The European Securities and Markets Regulator (ESMA), the EU’s securities markets regulator, today publishes a study on the market impacts of circuit breakers.
Sudden and drastic price swings in financial markets can be a source of market instability and are a concern for market participants, supervisors and regulators. Circuit breakers are key instruments used by trading venues to regulate markets and interrupt excessive price movements.
Based on Morningstar Real Time data ESMA has created a unique database of circuit breakers triggered between 1 April 2016 and 31 December 2016 on a sample of 10,000 financial instruments traded on EU trading venues, to analyse the impact they have on the market.
The study finds that that price volatility is significantly lower after the use of a circuit breaker. At the same time, bid-ask spreads widen and the price discovery process is not negatively affected. The cross-venue character of ESMA’s database also allows the assessment of coordination of circuit breakers across venues. 
Compliments of the European Commission

The European Insurance and Occupational Pensions Authority (EIOPA) published, today, its 2019 Consumer Trends Report outlining major developments in the insurance and pensions sectors affecting European consumers.
Improvements in disclosure practices have been seen and digitalisation remains a broadly noteworthy trend, showing that financial innovations can bring benefits for both insurers and consumers, so long as they are adequately designed and properly implemented.
Accident and health insurance products continue being ‘good value-for-money’, with the medical expense line of business having the highest claims ratio and the lowest commission rates for non-life insurance products.
Conduct issues related to unit-linked, credit life/credit protection insurance and add-on insurance products have become more prevalent. Claims management in motor insurance, in particular in some markets, also remains an area of concern.
Unit-linked insurance. Concerns continue on the poor levels of consumer understanding, product complexity, unmitigated conflicts of interests, and poor returns – sometimes due to unnecessarily high costs. Issues were identified on the sale of unit-linked policies to vulnerable consumer groups.
Credit life and credit protection products. These are increasingly under the supervisory scrutiny of NCAs and EIOPA. Even though they can bring significant benefits to consumers, potential for consumer detriment exists given generally high commissions that can lead to unmitigated conflicts of interests and some aggressive sales techniques. A data analysis shows that the ratio of acquisition expenses over gross written premiums, an indicator of commission levels, is high for other life insurance, with 151 insurance undertakings above 30% and 50 above 50%.
Add-on insurance. Despite bringing peace of mind to consumers and generally being a low cost product, add-on insurance is also a potential source of consumer detriment across several European markets. Concerns relate to the possible exploitation of behavioural biases in the context of an increase in cross-selling practices and high commissions.
Innovations in the motor insurance. These are broadly noteworthy, with an increase in policies being sold through comparison websites and an increasing uptake of telematics. However motor insurance-related complaints, due to claims management issues, continue to be the most prevalent complaints and have increased by 6% at the EEA level.
For pensions, with life expectancy increasing, a strain is being put on the decumulation phase. To address this issue, changes and innovations – such as lifecycling or delayed retirement – are taking place.
Moreover, effective and clear communication with members is essential for them to be aware of both the product’s characteristics and their pension situation. Given that more members prefer online and more interactive communication, innovations are taking place across several countries. Publicly or privately run pensions dashboards are also appearing, making it easier for consumers to access information on their overall pension situation.
Looking ahead, although regulatory changes that came into force in 2018 (Insurance Distribution Directive and the Packaged Retail and Insurance-based Investment Products Regulation) are already showing some positive developments — mainly in relation to disclosures — it is anticipated that there will be an increasing focus on product oversight and governance, to ensure that products are adequately designed and targeted, thereby ensuring good consumer outcomes.
Gabriel Bernardino, Chairman of EIOPA, said:
‘Understanding consumer trends is an essential part of our work to identify where customers might suffer because of poor practices or lack of information. Despite evidence of improved disclosures, problems remain with product design and product review processes and undertakings and distributors must take responsibility for improving consumer outcomes. At the same time, where EIOPA identifies areas for concern we will take action. This was the case for certain business models in travel insurance, where EIOPA recently issued a warning. In 2020, we will launch a comprehensive thematic review on mortgage life and other credit protection insurance sold through banks, to gather evidence on areas of potential consumer detriment.
View the whole report here
Compliments of the European Commission

December 12 – At today’s meeting the Governing Council of the European Central Bank (ECB) decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.50% respectively. The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.
On 1 November net purchases were restarted under the Governing Council’s asset purchase programme (APP) at a monthly pace of €20 billion. The Governing Council expects them to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates.
The Governing Council intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when it starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.
The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.

