Today, the European Parliament, the Council and the Commission celebrate the launch of an annual ‘EU organic day’. The three institutions signed a joint declaration establishing from now on each 23 September as EU organic day. This follows up on the Action Plan for the development of organic production, adopted by the Commission on 25 March 2021, which announced the creation of such a day to raise awareness of organic production.
At the signing and launch ceremony, Commissioner for Agriculture Janusz Wojciechowski said: “Today we celebrate organic production, a sustainable type of agriculture where food production is done in harmony with nature, biodiversity and animal welfare. 23 September is also autumnal equinox, when day and night are equally long, a symbol of balance between agriculture and environment that ideally suits organic production. I am glad that together with the European Parliament, the Council, and key actors of this sector we get to launch this annual EU organic day, a great opportunity to raise awareness of organic production and promote the key role it plays in the transition to sustainable food systems.”
The overall aim of the Action Plan for the development of organic production is to boost substantially the production and consumption of organic products in order to contribute to the achievement of the Farm to Fork and Biodiversity strategies’ targets such as reducing the use of fertilisers, pesticides and anti-microbials. The organic sector needs the right tools to grow, as laid out in the Action Plan. Structured around three axes – boosting consumption, increasing production, and further improving the sustainability of the sector -, 23 actions are put forward to ensure a balanced growth of the sector.
Actions
To boost consumption the Action Plan includes actions such as informing and communicating about organic production, promoting the consumption of organic products, and stimulating a greater use of organics in public canteens through public procurement. Furthermore, to increase organic production, the Common Agricultural Policy (CAP) will remain a key tool for supporting the conversion to organic farming. It will be complemented by, for instance, information events and networking for sharing best practices and certification for groups of farmers rather than for individuals. Finally, to improve the sustainability of organic farming, the Commission will dedicate at least 30% of the budget for research and innovation in the field of agriculture, forestry and rural areas to topics specific to or relevant for the organic sector.
Background
Organic production comes with a number of important benefits: organic fields have around 30% more biodiversity, organically farmed animals enjoy a higher degree of animal welfare and take less antibiotics, organic farmers have higher incomes and are more resilient, and consumers know exactly what they are getting thanks to the EU organic logo.
Compliments of the European Commission.
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The EU Commission has published its second report on the impact of SURE, the €100 billion instrument designed to protect jobs and incomes affected by the COVID-19 pandemic.
The report finds that SURE has been successful in cushioning the severe socio-economic impact resulting from the COVID-19 pandemic. National labour market measures supported by SURE are estimated to have reduced unemployment by almost 1.5 million people in 2020. SURE has helped to effectively contain the increase in unemployment in the beneficiary Member States during the crisis. Thanks to SURE and other support measures, this increase in unemployment has turned out to be significantly smaller than during the global financial crisis, despite the much larger fall in GDP.
SURE is a crucial element of the EU’s comprehensive strategy to protect citizens and mitigate the negative consequences of the COVID-19 pandemic. It provides financial support in the form of loans granted on favourable terms from the EU to Member States to finance national short-time work schemes, similar measures to preserve jobs and support incomes ­ – notably for the self-employed, and some health-related measures.
A total of €94.3 billion of financial assistance has so far been approved to 19 Member States, of which €89.6 billion has been disbursed. SURE can still provide almost €6 billion of financial assistance to Member States out of the total envelope of €100 billion.
Main findings
SURE has supported approximately 31 million people in 2020, of which 22.5 million are employees and 8.5 million self-employed. This represents more than one quarter of the total number of people employed in the 19 beneficiary Member States.
Moreover, around 2.5 million firms affected by the COVID-19 pandemic have benefitted from SURE, allowing them to retain workers.
Given the EU’s strong credit rating, beneficiary Member States have saved an estimated €8.2 billion in interest payments thanks to SURE.
The Commission raised a further €36 billion across three issuances since the time of the drafting of the first report in March 2021. These issuances were largely oversubscribed. All funds have been raised as social bonds, giving investors confidence that their money goes towards a social purpose, and making the EU the world’s largest issuer of social bonds.
