commission welcomes the adoption by the European Parliament of the Digital Services Act and Digital Markets Act, proposed by the Commission in December 2020.
The Digital Services Package sets out a first comprehensive rulebook for the online platforms that we all depend on in our daily lives. These new rules will be applicable across the whole of the EU and will create a safer and more open digital space, grounded in respect for fundamental rights.
Executive Vice-President for a Europe Fit for the Digital Age, Margrethe Vestager, said: “The European Parliament has adopted a global first: Strong, ambitious regulation of online platforms. The Digital Services Act enables the protection of users’ rights online. The Digital Markets Act creates fair, open online markets. As an example, illegal hate speech can also be dealt with online. And products bought online must be safe. Big platforms will have to refrain from promoting their own interests, share their data with other businesses, enable more app stores. Because with size comes responsibility – as a big platform, there are things you must do and things you cannot do.”
Commissioner for the Internal Market Thierry Breton said: “10 years ago, a page was turned on ‘too big to fail‘ banks. Now — with DSA & DMA — we’re turning the page on ‘too big to care‘ platforms. We are finally building a single digital market, the most important one in the ‘free world‘. The same predictable rules will apply, everywhere in the EU, for our 450 million citizens, bringing everyone a safer and fairer digital space.”
The adoption of the Digital Services Package in the first reading by the European Parliament follows the political agreement that has been reached by the co-legislators on the Digital Markets Act on 24 March and the Digital Services Act on 23 April this year. The new rules will be enforced by the Commission for the largest online platforms active in the EU. The Commission is taking all necessary steps to be ready to take up this role upon the entry into force of the rules.
Next Steps
Following the adoption of the Digital Services Package in the first reading by the European Parliament, both texts now have to be formally adopted by the Council of the European Union. After their signature, the Digital Services Act and the Digital Markets Act will be published in the Official Journal. Both acts will enter into force 20 days after their publication in the Official Journal, in autumn this year.
Background
The Commission made its proposals on the Digital Services Act and the Digital Markets Act on 15 December 2020.The European Parliament and Council reached a political agreement on 24 March 2022 on the Digital Markets Act, and on 23 April on the Digital Services Act. Updated Q&A documents are available for the DSA and the DMA.
Compliments of the European Commission.
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The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has published the results of its fourth stress test exercise of Central Counterparties (CCPs). The results confirm the overall resilience of European Union (EU) CCPs, as well as third-country Tier 2 CCPs, to credit, concentration and operational risks under the tested scenarios and implemented framework. However, the stress test also identified areas where some CCPs may need to strengthen their risk management frameworks, or where further supervisory work should be prioritised, including on concentration and operational risks.
The report’s key findings are:

CCPs have sufficient buffers to withstand adverse market developments in combination with the default of the two clearing members with the largest exposures;
Gaps are identified between the necessary and available buffers for concentration risks for some CCPs, particularly in commodity derivatives markets;
CCPs remained overall resilient despite increased market volatility in the wake of Russia’s invasion of Ukraine;
For operational risk, differences in terms of risk sources, exposures and mitigation tools across CCPs are observed and need to be further assessed on an individual basis before issuing potential recommendations; and
Most of the analysed operational events stem from third-party services, whereas a number of critical third-party service providers have the potential to affect the critical functions of multiple CCPs in a correlated manner.

