The EU has a problem with climate catastrophe insurance: only a quarter of the losses from climate-related disasters are covered. Greater coverage could reduce the economic damage that results from them. This joint ECB-EIOPA post for The ECB Blog looks at ways to make this happen.

Drought affected two-thirds of the European Union in 2022, likely the worst episode in 500 years.[2] Agricultural production withered, river transport was disrupted and hydroelectric power generation fell, which exacerbated the energy crisis. Just a year earlier, severe flooding across the continent killed hundreds and caused substantial damage. Climate change will make catastrophes like these more frequent and more severe.
Putting the brake on climate change by accelerating the green transition remains vital. But we also need policies to lessen the impact of catastrophes when they occur. Insurance plays an important role in this. By promptly providing funds for reconstruction, insurance allows economic activities to return to pre-catastrophe levels more quickly.[3] So high rates of coverage and speedy pay-outs can substantially mitigate the economic damage. They can also reduce financial stability risks and lower the cost to taxpayers of government relief to cover uninsured losses.
So, are we covered when disaster strikes? No, the EU actually has a major climate insurance protection gap. Only a quarter of climate-related catastrophe losses are insured. In some countries, the figure is less than 5% (Figure 1). Moreover, the growing effects of climate change mean that coverage is likely to shrink as rising premiums choke demand and insurers withdraw from particularly exposed areas.

Figure 1
The insured share of economic losses related to catastrophes in Europe is low and expected to decline

Average share of insured economic losses caused by weather-related events in Europe
1980-2020 percentages

Sources: EIOPA Protection Gap Dashboard, European Environment Agency (EEA) CATDAT.

Even when insurance coverage is affordable, there are various reasons why it is not purchased. For one, people generally underestimate the likelihood and impact of catastrophes. For another, they often believe governments will compensate them for losses and that they therefore do not need their own insurance. This behaviour is a well-known challenge for insurance and is called moral hazard. Broadly speaking, moral hazard is where people do not make the effort to reduce risks themselves because they expect to be compensated for their loss anyway.
A ladder approach to catastrophe insurance
The ECB and the European Insurance and Occupational Pensions Authority (EIOPA) are working together to find ways to address the problem. Today they published a joint Discussion Paper outlining policy options to reduce the climate insurance protection gap in Europe. Insurance and catastrophe losses come in several layers. The Discussion Paper uses the concept of a ladder to help visualise these layers and tailor the proposed policy options to them (Figure 2).
The first rung of the ladder is private insurance, the initial line of defence to pool risks and cover losses. Carefully designed insurance policies can encourage households and businesses to better adapt to climate change and increase their resilience, for example by setting standards for flood-proofing homes in flood-prone areas.

Figure 2
A ladder approach to catastrophe insurance

Source: Simplified version of figure appearing in ECB-EIOPA discussion paper ”Policy options to reduce the climate insurance protection gap” (2023).

Larger catastrophe risks, however, require a more elaborate framework. The next rung involves reinsurance and greater use of capital market instruments such as catastrophe (“cat”) bonds. Cat bonds can help insurers pass on part of the losses from rarer, but more devastating, catastrophes to a broad set of investors, helping to diversify sources of capital and lower overall premiums. Deepening cat bond markets – which may also be supported by further progress on the EU’s Capital Markets Union – can therefore help to tackle the climate insurance protection gap.
The third rung comprises the important roles played by national governments. As already noted, low insurance coverage means that the public sector often has to provide disaster relief. Public finances would generally benefit from more comprehensive disaster risk management strategies. These make it easier to balance the costs of measures taken before catastrophes occur against the relief provided once they eventually do. Precautionary measures include spending on climate adaptations such as sea walls or irrigation, as well as creating fiscal buffers such as national reserve funds for emergencies. Even with such preparations, fiscal spending will remain an important part of catastrophe relief, especially for cases such as public infrastructure. Governments could also enter into the type of public-private partnerships that already exist in some European countries, either via direct insurance or as reinsurer of last resort. A key objective of policy at this level should be to lower the share of catastrophe losses borne by the public sector, while simultaneously incentivising and improving risk mitigation and adaptation.
The final rung on the ladder is a possible EU-wide public sector scheme covering rarer, but larger, climate-related catastrophes. By providing meaningful reconstruction support to Member States, it could complement and reinforce national measures, and help to more efficiently pool catastrophe risks, which typically hit individual EU countries at different times. Such a scheme would complement the EU’s wider climate policies and existing tools for disaster relief, such as the EU Solidarity Fund, that cannot singlehandedly meet the increasing needs from climate-related catastrophes.
As set out in the Discussion Paper, all these policy options must be carefully designed and implemented so that the behaviour that generates moral hazard does not simply move to a different rung in the ladder. The EU-wide public sector scheme, for example, would need safeguards to ensure Member States also act to improve resilience to catastrophes rather than solely relying on relief from the EU. These safeguards could include partially linking contributions to actual risk exposure and only granting access once Member States have implemented agreed adaptation strategies and met their emissions reduction targets.
It will not be possible to fully insure against all future catastrophe risks, nor would doing so be a good idea if we want to encourage adaptation to climate change. Nonetheless, considering the steps outlined here should help to make Europe more resilient to future catastrophes, and lessen their macroeconomic, financial and fiscal impacts.
Authors:

Casper Christophersen, Margherita Giuzio, Hradayesh Kumar, Miles Parker, Hanni Schölermann et al.[1]

Contact:
The ECB and EIOPA welcome comments and feedback on all aspects of the Discussion Paper. Comments should be sent to ecb_eiopa_staff_protection_gap@eiopa.europa.eu, ideally by 15 June 2023.
For information: The ECB and EIOPA are jointly hosting a workshop on 22 May 2023 where these policy options will be discussed with regulators, policymakers, academics and representatives from the private sector.
Compliments of the European Central Bank.

Footnotes:
1. Nicholai Benalal, Marien Ferdinandusse, Sujit Kapadia, Linda Rousová, Elisa Telesca and Pär Torstensson (ECB), Luisa Mazzotta, Marie Scholer, Pamela Schuermans and Dimitris Zafeiris (EIOPA).
2. See European Commission Press Release (French) and Global Drought Observatory (2022) Drought in Europe – August 2022.
3. See, for example, von Peter, G., von Dahlen, S. and Saxena, S., (2012), “Unmitigated disasters? New evidence on the macroeconomic cost of natural catastrophes”, BIS Working Paper No. 394; Fache Rousová, L., Giuzio, M., Kapadia, S., Kumar H., Mazzotta, L., Parker, M., Zafeiris, D., (2021), “Climate change, catastrophes and the macroeconomic benefits of insurance”, EIOPA Financial Stability Report, July.
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The Council today adopted five laws that will enable the EU to cut greenhouse gas emissions within the main sectors of the economy, while making sure that the most vulnerable citizens and micro-enterprises, as well as the sectors exposed to carbon leakage, are effectively supported in the climate transition.
The laws are part of the ‘Fit for 55’ package, which sets the EU’s policies in line with its commitment to reduce its net greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels and to achieve climate neutrality in 2050.
The vote in the Council is the last step of the decision-making procedure.
EU emissions trading system
The EU Emissions Trading System (EU ETS) is a carbon market based on a system of cap-and-trade of emissions allowances for energy-intensive industries, the power generation sector and the aviation sector.
The new rules increase the overall ambition of emissions reductions by 2030 in the sectors covered by the EU ETS to 62% compared to 2005 levels.
Maritime transport emissions
Emissions from shipping will be included within the scope of the EU ETS for the first time. Obligations for shipping companies to surrender allowances will be introduced gradually: 40% for verified emissions from 2024, 70% from 2025 and 100% from 2026.
Most large vessels will be included within the scope of the EU ETS from the start, while other big vessels, namely offshore vessels, will be included in the ‘MRV’ regulation on the monitoring, reporting and verification of CO2 emissions from maritime transport first, and only later included in the EU ETS.
Non-CO2 emissions (methane and N2O) will be included in the ‘MRV’ regulation from 2024 and in the EU ETS from 2026.
Buildings, road transport and additional sectors
A new, separate emissions trading system for the buildings, road transport and additional sectors (mainly small industry) has been established, in order to ensure cost-efficient emissions reductions in these sectors, which have thus far proven difficult to decarbonise. The new system will apply to distributors that supply fuels to the buildings, road transport and additional sectors from 2027. A safeguard has been put in place whereby if the price of oil and gas are exceptionally high in the run up to the start of the new system, this will be postponed until 2028.
Emissions from aviation
Free emission allowances for the aviation sector will be gradually phased out and full auctioning from 2026 will be implemented. Until 31 December 2030, 20 million allowances will be reserved to incentivise the transition of aircraft operators from the use of fossil fuels.
The EU ETS will apply for intra-European flights (including departing flights to the United Kingdom and Switzerland), while CORSIA will apply to extra-European flights to and from third countries participating in CORSIA from 2022 to 2027 (‘clean cut’).
Transparency on aircraft operators’ emissions and offsetting will also be improved and a monitoring, reporting and verification framework for non-CO2 aviation effects will be set up. By 1 January 2028, building on the results of that framework, the Commission will propose, where appropriate, mitigation measures for non CO2 aviation effects.
Carbon Border Adjustment Mechanism
The Carbon Border Adjustment Mechanism (CBAM) is a mechanism which concerns imports of products in carbon-intensive industries. The objective of CBAM is to prevent – in full compliance with international trade rules – that the greenhouse gas emissions reduction efforts of the EU are offset by increasing emissions outside its borders through the relocation of production to EU countries where policies applied to fight climate change are less ambitious than those of the EU or increased imports of carbon-intensive products.
Until the end of 2025 the CBAM will apply only as a reporting obligation. CBAM will be phased in gradually, in parallel to a phasing out of the free allowances, once it begins under the revised EU ETS for the sectors concerned. Free allowances for sectors covered by the Carbon Border Adjustment Mechanism – cement, aluminium, fertilisers, electric energy production, hydrogen, iron and steel, as well as some precursors and a limited number of downstream products – will be phased out over a nine-year period between 2026 and 2034.
CBAM promotes the import of goods by non-EU businesses into the EU which fulfil the high climate standards applicable in the 27 EU member states. This will ensure a balanced treatment of such imports and is designed to encourage the EU’s partners in the world to join the EU’s climate efforts.
The Social Climate Fund
The Social Climate Fund will be used by member states to finance measures and investments to support vulnerable households, micro-enterprises and transport users and help them cope with the price impacts of an emissions trading system for the buildings, road transport and additional sectors.
The fund will be funded by revenues mainly from the new emissions trading system up to a maximum amount of EUR 65 billion, to be supplemented by national contributions. It is established temporarily over the period 2026-2032.
Background
The Council today voted on the following laws of the ‘Fit for 55’ package:

Revision of the ETS Directive
Amendment of the MRV shipping Regulation
Revision of the ETS Aviation Directive
Regulation establishing a Social Climate Fund
Regulation establishing a Carbon Border Adjustment Mechanism

Presented by the European Commission on 14 July 2021 under the European Green Deal, the ‘Fit for 55’ package will enable the EU to reduce its net greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels and achieve climate neutrality in 2050.
The Council and the European Parliament reached a provisional agreement on ETS aviation on 7 December 2022, on CBAM on 13 December 2022 and on the EU ETS and the SCF on 18 December 2022. The Parliament formally adopted the laws on 18 April 2023.
Next steps
The laws will now be signed by the Council and the European Parliament and published in the EU’s Official Journal before entering into force.
Compliments of the European Council, the Council of the European Union.The post ‘Fit for 55’: Council adopts key pieces of legislation delivering on 2030 climate targets first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

President Biden,
Special Envoy Kerry,
Thank you for convening us today and for your continued leadership on climate action. We are the policy makers who can keep global warming below 1.5 degrees Celsius. And we have the tools! With innovation, science, technology and industrial capacity to achieve this goal. Last year, we Europeans produced more electricity from sun and wind than from gas and any other source. And the world’s electricity system is now cleaner than ever before. We are on the path towards net-zero. But the speed of our progress must accelerate.
This is why the European Union supports the four objectives that you set for this Major Economies Forum. First, we can achieve a net-zero power sector by 2040. Here in Europe, we have just raised our 2030 target for renewables, from 32% up to over 42%. And we also increased our energy efficiency target. Globally, many countries have chosen the same direction of travel. Just last weekend, G7 Ministers highlighted energy efficiency as a key pillar in the global energy transition. As Fatih Birol just showed us: Now the time has come for global action.
That’s why, today, I would like to launch a new initiative to work together towards global targets for energy efficiency, and renewable energy. We could develop these targets by COP28, together with organisations like the IEA. These targets would complement other goals. Such as the phase out of unabated fossil fuels. And the ambitious goals for zero emission vehicles and ships that you mentioned.
Second, we share the goal of reducing deforestation to net zero by 2030. The EU has joined the Forest and Climate Leaders Partnership. And we will invest one billion euros by next year, including through the Amazon Fund.
Third, 150 countries have now joined the Global Methane Pledge that the EU launched together with the US. Now we must all come up with roadmaps to turn pledges into action. In the EU, we are reducing fluorinated gases beyond what is required under the Kigali amendment. And Team Europe will continue to contribute to the Montreal Protocol Multilateral Fund.
Finally, we welcome your initiative on carbon management. The European Commission has proposed a binding European target for carbon storage capacity – to store 50 million tonnes of CO2 per year by 2030.
To conclude: Working together to achieve net zero is a must for the climate, a new frontier for technology, an opportunity for businesses and a driver for good jobs. Thank you.