On 4 March 2021, the Commission presented a Recommendation on Effective Active Support to Employment following the COVID-19 crisis (EASE). It outlines a strategic approach to gradually transition between emergency measures taken to preserve jobs during the pandemic and new measures needed for a job-rich recovery. With EASE, the Commission promotes job creation and job-to-job transitions, including towards the digital and green sectors, and invites Member States to use available EU funds.
Members of the College said:
Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People said: “The SURE scheme has proven its worth and continues to fulfil its purpose. We created it during an emergency to prop up people’s incomes, protect their families and preserve their livelihoods when they needed it most. Its success can be measured by the figures in today’s report, showing that SURE managed to keep many millions of Europeans in a job during the worst of the crisis. It has played a major part in Europe’s overall response, for which we must also thank national governments. As we exit the pandemic, our approach should gradually focus on promoting quality job creation and easing job-to-job transitions through training and other measures.”
Johannes Hahn, Commissioner for Budget and Administration, said: “It is reassuring that the money raised on the market under SURE has helped EU countries achieved impressive results in a short period of time. For the Commission, SURE has set the scene for borrowing under the much bigger NextGenerationEU recovery instrument. With €49 billion disbursed to 13 EU countries so far and a few billion to EU budget programmes, NextGenerationEU is also making sure the recovery works for all.”
Nicolas Schmit, Commissioner for Jobs and Social Rights, said: “The SURE instrument has proven to be both innovative and indispensable. It is a shining example of a Europe that protects and works for people. The report published today states that making finance available to Member States through SURE helped avoid up to 1.5 million more people entering unemployment in 2020. SURE helped to stem this flow. Now, we must act equally resolutely and quickly to put in place active labour market policies for a job-rich recovery in the changing labour market.”
Paolo Gentiloni, Commissioner for Economy said: “This second report on the impact of SURE confirms the value of this unprecedented instrument of solidarity. The figures speak for themselves: 1.5 million fewer unemployed, 31 million workers and 2.5 million firms supported, and more than €8 billion in interest savings. I am proud of the European success story that is SURE: a success story upon which we must build!”
Background
The Commission proposed the SURE Regulation on 2 April 2020, as part of the EU’s initial response to the pandemic. It was adopted by the Council on 19 May 2020, and became available after all Member States signed the guarantee agreements on 22 September 2020. The first disbursement took place five weeks after SURE became available.
Today’s report is the second report on SURE addressed to the Council, the European Parliament, the Economic and Financial Committee (EFC) and the Employment Committee (EMCO). Under Article 14 of the SURE Regulation, the Commission is legally required to issue such a report within 6 months of the day that the instrument became available. The first report was published on 22 March 2021. Subsequent reports will follow every six months for as long as SURE remains available.
The Commission is issuing social bonds to finance the SURE instrument and using the proceeds to provide back-to-back loans to beneficiary Member States. Further information on these bonds, along with a full overview of the funds raised under each issuance and the beneficiary Member States, is available online here.
Compliments of the European Commission
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Speech | 22 September 2021 | Brussels | “Check against delivery”
Ladies and gentlemen,
For fifty years, the EU has supported vulnerable developing countries by giving them preferential access to the EU market.
This has been a shining example of how trade policy can stimulate growth, create jobs and help to eradicate poverty.
By removing import duties, we have helped these countries to diversify their economies, develop sustainably and play a fuller part in the global economy. And this without harming EU industry.
So, we know this preferential system as the Generalised Scheme of Preferences – or GSP.
It has encouraged countries to improve human and labour rights, the environment and good governance. Today, it covers 67 countries – and almost one and a half billion workers.
The scheme has certainly proven its worth over the years.
EU imports from GSP beneficiaries increased by 25% between 2014 and 2019, compared with a 16% rise in imports from all third countries.
And this was particularly the case for the least developed countries that have benefitted from the most generous preferences.
But it’s not only about economic development.
It’s about more sustainable development too.