Klaus Löber, Chair of the CCP Supervisory Committee, said:
“ESMA’s fourth stress test found that the European clearing market is resilient and capable of withstanding severe stress scenarios, although certain areas need further strengthening. CCPs’ resilience was confirmed during the real-life market stress following Russia’s invasion of Ukraine.
“CCPs are of critical importance to the stability of the financial system and the failure of one CCP has the potential to cause serious systemic risk across the EU. Therefore, stress testing CCPs is a key supervisory tool to understand the clearing industry, identify issues relevant for financial stability and eventually mitigate systemic risk, contributing to ESMA’s mission.”
CCP stress test scenarios and outcomes
A total of 15 CCPs were covered by the exercise, including two UK CCPs qualifying as Tier 2 CCPs. The exercise assessed credit and concentration risk and included a new operational risk component that aimed to assess the resilience of CCPs to operational events and failures of third-party service providers.
Operational risk analysis
ESMA identified varying degrees of operational reliability for the CCPs included in the exercise and identified specific CCPs where further work should be conducted to understand the drivers of these differences, the root causes of the events, and the remediation actions taken.
ESMA also evaluated the exposure of CCPs to critical third-party service providers and the ability of CCPs to reduce risk through operational risk management tools. Through this process, ESMA identified differences across CCPs in their relative level of third-party risk as well as the critical third-party service providers with the highest systemic importance for the CCP sector. Further work is needed to analyse exposures to third-party service providers both at an individual CCP level, as well as system wide, to further strengthen operational resilience.
Credit Stress Test
Two default scenarios, combined with the common ESRB market stress scenario, were run on two different reference dates, 19 March (end of day) and 21 April 2021 (intraday snapshot).
For 19 March 2021, the impact due to concentration and specific wrong-way risk stemming from cleared positions was also included in the baseline scenario calculations. The first scenario concerned a Cover-2 default per CCP, where the default of two clearing member groups under common price shocks is assumed separately for each CCP. The second scenario was an All-CCPs Cover-2 default, involving a default of the same two groups for all CCPs in the system, designed to assess the resilience of CCPs collectively to the market stress scenario. ESMA did not detect any major systemic risk concerns under the tested credit scenarios.
Concentration Stress Test
The European-wide concentration analysis performed on 19 March 2021 shows that concentrated positions represent a significant risk for CCPs. For most asset classes, concentrated position risk is clustered in one or two CCPs. The analysis found that concentration risk is factored in explicitly in a majority of CCPs, through dedicated margin add-ons.
Concentration modelled for commodity derivatives and the equity segment (securities and derivatives) is significant, with around 7bn EUR of concentration risk calculated for each asset class. There is a large coverage gap between the system-wide estimated market impact and margin add-ons for commodity derivatives and to a lesser extent for equity products. The concentration risk for emission allowances stands at 2.5bn EUR and is not adequately covered per the ESMA methodology.
Russia’s invasion of Ukraine
During the time of finalisation of the exercise, Russia’s invasion of Ukraine led to extreme market movements for instruments across the commodities and energy markets. ESMA concludes that the ESRB scenario is overall of greater or comparable severity for most asset classes, but of a lesser severity for some products, especially for power and gas derivatives. ESMA, in coordination with national competent authorities, also closely monitored the financial impacts that the invasion has had on CCPs. Overall, ESMA notes that CCPs remained resilient during the crisis, despite the extreme prices and increased market volatility.
Next steps
As with previous exercises, the ESMA stress test exercise for CCPs was not aimed at assessing the compliance of the CCPs with regulatory requirements, nor at identifying any potential deficiency of the stress testing methodology of individual CCPs. However, in line with the EMIR mandate, where the assessments expose shortcomings in the resilience of one or more CCPs, ESMA will issue the necessary recommendations.
Compliments of the European Securities and Markets Authority.
The post ESMA stress test of Central Counterparties finds clearing system resilient first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Today marks a historic moment in digital regulation with the landslide vote by the European Parliament adopting the Digital Services Act (DSA) and Digital Markets Act (DMA) which I have been working on together with my teams from the very first day of my mandate.
These two Acts, agreed upon in record time, have resonated around the world as landmarks – with front-page media coverage in many countries and even high-level political acknowledgements including by a former US President.
The EU is the first jurisdiction in the world to set a comprehensive standard for regulating the digital space. 
We have created a common framework for digital services, which must be respected in the same way everywhere in a single market of 450 million consumers.
Europe is the first single digital market in the “free world”, with clear and predictable rules
Europe is the first single digital market in the so-called “free world”.
And in our European single market — which is also one of the largest democracies in the world, if not the largest — the DSA and the DMA will strengthen the rule of law and provide better protection for our citizens and provide new opportunities for our businesses in the digital space.
This means in concrete terms:

New strong obligations to tackle all forms of illegal content: counterfeit or dangerous products, incitement to violence, hate speech; as an intermediary, you might not be liable, but certainly you need to be responsible;
An innovative framework for the protection of fundamental rights and the fight against harmful content and disinformation;

More trust and protection for consumers in online marketplaces;
 More protection for social network users, especially children;
More opportunities for innovative businesses and a wider choice of innovative products and services;
A new framework for online advertising to limit the use of data and protect the most vulnerable users, especially children;
And finally, one point that I think is essential: opening up the “black box” of algorithms that are at the heart of platforms’ systems.