President von der Leyen

Compliments of the European Commission.The post Statement by President von der Leyen at the Major Economies Forum on Energy and Climate first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

For many people, buying a franchise has proven to be a good choice, but like any other financial decision, there is no one-size-fits-all answer to the question “Is a franchise right for me?” Buying a franchise involves a major financial outlay and owning one often requires an “all in” lifestyle commitment. If you’re thinking about whether your future could be in a franchise, follow the FTC Business Blog for a series we’re calling Franchise Fundamentals. We’ll explore some of the factors to consider as you investigate franchise opportunities. The first topic: debunking myths and misconceptions about becoming a franchisee.
Myth #1: Being a franchisee is the same as owning your own business. Owning a franchise isn’t the same as being a business owner. In fact, the franchisor may control many aspects of your business – for example, your site location, your sales territory, the design of your retail establishment, and the products or services you can (and can’t) sell. Of course, the right franchisor may assist you with training and expertise, but that help comes with a price both in terms of finance and control.
Myth #2: Buying a franchise will give you “be your own boss” status. After years of earning a; salary, many prospective entrepreneurs look to franchise ownership as a way to exercise autonomy. Not so fast. Franchise agreements often give franchisors authority not only over big-picture decisions at the outset, but also over some day-to-day operations – how you can advertise, what your sign must look like, where you buy supplies, etc. If part of your motivation for considering a franchise is to live that “be your own boss” lifestyle, investigate thoroughly first.
Myth #3: Liking a company’s products is the best indicator that you’ll achieve success as a franchisee. Successful franchisees often say it helps to like the product or service, but being a satisfied customer is no guarantee that a franchise is the right fit for you. Some franchises – say, auto repair or tax preparation – require technical expertise or special training. Are the skills you bring to the table a good fit for the franchise? And has your previous work experience given you the financial and management know-how essential for success?
Myth #4: Owning a franchise is an excellent source of passive income. Who unlocks the shop several hours before opening, turns off the lights at the end of a very long day, and is there in between to handle payroll, customer service, and maybe even routine maintenance? It’s often the franchisee. Even franchisees who choose to hire day-to-day managers will likely find that owning a franchise involves a major commitment of time, effort, and resources. That cruise-ship-and-golf-resort image some people have of franchise ownership just doesn’t square with reality.
Myth #5: Owning a franchise is a financial “sure thing.” The only sure thing in franchising or any other business model is that there’s no such thing as a sure thing. Spending your nest egg for a national name isn’t a guarantee of success. Certainly, your skills and commitment factor into the equation, but so do a lot of variables beyond your control – demand for the product or service, competition, and local and national economic conditions, to name just a few. What’s more, under your franchise agreement, you may have to pay the franchisor even if you’re losing money. Those are just some of the intangibles to consider if you’re thinking about a franchise.
Compliments of the Federal Trade Commission.The post FTC | Franchise Fundamentals: Debunking five myths about buying a franchise first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The Commission propose regulation to tackle cyber threats and incidents.
On the 18 April 2023, the Commission has adopted a proposal for the EU Cyber Solidarity Act to strengthen cybersecurity capacities in the EU. It will support detection and awareness of cybersecurity threats and incidents, bolster preparedness of critical entities, as well as reinforce solidarity, concerted crisis management and response capabilities across Member States.
The Cyber Solidarity Act establishes EU capabilities to make Europe more resilient and reactive in front of cyber threats, while strengthening existing cooperation mechanism.  It will contribute to ensuring a safe and secure digital landscape for citizens and businesses and to protecting critical entities and essential services, such as hospitals and public utilities.
The Commission has also presented a Cybersecurity Skills Academy, as part of the 2023 European Year of Skills, to ensure a more coordinated approach towards closing the cybersecurity talent gap, a pre-requisite to boosting Europe’s resilience. The Academy will bring together various existing initiatives aimed at promoting cybersecurity skills and will make them available on an online platform, thereby increasing their visibility and boosting the number of skilled cybersecurity professionals in the EU.
The Commission has also proposed today a targeted amendment to the Cybersecurity Act, to enable the future adoption of European certification schemes for ‘managed security services’.
Commissioner Thierry Breton, responsible for the Internal Market, said:
“Today marks the proposal of a European cyber shield. To effectively detect, respond, and recover from large-scale cybersecurity threats, it is imperative that we invest substantially and urgently in cybersecurity capabilities. The Cyber Solidarity Act is a critical milestone in our journey towards achieving this objective.“
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Today, the Commission adopted two proposals for a Council Recommendation in the context of the European Year of Skills, with the aim to support Member States and the education and training sector in providing high-quality, inclusive and accessible digital education and training to develop the digital skills of European citizens.
The proposals address the two main common challenges jointly identified by the Commission and EU Member States: 1) the lack of a whole-of-government approach to digital education and training, and 2) difficulties in equipping people with the necessary digital skills.
Strengthening key enabling factors
Despite progress and some excellent examples of innovation, combined efforts have so far not resulted in systemic digital transformation in education and training. Member States still struggle to attain sufficient levels of investment in digital education and training infrastructure, equipment and digital education content, digital training (up-skilling) of teachers and staff, and monitoring and evaluation of digital education and training policies.