For example, Sri Lanka committed to fully eliminating child labour by 2022. It was able to reduce this to 1% of the child population in 2019, partly thanks to its new ‘Child Labour Free Zones’.
And Bolivia raised the minimum working age to the internationally accepted standard of 14 years.
Now, we want to build on the success of the GSP scheme and take it further – especially since the current set-up will expire by the end of 2023.
There is no need to overhaul the scheme, as we did 10 years ago. But we will do some fine-tuning, to respond better to the changing needs and challenges of beneficiary countries – and to bring the scheme closer in line with our trade sustainability principles.
We plan to keep the current structure with its three market access arrangements:

for low and lower-middle income countries, there is the standard GSP;
GSP+ for vulnerable countries, based on sustainable development and good governance commitments; and
Everything But Arms for least developed countries.

Today’s proposal aims to reinforce the scheme’s social, environmental and climate aspects, reduce poverty and increase export opportunities for developing countries.
We do this in a number of ways.
For example, by better focusing preferences on less competitive products and countries so that the EU trade advantages go to the countries that need them most.
Then, by expanding the list of international conventions and agreements with which countries must comply to receive those advantages. At present, there are 27.
We propose adding six more conventions on human and labour rights, rights of people with disabilities, rights of the child, and transnational organised crime, for example. And we are replacing the Kyoto Protocol with the Paris agreement on climate change.
And by updating the system of withdrawing GSP preferences to include environmental and good governance conventions if a country is breaching international standards.
If the violation is especially severe, we will activate an urgent procedure to withdraw preferences more quickly. In doing so, we will also assess the socio-economic impacts of withdrawing the preferences on the country concerned.
It is also important that we maintain a transparent system of monitoring the sustainable development commitments taken by the beneficiaries. Here, the recently created Single Entry Points for complaints can play an important role.
Finally, we are retaining safeguards to make sure that imports do not harm EU industry, and also improve their functioning.
We launched the GSP scheme all those years ago to help developing countries sell more of their products in developed countries and build up their own industry.
It remains a key element of the EU’s trade and development policies. It has stood the test of time – very well. It shows how trade can contribute to integrating low-income countries into the world economy, creating decent jobs and reducing poverty.
We are continuing it – because it works.
And by updating its focus, we will help to advance sustainable development across the world, boost global trade and help those most in need. Thank you.
The post Remarks by Executive Vice-President and Commissioner for Trade, Valdis Dombrovskis, at the press conference on the new EU Generalised Scheme of Preferences first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Speech | 22 September 2021 | Brussels | “Check against delivery”
Good afternoon, thank you Valdis for that introduction.
When we look back over 5 years when Solvency II came into being, back then it was really a major change in the European rulebook for insurers, aligning prudential rules with state-of-the-art risk management practices.
And Solvency II is a global leader, so we can be proud of our achievements in that regard.
Because Solvency II has provided a solid base for the single market in insurance, letting insurance companies operate across the EU and of course protecting consumers and businesses.
So again with some confidence: we are very happy with the way Solvency II has worked and today we’re looking at how to improve it further in this review.
I want to thank EIOPA for their work in implementing Solvency II and in particular their contribution to our review.
So today we have a chance to make improvements where needed, for example simpler rules for smaller and less risky insurers.
Public authorities will be better equipped to protect consumers and maintain financial stability.
And we want to make sure the insurance sector is more resilient so that it can weather future crises.
The economic and political context is evolving.
We have been through a major health crisis with serious economic consequences and we are now looking towards the recovery.
We also have a renewed and important focus on the Capital Markets Union and ensuring the single market for capital really works.
That means that this review of Solvency II is adjusting some rules to allow insurers invest for the recovery and for long-term, sustainable growth.
And we have the European Green Deal: where we are fighting climate change, while also helping our economies and societies to adapt.
Our mission is to allow businesses get more access to funding, beyond bank loans, and to build up our Capital Markets Union.
As Valdis has said, insurers are major institutional investors in the EU, and we believe they can play an even bigger role.
In the first few years after entry into force, this review will release several tens of billions of euros of capital for the insurance sector – allowing insurers to invest that money in the economy.