The DSA and DMA will allow us to have more transparency, more information and if that is not enough, to go directly to inspect the these “black boxes”  to find the information that the regulator needs to ensure the implementation and monitoring of platform obligations. Also vetted researchers will gain access to data to conduct research that will support our enforcement tasks.
Turning the page on “too big to care” platforms
Ten years ago, a page was turned on the so-called “too big to fail” banks.
Today, a new page is being turned, that of the “too big to care” platforms.
Russian disinformation, the revelations about the Capitol Hill attack, online harassment and hateful content… demonstrate the urgency of the DSA.
The difficulties experienced by SMEs, particularly against the abuses of gatekeepers, which undermines fair and free consumer and business choice, the race to conquer the Metaverse, etc., remind us of the urgency of the DMA.
In the future, very large platforms will have to perform an in-depth risk assessment and propose adequate measures to minimise these risks.
Gatekeeper platforms will have to finally adapt their technologies and business models to give more choice to consumers and stop creating obstacles to smaller innovative tech companies: no need to wait for a case by case decision, their obligations of interoperability, sideloading, no self-preferencing and more are by now clearly spelled out and will apply immediately. 
Enforcement is key
Introducing new obligations on platforms and rights for users would be pointless if they are not properly enforced.
The new harmonised rules will apply directly and uniformly anywhere in Europe. The Commission’s specialised teams will centrally supervise very large platforms and very large online search engines as well as gatekeepers, coupled with effective and dissuasive sanctions.
Each platform, big and small, will have to have a legal representative in Europe. So we will now know who to call if there is a problem. And each Member State will have a regulator with the necessary powers to enforce the rules. Orders sent by national public authorities will be more effective to tackle illegal content and get information about the wrongdoer, in particular cross-borders. We will also rely on a network of trusted flaggers, such as NGOs, hotlines or rightsholders, to ensure that platforms react to the flagged illegal content as a priority. Class actions against platforms breaking the rules will be made easier, and damaged consumers can be compensated.
New powers for the Commission to investigate and sanction platforms
For the first time, the European Commission will become the supervisor of “gatekeepers” and very large platforms and very large online search engines.
Under the DSA, the Commission will be able to apply supervisory fees on very large platforms and very large online search engines to cover the costs of these supervisory and enforcement tasks.  
Within the Commission, my teams will be responsible for designating these platforms, monitoring the application of the new rules and enforcing them – including new powers to investigate and sanction platforms.
Sanctions will be gradual and unprecedented in their scope. Fines will amount to up to 6% of the global turnover of the conglomerate for DSA violations.
And in the event of serious and repeated breaches, national courts can go as far as a ban on operating on European territory. These sanctions will be extremely clear.
Under the DMA, sanctions can go up to 10% of the global turnover and even beyond up to 20% that for repeated offenders, that may be also subject to the ultimate remedy of divestitures and structural separation when they systematically undermine their obligations.
The direct enforcement by the Commission of these internal market rules against private companies represents a historic and exciting new step for the Commission in particular.
But we are not starting from a blank sheet. I have had the pleasure to note in my everyday work with DG CONNECT (Directorate-General for Communications Networks, Content and Technology)that it has rightly earned its reputation for the quality of its policy work and its deep technical expertise, and can also build on its long-standing experience in enforcing internal market rules, for example through the so-called Article 7 procedures for electronic communications, working closely with National Regulatory Authorities.
A sneak peek at the future organisation implementing the DSA & DMA
Dedicated teams within DG CONNECT will be organised around thematic domains – including the societal aspects, the technical aspects, and the economic aspects.
To name a few examples: issues such as risk assessments and audits will be handled by the societal issues team.
The technical team will take responsibility for issues such as interoperability of messenger services or the use of non-fungible tokens for product tracing, or the development of standards supporting the new rules.
Finally, the economic team will cover DMA-related unfair trading practices, such as data access or so-called FRAND conditions; or ensuring respect to the DSA-related liability exemptions or“know-your-business customer” rules for marketplaces.
As platforms do not create challenges in only one (societal, technical, economic) level, but problems appear usually in combination, these three teams will work closely together, coordinated by a sort of “program office” that will also deal with international issues and litigation.
Building up specific expertise
It is also clear, we will need to increase our staffing levels and build up specific expertise, in particular in data science and algorithms.
We have started to gear the internal organisation to this new role, including by shifting existing resources, and we also expect to ramp up recruitment next year and in 2024 to staff the dedicated DG CONNECT team with over 100 full time staff, combining both DSA and DMA – the DMA together with DG Competition.
A share of this head count will be financed, for DSA-related tasks, through a fee, which I initiated, that the Commission will collect from very large online platforms and very large online search engines to cover the additional costs needed for their supervision.
A high-profile European Centre for Algorithmic Transparency
Some of the new tasks in the enforcement of the new rules require sophisticated competencies, too.
Most prominently, the DSA contains wide-ranging rules on algorithmic transparency and accountability for online platforms, and important data access obligations for the very large ones. In order to assist the enforcement of these new DSA rules DG CONNECT and the Joint Research Centre will establish a high-profile European Centre for Algorithmic Transparency.
This new Centre will attract world-class scientific talent in data science and algorithms that will complement and assist the enforcement teams.
The new DG CONNECT teams dedicated to the DSA/DMA implementation, together with DG Competition, the Commission Legal Service and the JRC, and in cooperation with enforcement authorities in Member States, will make a powerful new digital regulator that has technology baked into its DNA from the start.
There will be a before and an after to the DSA and DMA.
Many thought that regulation would take years, would be impossible, too complicated, the lobbying too strong…
Today’s vote shows that, when we work together, much can be done in the general interest of Europeans.
We are ready.
Compliments of the European Commission.
The post Sneak peek: how the EU Commission will enforce the DSA & DMA – Blog of Commissioner Thierry Breton first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