On 12 December, EU leaders discussed climate change, the EU’s long-term budget and external relations, among other issues. On 13 December, they focused on the economic and monetary union and Brexit.
Climate change
EU leaders endorsed the objective of making the EU climate-neutral by 2050, in line with the Paris Agreement. They underlined that the transition to climate neutrality will bring significant opportunities for economic growth, markets, jobs and technological development. Poland, at this stage, could not commit to implementing this objective, which is why the European Council will come back to this issue in June 2020.
The European Council took note of the Commission communication on the European Green Deal and asked the Council to take work forward.
Leaders recognised the need to put in place an enabling framework to ensure a cost-effective, as well as socially balanced and fair transition to climate neutrality, taking into account different national circumstances.
The European Council underlined that the next multiannual financial framework (MFF) will significantly contribute to climate action. Tailored support for regions and sectors most affected by the transition will be made available from the Just Transition Mechanism.

“All relevant EU legislation and policies need to be consistent with, and contribute to, the fulfilment of the climate neutrality objective while respecting a level playing field.”
European Council conclusions, 12 December 2019

The European Council recognised that all relevant EU policies need to be in line with the climate-neutrality objective and invited the Commission to examine whether existing rules, including on state aid and public procurement, require adjustment. It also asked the Commission to report regularly on the environmental and socio-economic impact of the transition to climate neutrality.
EU leaders acknowledged the need to ensure energy security and to respect the right of the member states to decide on their energy mix and to choose the most appropriate technologies. Some countries have indicated that they use nuclear energy as part of their national energy mix.
Finally, leaders invited the Commission to prepare:
a proposal for the EU’s long-term strategy as early as possible in 2020 with a view to its adoption by the Council and its submission to the UNFCCC
after a thorough impact assessment, a proposal for an update of the EU’s nationally determined contribution (NDC) for 2030 under the Paris Agreement
Climate change: what the EU is doing (background information)
Taking the lead on climate change (multimedia story)
Long-term EU budget
The European Council discussed the main features of the multiannual financial framework (MFF) for 2021-2027. This followed the presentation of the MFF negotiating box with figures by Finland’s presidency.
EU leaders called on the European Council President Charles Michel to take the negotiations forward with the aim of reaching a final agreement.
Multiannual financial framework for 2021-2027: negotiations
Conference on the Future of Europe
The European Council considered the idea of a Conference on the Future of Europe, starting in 2020 and ending in 2022, to involve the Council, the European Parliament and the Commission in their respective roles.
External relations
EU-Africa partnership
EU leaders reaffirmed the importance of the EU-Africa partnership. They stressed the need for a strategic discussion, on Africa relations and on the next EU-African Union summit, at the June 2020 European Council.
EU-Africa relations (background information)
Relations with Russia
Chancellor Merkel and President Macron informed the leaders about the implementation of the Minsk agreements, following the meeting in Normandy format on 9 December 2019 in Paris. EU leaders agreed to roll over the economic sanctions on Russia for another 6 months.
Turkey
EU leaders discussed relations with Turkey, in light of Turkey’s actions in the Eastern Mediterranean and Aegean Sea. They reconfirmed previous Council conclusions condemning Turkey’s illegal drilling activities in the Eastern Mediterranean. They also denounced the Turkey-Libya Memorandum of Understanding on the delimitation of maritime jurisdictions and reaffirmed their full solidarity with Greece and Cyprus on this matter.
Turkey’s illegal drilling activities in the Eastern Mediterranean: Council adopts conclusions, 14 October 2019
Albania
The European Council expressed solidarity with Albania in light of the recent earthquake. EU leaders welcomed the Commission’s announcement to provide humanitarian assistance and to organise a donors’ conference.
Trade
The European Council reiterated its full support for the global rules-based international order and noted with concern the paralysis of the World Trade Organisation’s (WTO) mechanism for settling disputes.
Leaders supported the European Commission’s efforts to set up interim arrangements with third countries while actively pursuing a permanent solution. In that connection, the European Council called on the European Parliament and the Council to examine the Commission’s proposal to adapt the EU legislation referring to the EU’s rights under international trade agreements.
Economic and monetary union
EU27 leaders took stock of progress made on the implementation of the June 2019 Statement of the Euro Summit, including the:
revision of the European Stability Mechanism (ESM) Treaty
budgetary instrument for convergence and competitiveness (BICC)
technical work on the strengthening of the banking union
Euro Summit, 13 December 2019
Brexit
EU27 leaders discussed Brexit and preparations for the negotiations on future EU-UK relations after the withdrawal. They reconfirmed their aim of establishing as close as possible future relationship with the UK and welcomed the Commission’s decision to reappoint Michel Barnier.
Special European Council (Art. 50), 13 December 2019
Compliments of the European Commission