And with this package, we will make it less costly for insurers to invest, when such investments are made with a long-term perspective.
We will also improve the framework so that market volatility does not result in short-sighted investment decisions. Our businesses need long-term, stable capital funding.
However, as Valdis said, we should not forget that Solvency II needs to remain fit for the low-yield environment.
So today’s package will ensure that Solvency II better reflects the risks insurers are exposed to both in capital requirements and the rules on the calculation of insurers’ obligations towards policyholders.
We have ensured that the overall impact is not unduly burdensome. The review is well balanced in terms of capital requirements at EU level. Overall, insurers’ capacity to invest will increase.
The insurance sector also is vital for the European Green Deal.
Firstly in terms of providing sustainable investment with a long-term perspective to tackle climate change.
And secondly about adapting to the changes that are already happening.
I think this summer’s tragic events in Germany, Belgium and Greece remind us that the impact of climate change is already with us, and we need to be better prepared.
We will require insurers to fully take into account the risk of climate change in their investment and underwriting activities.
We will also ask EIOPA to assess whether a differentiated prudential treatment is justified, and whether natural catastrophe risk is still being properly addressed in view of climate science.
Beyond helping the insurance sector make its rightful contribution to our political goals, we want to make EU rules work better for insurers.
We will simplify Solvency II rules wherever possible, without putting at risk consumer protection.
More concretely, we will ensure that more small domestic insurers are exempted from Solvency II, so they are subject to simpler national regimes.
And we have introduced a simpler regime for firms that have a relatively low risk profile.
In addition, we have also identified some loopholes in the supervision of cross-border business, with some failures of insurers hurting EU citizens in several Member States.
So today’s package will close gaps in cross-border supervision.
In particular, EIOPA will have a stronger role, and there will be clearer responsibilities for the different authorities in charge of supervising cross-border insurers.
We are also introducing a recovery and resolution framework for insurers.
The new regime will help ensure a better outcome for policyholders should their insurers fail, while minimising the impact on the economy, the financial system and European taxpayers.
So in closing, I want to highlight the importance of the insurance sector, already identified by Valdis.
Insurance and insurance companies allow households and businesses to prepare for a rainy day.
While at a broader level the sector can help us recover from the crisis, and build up the Capital Markets Union and support the European Green Deal.
It is important that we get the rules right: we think they are already good, and now we want to make them better.
We are now counting on the support of the European Parliament and Member States. And I look forward to working with them.
Thank you.
Compliments of the European Commission.
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The European Union and the United States announced today the Global Methane Pledge, an initiative to reduce global methane emissions to be launched at the UN Climate Change Conference (COP 26) in November in Glasgow. President Biden and European Commission President Ursula von der Leyen urged countries at the US-led Major Economies Forum on Energy and Climate (MEF) to join the Pledge and welcomed those that have already signaled their support.
Methane is a potent greenhouse gas and, according to the latest report of the Intergovernmental Panel on Climate Change, accounts for about half of the 1.0 degrees Celsius net rise in global average temperature since the pre-industrial era. Rapidly reducing methane emissions is complementary to action on carbon dioxide and other greenhouse gases, and is regarded as the single most effective strategy to reduce global warming in the near term and keep the goal of limiting warming to 1.5 degrees Celsius within reach.
Countries joining the Global Methane Pledge commit to a collective goal of reducing global methane emissions by at least 30 percent from 2020 levels by 2030 and moving towards using best available inventory methodologies to quantify methane emissions, with a particular focus on high emission sources. Delivering on the Pledge would reduce warming by at least 0.2 degrees Celsius by 2050. Countries have widely varying methane emissions profiles and reduction potential, but all can contribute to achieving the collective global goal through additional domestic methane reduction and international cooperative actions. Major sources of methane emissions include oil and gas, coal, agriculture, and landfills. These sectors have different starting points and varying potential for short-term methane abatement with the greatest potential for targeted mitigation by 2030 in the energy sector.