‘Countries have made substantial progress toward implementing capital markets regulatory reform, but important gaps remain and new challenges have raised the bar.’
Capital markets are like engines that help power the global economy: they perform best with regular tune-ups. In this spirit, the major regulatory overhaul following the global financial crisis was aimed at shoring up key segments, from over-the-counter derivatives to investment funds and market infrastructure, closing fault lines revealed by the crisis.
But now, even after historic enhancements in recent years, countries still need to keep pushing to lower risks and strengthen the tools to manage future crises, and ultimately to reduce fluctuations tied to economic cycles.
So, to better gauge progress on reforms to market regulation and what further gains are needed, our latest research surveys IMF financial sector assessment programs in several countries over the past seven years.

‘Financial-sector assessments are still uncovering shortcomings despite progress since the global financial crisis.’

These regular reviews tracked risks, vulnerabilities, and arrangements for market oversight and crisis management, with a focus on safety nets to manage any potential failures of major firms.
They also looked at the resilience of central counterparties, the entities that function as buyer to every seller and seller to every buyer to guarantee performance of open contracts, which have grown in prominence under derivatives-clearing reforms. The reviews also examined the vulnerability of asset managers like money market funds and bond funds, and whether trading venues beyond traditional exchanges are adequately regulated.
Making progress
One main reason we see a need for greater reform even after the significant progress seen in recent years is that it has been accompanied by rapid growth of financial services firms that don’t have banking licenses or take deposits, such as insurers, mutual funds, and exchanges.
Nonbank financial intermediation, as it’s known, has grown to represent almost half of the assets of the global financial system, thereby playing a much bigger role in the global economy . Regulators must better ensure that its vulnerabilities and business models don’t amplify future shocks to markets and financial stability. Applied to the asset management sector, a key priority is to broaden the range of liquidity management tools that are available to investment funds managers.
Another priority for regulators is to reinforce financial safety nets and crisis-management arrangements, while a third is to strengthen early warning capabilities, for example, through enhanced stress-testing tools and capacities.
Emerging issues
Issues like these are challenging on their own, but securities regulators can’t limit themselves to just implementing the capital markets reform agenda that followed the global financial crisis. Rather, their priorities must also evolve and broaden in-step with the financial systems they safeguard.
That’s especially true in capital markets, where cyber resilience, fintech, and climate change are key emerging issues. Trading venues are a focus for cybersecurity, as both supervisors and market participants aim to boost their technological and operational resilience to minimize potential market disruptions. And fintech’s promise also involves risks stemming from crypto assets and decentralized finance.
Regulators also must be vigilant amid the shift away from benchmarks like the London Interbank Offered Rate to new references for interest rate swaps and other key financial contracts. Finally, the impact of climate change will need to be appropriately reflected in financial statements, valuations, and issuer disclosures on which investors depend.
Appropriate perimeter
A key priority highlighted by this wide-ranging, future work program is ensuring the adequacy of the financial regulation perimeter so that it covers all the relevant actors, activities, and instruments.
Our financial-sector assessments are still uncovering important shortcomings despite all of progress that has been made since the global financial crisis began a decade and a half ago.
Some countries, for example, appear to have regulatory gaps for asset management firms. Also, policymakers need to consider more explicitly which derivatives to regulate as part of efforts to manage risks from commodity, climate, emissions, and other carbon-related instruments.
This array of challenges raises concern given the insufficient resources for supervisors even in some of the world’s largest and most sophisticated markets—a finding IMF financial sector assessments confirm. Post-crisis reforms implied a significant expansion of the regulatory perimeter and raised expectations of supervision needed to assess and mitigate risk, but securities regulators rarely saw a commensurate increase in resources.
Emerging challenges like new market technology and a broadening of the regulatory perimeter make it important for regulators to have a wider range of specialist expertise and to ensure that their supervisory techniques and technology keep pace. Strained resources in some jurisdictions are compounded by a lack of operational independence for authorities, which limits their ability to effectively supervise and respond to risks.
Therefore, we must keep prioritizing our push to make further progress on these key aspects of the institutional and regulatory framework underpinning capital markets.
Authors:

Tobias Adrian
Jay Surti

Compliments of the IMF.
The post IMF | Capital Markets Regulation Is Stronger, but Some Gaps Still Must be Closed first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The Commission has today adopted the 2022 Strategic Foresight Report – “Twinning the green and digital transitions in the new geopolitical context”. As we prepare to accelerate both transitions, the report identifies ten key areas of action with the objective of maximising synergies and consistency between our climate and digital ambitions. By doing so, the EU will strengthen its cross-sector resilience and open strategic autonomy, and be better prepared to face new global challenges between now and 2050.
Maroš Šefčovič, Vice-President for interinstitutional Relations and Foresight said: “To reach climate neutrality by 2050, we need to unleash the power of digitalisation. At the same time, sustainability must be at the heart of the digital transformation. That is why this Strategic Foresight Report takes a deeper look at how to best align our twin objectives, especially as they take on a significant security dimension due to the current geopolitical shifts. For instance, from 2040, recycling could be a major source of metals and minerals, inevitable for new technologies, if Europe fixes its shortcomings in the area of raw materials. Understanding this interplay between the twin transitions, while striving for open strategic autonomy, is the right way forward.”
The green and digital transitions are at the top of the Commission’s political agenda set out by President von der Leyen in 2019. In light of Russia’s aggression against Ukraine, Europe is accelerating its embrace of climate and digital global leadership, with eyes firmly on key challenges, from energy and food, to defence and cutting-edge technologies. From this perspective, the 2022 Strategic Foresight Report puts forward a future-oriented and holistic analysis of the interactions between the twin transitions, taking into account the role of new and emerging technologies as well as key geopolitical, social, economic and regulatory factors shaping their twinning – i.e. their capacity to reinforce each other.
Technologies essential for the twinning towards 2050
On one hand, digital technologies help the EU achieve climate neutrality, reduce pollution and restore biodiversity. On the other hand, their widespread use is increasing energy consumption, while also leading to more electronic waste and bigger environmental footprint.
Energy, transport, industry, construction, and agriculture – the five biggest greenhouse gas emitters in the EU – are key for a successful twinning of the green and digital transitions. Technologies will play a key role in reducing these sector’s carbon footprint. By 2030, most reductions in CO2 emissions will come from technologies available today. However, achieving climate neutrality and circularity by 2050 will be enabled by new technologies currently at the experimental, demonstration or prototype phase.
For example:

In the energy sector, novel sensors, satellite data and blockchain could help strengthen the EU’s energy security, by improving the forecasting of energy production and demand, by preventing weather-related disruptions or by facilitating cross-border exchanges.
In the transport sector, a new generation of batteries or digital technologies, like artificial intelligence and internet of things will enable major shifts towards sustainability and multimodal mobility across different modes of transport, even short–distance aviation.
Across industrial sectors, digital twins – a virtual counterpart of a physical object or process, using real-time data and machine learning, – could help improve design, production and maintenance.
In the construction sector, building information modelling could improve energy and water efficiency, affecting design choices and use of buildings.
Finally, in the agriculture sector, quantum computing, in combination with bioinformatics, can enhance understanding of the biological and chemical processes needed to reduce pesticides and fertilisers.

Geopolitical, social, economic and regulatory factors affecting the twinning
The current geopolitical instability confirms the need to not only accelerate the twin transitions but to also reduce our strategic dependencies. In the short-term, this will continue affecting energy and food prices, with the significant social fallout. In the medium- and long-term, for instance, sustainable access to raw materials critical for the twin transitions will remain of paramount importance, adding pressure to move to shorter and less vulnerable supply chains and to friend-shoring wherever possible.
The twinning will also require hinging the EU’s economic model on wellbeing, sustainability and circularity. The EU’s position in shaping global standards will play an important part, while social fairness and the skills agenda will be amongst the conditions for success, alongside the mobilisation of public and private investment. It is expected that almost €650 billion will be needed in additional future-proof investment annually until 2030.
Ten key areas of action
The report identifies areas where a policy response is needed to maximise opportunities and minimise potential risks stemming from the twinning:

Strengthening resilience and open strategic autonomy  in sectors critical for the twin transitions via, for instance, the work of the EU Observatory of Critical Technologies, or the Common Agricultural Policy in ensuring food security.
Stepping up green and digital diplomacy, by leveraging the EU’s regulatory and standardisation power, while promoting EU values and fostering partnerships.
Strategically managing supply of critical materials and commodities, by adopting a long-term systemic approach to avoid a new dependency trap.
Strengthening economic and social cohesion, by for instance, reinforcing social protection and the welfare state, with regional development strategies and investment also playing an important role.
Adapting education and training systems to match a rapidly transforming technological and socio-economic reality as well as supporting labour mobility across sectors.
Mobilising additional future-proof investment into new technologies and infrastructures – and particularly into R&I and synergies between human capital and tech –with cross-country projects key to pooling EU, national and private resources.
Developing monitoring frameworks for measuring wellbeing beyond GDP and assessing the enabling effects of digitalisation and its overall carbon, energy and environmental footprint.
Ensuring a future-proof regulatory framework for the Single Market, conducive to sustainable business models and consumer patterns, for instance, by constantly reducing administrative burdens, updating our state aid policy toolbox or by applying artificial intelligence to support policymaking and citizens’ engagement.
Stepping up a global approach to standard-setting and benefitting from the EU’s first mover advantage in competitive sustainability, centred around a ‘reduce, repair, reuse and recycle’ principle.
Promoting robust cybersecurity and secure data sharing framework to ensure, among other things, that critical entities can prevent, resists and recover from disruptions, and ultimately, to build trust in technologies linked to the twin transitions.

Next steps
The Commission will continue to advance its Strategic Foresight Agenda, while informing the Commission Work Programme initiatives for next year.
On 17-18 November 2022, the Commission will co-organise the annual European Strategy and Political Analysis System (ESPAS) conference to discuss the conclusions of the 2022 Strategic Foresight Report and prepare the ground for the 2023 edition.
Background
Strategic foresight supports the Commission on its forward-looking and ambitious path towards achieving President von der Leyen’s six headline ambitions. As of 2020, based on full foresight cycles, annual Strategic Foresight Reports are prepared to inform the Commission’s priorities defined in the annual State of the Union address, the Commission Work Programme and multi-annual programming.
This year’s report builds on the 2020 and 2021 Strategic Foresight Reports, which focused on resilience as a new compass for EU policymaking and on the EU’s open strategic autonomy, respectively.
The analysis presented in the 2022 Strategic Foresight Report was based on an expert-led, cross-sectoral foresight exercise conducted by the Joint Research Centre, complemented by broad consultations with Member States, and other EU institutions in the framework of the European Strategy and Policy Analysis System (ESPAS), as well as with citizens through a call for evidence published on Have Your Say. The results of the foresight exercise are presented in the Joint Research Centre’s Science for Policy report: ‘Towards a green and digital future. Key requirements for successful twin transitions in the European Union’.
Compliments of the European Commission.
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We, the Leaders of the Group of Seven (G7), met in Elmau, Germany, on 26-28 June 2022, were joined by the Leaders of Argentina, India, Indonesia, Senegal and South Africa, as well as Ukraine.
At a time when the world is threatened by division and shocks, we, the G7, stand united. We underscore our resolve to, together with partners, jointly defend universal human rights and democratic values, the rules-based multilateral order, and the resilience of our democratic societies. In doing so, we will address the key challenges of our time:

We reemphasise our condemnation of Russia’s illegal and unjustifiable war of aggression against Ukraine. We will stand with Ukraine for as long as it takes, providing the needed financial, humanitarian, military, and diplomatic support in its courageous defence of its sovereignty and territorial integrity. We are ready to reach arrangements together with interested countries and institutions and Ukraine on sustained security commitments to help Ukraine defend itself and to secure its free and democratic future.
Our financial support in 2022 amounts to more than USD 2.8 billion in humanitarian aid, and we are ready to grant, or have pledged and provided USD 29.5 billion in budget aid. We are strongly committed to supporting Ukranian reconstruction through an international reconstruction conference and plan, drawn up and implemented by Ukraine in close coordination with international partners.
We will continue to impose severe and enduring costs on Russia to help bring an end to this war. Beyond its direct implications, Russia’s aggression is impeding the global recovery and dramatically worsening energy security and access to food globally. To this end, we remain steadfast in our commitment to our unprecedented coordination on sanctions for as long as necessary, acting in unison at every stage, and will reduce Russia’s revenues, including from gold.
We will help to stabilise and transform the global economy while tackling rising costs of living for our citizens. We will coordinate on our economic security, strengthen the resilience of supply chains and secure a level-playing field.
We will take immediate action to secure energy supply and reduce price surges driven by extraordinary market conditions, including by exploring additional measures such as price caps. We reaffirm our commitment to phase out our dependency on Russian energy, without compromising on our climate and environmental goals.
With our partners, we have made significant progress towards the target of USD 100 billion for the most vulnerable, building on the 2021 Special Drawing Rights allocation. To protect people from hunger and malnutrition, and in response to Russia’s weaponisation of grain, we will increase global food and nutrition security through the Global Alliance on Food Security. We will provide an additional USD 4.5 billion to this end, stand by our commitments to keep our food and agricultural markets open and step up efforts to help Ukraine produce and export.
We endorse the goals of an open and cooperative international Climate Club, and will work with partners towards establishing it by the end of 2022. To drive urgent, ambitious, and inclusive action to align ourselves with 1.5°C pathways and to accelerate implementation of the Paris Agreement, we commit to a highly decarbonised road sector by 2030, a fully or predominantly decarbonised power sector by 2035, and prioritising concrete and timely steps towards the goal of accelerating phase-out of domestic unabated coal power.
Through our Partnership for Global Infrastructure and Investment, we aim to mobilise USD 600 billion over the next five years to narrow the global investment gap. We will step up our cooperation globally, including through working towards new Just Energy Transition Partnerships with Indonesia, India, Senegal and Vietnam, building on our existing partnership with South Africa.
To overcome the current COVID-19 pandemic, we will build on our provision of over 1.175 billion vaccine doses since we last met. We will also prevent, prepare, and respond to future pandemics and health challenges including through the G7 Pact for Pandemic Readiness.
Guided by the conviction that democratic values make us stronger in tackling global challenges, we will cooperate with civil society and our partners beyond the G7 to strengthen the resilience of our societies, promote human rights online and offline, address disinformation, and achieve gender equality.