Methane abatement delivers additional important benefits, including improved public health and agricultural productivity.  According to the Global Methane Assessment from the Climate and Clean Air Coalition (CCAC) and the United Nations Environmental Programme (UNEP), achieving the 2030 goal can prevent over 200,000 premature deaths, hundreds of thousands of asthma-related emergency room visits, and over 20 million tons of crop losses a year by 2030 by reducing ground-level ozone pollution caused in part by methane.
The European Union and eight countries have already indicated their support for the Global Methane Pledge. These countries include six of the top 15 methane emitters globally and together account for over one-fifth of global methane emissions and nearly half of the global economy.
The European Union has been taking steps to reduce its methane emissions for almost three decades. The European Commission strategy adopted in 1996 helped reduce methane emissions from landfilling by almost a half. Under the European Green Deal, and to support the European Union’s commitment to climate neutrality by 2050, the European Union adopted in October 2020 a strategy to reduce methane emissions in all key sectors covering energy, agriculture and waste. The reduction of methane emissions in the current decade is an important part of the European Union’s ambition for reductions in greenhouse-gas emissions by at least 55% by 2030. This year, the European Commission will propose legislation to measure, report and verify methane emission, put limits on venting and flaring, and impose requirements to detect leaks, and repair them.  The European Commission is also working to accelerate the uptake of mitigation technologies through the wider deployment of ‘carbon farming’ in European Union Member States and through their Common Agricultural Policy Strategic Plans, and to promote biomethane production from agricultural waste and residues. Finally, the European Commission is supporting the United Nations Environmental Programme (UNEP) in establishing an independent International Methane Emissions Observatory (IMEO) to address the global data gap and transparency in this area, including through a financial contribution. IMEO will play an important role in creating a sound scientific basis for methane emissions calculations and delivering the Global Methane Pledge in this regard.
The United States is pursuing significant methane reductions on multiple fronts. In response to an Executive Order that President Biden issued on the first day of his Presidency, the Environmental Protection Agency (EPA) is promulgating new regulations to curtail methane emissions from the oil and gas industry. In parallel, the EPA has taken steps to implement stronger pollution standards for landfills and the Department of Transportation’s Pipeline Hazardous Materials and Safety Administration is continuing to take steps that will reduce methane leakage from pipelines and related facilities. At the President’s urging and in partnership with US farmers and ranchers, the US Department of Agriculture is working to significantly expand the voluntary adoption of climate-smart agriculture practices that will reduce methane emissions from key agriculture sources by incentivizing the deployment of improved manure management systems, anaerobic digesters, new livestock feeds, composting and other practices. The US Congress is considering supplemental funding that would support many of these efforts. Among the proposals before the Congress, for example, is a major initiative to plug and remediate orphaned and abandoned oil, gas, and coal wells and mines, which would significantly reduce methane emissions. In addition, the United States continues to support collaborative international methane mitigation efforts, especially through its leadership of the Global Methane Initiative and CCAC.
The European Union and eight countries have already indicated their support for the Global Methane Pledge:

Argentina
Ghana
Indonesia
Iraq
Italy
Mexico
United Kingdom
United States

The United States, the European Union and other early supporters will continue to enlist additional countries to join the Global Methane Pledge pending its formal launch at COP 26.
Compliments of the European Commission.
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1 Introduction
Targeted longer-term refinancing operations (TLTROs) play a key role in preserving favourable bank financing conditions for households and firms, thereby contributing to inflation reaching the ECB’s target of 2% in the medium term. The operations are part of a broad set of complementary policy instruments, which include asset purchases, negative interest rates and forward guidance.[1] Since their inception in 2014, TLTROs have supported the transmission of monetary policy by incentivising lending through their targeting feature and by providing a reduction in bank funding cost, which has been instrumental in avoiding a deterioration in lending conditions that would have otherwise occurred. The third series of the TLTROs (TLTRO III) was introduced in early 2019. The initial announcement of TLTRO III in March 2019 reassured markets about the extension of the pre-existing TLTRO II. The operations were intended to stave off “congestion effects” in bank funding markets that would have otherwise materialised because of the need to replace expiring TLTRO II funds. The operations were recalibrated in September 2019 to preserve favourable bank lending conditions, ensure the smooth functioning of the monetary policy transmission mechanism and therefore further support the accommodative stance of monetary policy. From the start of the coronavirus (COVID-19) crisis, the recalibration of this tool was, thanks to its design and the role of the euro area banking system in the monetary policy transmission mechanism, an integral part of the ECB’s policy response to ensure favourable borrowing conditions for firms and households during the pandemic.