With these joint commitments and actions taken today, and by working together with partners, we will make progress towards an equitable world.
Full communiqué
Compliments of the European Council.
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Millions of Americans look to Walmart as their go-to place to pick up essentials. According to a complaint filed by the FTC, among the people who have come to rely on Walmart for their day-to-day needs are fraudsters who have allegedly used the retail giant’s money transfer services to bilk consumers out of millions of dollars. The FTC lawsuit charges that Walmart’s practice of looking the other way in the face of massive fraud and illegal telemarketing transactions violates the law.
Whether it’s an IRS impersonation scam, a sweepstakes fraud, or one of those “Help, Grandma. I’ve been arrested!” rip-offs, the transfer of money is the lifeblood of con artists – and they depend on a seamless way to convert their cons into cold cash. According to the FTC, that’s where Walmart’s money transfer services come in.
In addition to its retail business, Walmart runs a thriving operation as a financial services provider. Walmart acts as an agent for multiple money transfer services, including MoneyGram, Ria and Western Union, and offers services under its Walmart2Walmart and Walmart2World brands.
There is a good reason why money transfers are a pet payment method for fraudsters. Once a transfer has been picked up, the transaction is almost impossible to reverse. The criminal is often home free while the consumer is left high and dry. The FTC has been sounding the alarm about the role that money transfer operators play in the flimflam ecosystem, resulting in law enforcement actions against MoneyGram and Western Union for their failure to protect consumers who used their services.
You’ll want to read the complaint for details about the FTC’s allegations against Walmart, but it boils down to this. According to the FTC, Walmart turned a blind eye to massive amounts of fraud perpetrated through its money transfer operations. What was in it for Walmart? First, financial services drive retail sales, but Walmart also makes millions of dollars in fees from fraudulent transactions run through its financial services.
The FTC alleges that for years it was Walmart’s policy to issue payouts even in the case of suspicious money transfers. The upshot: Scammers had to go no further than their neighborhood Walmart to pick up the proceeds of their crimes. What’s more, the complaint charges that Walmart’s failure to have a policy in place to spot fraudulent transfers – and when the company finally put a policy in place, its failure to follow its own procedures – greased the wheels for scammers. Other allegedly illegal practices the FTC cited in its complaint: Walmart’s failure to effectively train its staff, and Walmart’s failure to adequately warn its money transfer customers of the risk of fraud.
The FTC also alleges that despite an express provision in the Telemarketing Sales Rule that prohibits money transfers from being used to pay for telemarketing purchases, Walmart has failed to take steps necessary to comply with that ban.
Filed in federal court, the lawsuit seeks – among other things – money back for defrauded consumers, civil penalties, and top-to-bottom changes in how Walmart runs its money transfer operations. Even at this early stage, the message to other companies is that it’s bad business to turn a blind eye in the face of fraud.
Do you know someone who has lost money to a transfer scam? The FTC has resources to help them spot the tell-tale signs of a rip-off.
Compliments of the Federal Trade Commission.
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A renewed focus on structural reforms would help drive stronger growth and sustain living standards in Estonia as rising inflation, exacerbated by Russia’s war of aggression against Ukraine has harmed its economic recovery and risks undermining its efforts to reduce poverty.
The latest OECD Economic Survey of Estonia sets out that double-digit inflation and labour shortages are slowing the pace of Estonia’s initially robust rebound from the COVID-19 crisis. Headline inflation stood at 20% year-on-year in May, with core inflation at 9%. Policy measures to better target social transfers to the most vulnerable, making use of Estonia’s highly advanced digital capacity, would help achieve the government’s important objective to reduce relative poverty from 21% in 2020 to 15% by 2023.
“Estonia’s economy rebounded strongly last year, after weathering the pandemic better than peer countries. Now, the economic impact of Russia’s war against Ukraine is hurting growth, fanning inflation and heightening poverty challenges. This makes structural reforms to reduce labour shortages, protecting labour market flexibility and addressing skills mismatches even more important and more pressing,” OECD Secretary-General Mathias Cormann said.
Estonia has made remarkable economic progress since independence, tripling per capita income over 30 years and steadily narrowing the income gap with advanced economies. Estonia enjoys solid institutions, strong public finances, high educational outcomes, a flexible job market, business-friendly regulations and world-class digital governance and innovation. At the same time, Estonia’s cost competitiveness was decreasing even before the pandemic and could fall further if labour market shortages cause wages to grow faster than productivity.
The Survey projects Estonia’s GDP growth at 1.3% in 2022 and 1.8% in 2023 after growth of 8.2% in 2021, as high inflation weighs on household purchasing power. Savings accumulated by consumers during the pandemic and the absorption of EU recovery funds will help support economic activity.
As well as making social transfers more effective and better targeted, the Survey recommends reducing employee social security contributions for low-wage earners, notably for young workers, to ease pressure on incomes. The survey also calls for additional action to reduce the gender pay gap, which remains significant despite impressive progress in recent years. This would help support vulnerable women such as single mothers, as well as raise work incentives for women.
Tax reforms could help Estonia to prepare for future challenges such as population ageing, which will increase health and pension spending. They would also help in addressing climate change, where carbon emission reductions and climate adaptation will require public investment. One option to increase tax revenues is to review the taxation of dividends, which is among the lowest in the OECD. Another option is to look at whether the review of land valuation under way in Estonia is an opportunity to also evaluate the stock of housing and business properties and potentially expand the property tax base beyond land.
See a Survey Overview with key findings and charts (this link can be used in media articles).
Contact:

For further information, journalists are invited to contact Catherine Bremer (catherine.bremer@oecd.org) in the OECD Media Office (news.contact@oecd.org)

Compliments of the OECD.
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