TLTRO III provided ample liquidity at attractive rates to address the emergency liquidity needs of households and firms induced by the pandemic. The ECB’s monetary policy response to the COVID-19 crisis involved two main tools. First, asset purchases supported favourable financing conditions for the real economy in times of heightened uncertainty, both through an additional envelope under the regular asset purchase programme (APP) and via the launch of the pandemic emergency purchase programme (PEPP). Second, the recalibration of the existing TLTRO III operations helped banks secure funding at favourable terms to support access to credit for firms and households.[2] The Governing Council’s decisions of 12 March[3] and 30 April[4] 2020 have secured the transmission of monetary policy via banks at times of elevated uncertainty and high liquidity needs by expanding banks’ borrowing allowance under TLTRO III from 30% to 50% of the eligible loan book (providing an additional leeway of approximately €1.2 trillion) and reducing the interest rate applied on these operations to a rate as low as -1% until June 2021 for banks fulfilling the lending requirements. These decisions also enlarged the set of assets eligible to collateralise the borrowing under TLTRO III and enhanced banks’ flexibility of repayment options and participation modalities across operations. The Governing Council’s decisions of 10 December 2020[5] further widened the borrowing allowance to 55% and prolonged the period in which banks could secure a rate as low as -1% to June 2022, subject to additional lending requirements until the end of 2021. This served to shelter borrowing conditions from the ripple effects of the pandemic.
The magnitude of the pandemic shock, the broad-based policy response and the attractive design of TLTROs (after the various recalibrations) resulted in one of the largest liquidity injections by the ECB directly into the euro area banking sector, bringing the total uptake to €2.2 trillion as of June 2021, thereby providing substantial support to the euro area throughout the entire pandemic period. The monetary policy response to buffer the impact of the pandemic on borrowing was complemented by policy support from other policy domains, ranging from microprudential and macroprudential policy via capital relief measures, to fiscal policy via extensive use of government guarantees and moratoria. The favourability of TLTRO conditions, together with the broadened eligibility of assets that could be pledged as collateral (see Box 1), the capital space and loan demand reinforced by other policies, enabled euro area banks to participate widely in the TLTRO III programme, leading to the largest participation in Eurosystem refinancing operations so far. The overall take-up exceeded €1.5 trillion after the June 2020 operation and subsequent operations brought it up to €2.2 trillion as of June 2021 (Chart 1). This article studies how, and by how much, this targeted longer-term central bank funding has affected bank lending conditions.
CONTINUE READING HERE
Compliments of the European Central Bank.
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Report to the Board of Executive Directors
WASHINGTON, September 16, 2021—The World Bank Group today released the following statement on behalf of the Bank’s Board of Executive Directors:
“The World Bank’s Board of Executive Directors today authorized the release of “Investigation of Data Irregularities in Doing Business 2018 and Doing Business 2020 – Investigation Findings and Report to the Board of Executive Directors,” an independent external review of the facts and circumstances around previously reported data irregularities in the 2018 and 2020 Doing Business reports.” 
Compliments of the World Bank.
Washington, DC: Ms. Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), issued the following statement on the Report on Investigation of Data Irregularities in Doing Business 2018 and Doing Business 2020:
“I disagree fundamentally with the findings and interpretations of the Investigation of Data Irregularities as it relates to my role in the World Bank’s Doing Business report of 2018. I have already had an initial briefing with the IMF’s Executive Board on this matter.”
Compliments of the IMF.
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By Kristalina Georgieva, IMF Managing Director | Launch event for “Investment Funds and Financial Stability” paper |
Good morning. I am very pleased that we are joined today by some of the world’s leading voices on financial stability and investment funds. I am also very proud of our latest contribution to this policy discussion from the IMF’s Monetary and Capital Markets Department.
To illustrate the importance of our new report, we need to go back to the height of the crisis in March of 2020. We were facing the biggest economic shock in our lifetimes.
But we did not face another Global Financial Crisis last year—not only because of the extraordinary monetary and fiscal measures, but also because countries had worked together after the Global Financial Crisis to strengthen the resilience of the banking sector, to ensure that banks have more reliable liquidity and capital cushions.
Last year’s experience was less encouraging for the investment fund sector—because the crisis exposed fundamental vulnerabilities that could affect global financial stability.
Many investment funds were heavily affected by the financial market turmoil; and the initial shock was amplified by rapid fund outflows and rapid sales of assets as liquidity suddenly dried up in key markets. The so-called “dash-for-cash” extended across borders—which triggered significant capital outflows from emerging and developing markets.
Today, the global economic recovery is underway—but there is also growing uncertainty, including rising concerns over stretched asset valuations. It is, therefore, not surprising that policymakers and regulators are keeping a close eye on investment funds.
Over the past two decades, non-bank financial institutions have come to play such a key role that they now hold about 50 percent of global financial assets. This benefits everything from entrepreneurs growing their businesses, to families buying their first home, to saving for retirement.
These investment funds are vital engines of prosperity. They come in all shapes and sizes, such as money-market funds and open-end mutual funds—and they are subject to a range of investor protection and market conduct regulations. But we also know that many funds have ventured into higher-risk investments—such as high-yield debt and real estate—which leaves them more exposed to liquidity pressures in times of distress.
This in turn demands greater vigilance to ensure that critical parts of the financial system do not freeze up when they are needed most.
So, our key message today is this: if we are to safeguard financial stability at the national and global levels, we need to boost the resilience of investment funds.
What can policymakers do?
One priority is to further strengthen risk management, especially liquidity risk management. Our new report shows how this can be achieved with a combination of liquidity management tools.
The key is that these tools can be deployed sequentially—as needed—depending on the intensity of pressures facing a particular fund. It means that funds would no longer have to rely on so-called redemption fees and gates linked to regulatory thresholds—which was problematic last year.
These measures would benefit all investment funds, but especially those holding less-liquid assets. We also believe that there is room for more prescriptive regulatory approaches in this critical area.
Here we can draw on the lessons learned in the banking sector. We saw a significant strengthening of risk management in banks, largely because of stronger regulatory frameworks put in place after the Global Financial Crisis.
This approach has served us well—and it’s even more important now. Just think of the risk of financial spillovers that could hit emerging and developing economies.
Again, this is an area where investment funds play a central role. Over the past decade, we have seen almost $1 trillion in foreign investment in emerging market sovereign debt—with investment funds accounting for about two thirds of these vital capital flows.
In our report, we provide specific proposals on how to mitigate capital-flow volatility, how to better manage cross-border fund flows in times of crisis.
These are important measures, but we need to go further. Even as some countries strengthen their policies and step up investment fund reforms, we must continue to be vigilant about those who try to game the system. Fighting regulatory arbitrage across borders remains critical.
That is why we need strong international cooperation. It lies at the heart of the ongoing reform process led by the Financial Stability Board. And it’s reflected in the joint efforts of national supervisory authorities and central banks, the International Organization of Securities Commissions and other standard setting bodies, and International Financial Institutions such as the IMF.
Policymakers worked together to make banks safer after the Global Financial Crisis—now we must do the same for investments funds. We know that financial stability risks remain elevated, and asset prices are stretched, so speed is of the essence when it comes to these reforms. Financial risks take time to build, but conditions can shift quickly and pose new and unforeseen challenges to the financial sector, as we saw during the turmoil last year.
Given the vital role of investment funds in fostering growth and safeguarding financial stability, we need to take the right actions now to boost their resilience.
With that, I look forward to hearing your views on this critical issue.
Thank you very much.
Compliments of the IMF.
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