The proposal for a “Council Recommendation on the key enabling factors for successful digital education and training” calls on all Member States to ensure universal access to inclusive and high-quality digital education and training, to address the digital divide, which has become even more apparent in the light of the COVID-19 crisis. This could be achieved by creating a coherent framework of investment, governance and teacher training for effective and inclusive digital education. It proposes guidance and action that Member States can pursue to implement a whole-of-government and multi-stakeholder approach as well as a culture of bottom-up innovation and digitalisation led by education and training staff.
Improving digital skills teaching
The second common challenge identified relates to the varying levels of digital skills within different segments of the population, and the ability of national education and training systems to address these differences. The proposal for a “Council Recommendation on improving the provision of digital skills in education and training” tackles each level of education and training. It calls on Member States to start early by providing digital skills in a coherent way through all levels of education and training. This can be ensured by establishing incremental objectives and setting up targeted interventions for specific ‘priority or hard-to-reach groups’. The proposal calls on Member States to support high quality informatics in schools, to mainstream the development of digital skills for adults, and to address shortages in information technology professions by adopting inclusive strategies.
The Commission stands ready to support the implementation of both proposals by facilitating mutual learning and exchanges among Member States and all relevant stakeholders through EU instruments, such as the Technical Support Instrument. The Commission also promotes digital education and skills through cooperation within the European Digital Education Hub and through EU funding, such as Erasmus+ and the Digital Europe Programme, the Just Transition Fund, the European Regional Development Fund, the European Social Fund Plus and the Recovery and Resilience Facility, Horizon Europe, and NDICI-Global Europe.
Pilot for a European Digital Skills Certificate
A key action by the Commission will be facilitating the recognition of certification of digital skills. To this end, the Commission will run a pilot project of the European Digital Skills Certificate together with several Member States. The certificate aims to enhance the trust in and acceptance of digital skills certification across the EU. This will help people have their digital skills recognised widely, quickly and easily by employers, training providers and more. The results of the pilot will be presented as part of a feasibility study on the European Digital Skills Certificate towards year-end. The final European Digital Skills Certificate will be rolled out in 2024 based on the pilot’s outcomes and the study’s findings.
Next Steps
The Commission calls on Member States to swiftly adopt today’s proposals for two Council Recommendations.
Building on the successful Structured Dialogue and the group of national coordinators, the Commission will set up a High-Level Group on Digital Education and Skills to support the implementation of the two Recommendations.
Background
The two proposals presented today draw on the conclusions of the Structured Dialogue on digital education and skills, during which the Commission engaged with EU Member States throughout 2022. Through the Digital Decade the EU aims to ensure that 80% of adults have at least basic digital skills and that 20 million ICT specialists are in employment in the EU by 2030. The objective of the dialogue was to increase the commitment on digital education and skills and help accelerate efforts at EU level, so Europe can deliver on its 2030 targets in this area. The proposals are furthermore in line with the solidarity and inclusion key pillar of the European digital rights and principles stating that everyone should have access to the internet and to digital skills, with no one left behind.
The proposals deliver on the two strategic priorities of the Digital Education Action Plan: fostering the development of a high-performing digital education ecosystem and enhancing digital skills and competences for the digital transformation. The Action Plan calls for greater cooperation at European level on digital education to address the challenges and opportunities of the COVID-19 pandemic, and to present opportunities for the education and training community (teachers and students), policy makers, academia and researchers on national, EU and international level. It is a key enabler to realising the vision of achieving a European Education Area by 2025, and contributes to achieving the goals of the European Skills Agenda , the European Social Pillar Action Plan and the 2030 Digital Compass. By promoting and improving digital skills of Europeans, today’s package is also a key deliverable of the European Year of Skills.
The proposal builds on the analysis conducted by the Commission’s Joint Research Centre identifying the main lessons and trends that have emerged through the Structured Dialogue, the Call for Evidence and the Resilience and Recovery Plans by EU Member States.
Compliments of the European Commission.The post EU Commission calls for massive boost in enabling digital education and providing digital skills first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The European Commission has today adopted a proposal to adjust and further strengthen the EU’s existing bank crisis management and deposit insurance (CMDI) framework, with a focus on medium-sized and smaller banks.
The EU’s banking sector, which includes a strong crisis management framework, has become much more resilient in recent years. Financial institutions in the EU are well capitalised, highly liquid and closely supervised.
However, experience has shown that many failing medium-sized and smaller banks have been managed with solutions outside the resolution framework. This sometimes involved using taxpayers’ money instead of the bank’s required internal resources or private, industry-funded safety nets (deposit guarantee schemes and resolution funds).
Today’s proposal will enable authorities to organise the orderly market exit for a failing bank of any size and business model, with a broad range of tools. In particular, it will facilitate the use of industry-funded safety nets to shield depositors in banking crises, such as by transferring them from an ailing bank to a healthy one. Such use of safety nets must only be a complement to the banks’ internal loss absorption capacity, which remains the first line of defence.
Overall, this will further preserve financial stability, protect taxpayers and depositors, and support the real economy and its competitiveness.
The proposal has the following objectives:

Preserving financial stability and protecting taxpayers’ money

The proposal facilitates the use of deposit guarantee schemes in crisis situations to shield depositors (natural persons, businesses, public entities, etc.) from bearing losses, where this is necessary to avoid contagion to other banks and negative effects on the community and the economy. By relying on industry-funded safety nets (such as deposit guarantee schemes and resolution funds), the proposal also better protects taxpayers who do not have to step in to preserve financial stability. Deposit guarantee schemes can only be used for this purpose after banks have exhausted their internal loss absorption capacity, and only for banks that were already earmarked for resolution in the first place.

Shielding the real economy from the impact of bank failure

The proposed rules will allow authorities to fully exploit the many advantages of resolution as a key component of the crisis management toolbox. In contrast with liquidation, resolution can be less disruptive for clients as they keep access to their accounts, for example by being transferred to another bank. Moreover, the bank’s critical functions are preserved. This benefits the economy and society, more broadly.

Better protection for depositors

The level of coverage of €100,000 per depositor and bank, as set out in the Deposit Guarantee Scheme Directive, remains for all eligible EU depositors. However, today’s proposal harmonises further the standards of depositor protection across the EU. The new framework extends depositor protection to public entities (i.e. hospitals, schools, municipalities), as well as client money deposited in certain types of client funds (i.e. by investment companies, payment institutions, e-money institutions). The proposal includes additional measures to harmonise the protection of temporary high balances on bank accounts in excess of €100,000 linked to specific life events (such as inheritance or insurance indemnities).

Next steps
The legislative package will now be discussed by the European Parliament and Council.
Background
In its statement of 16 June 2022, the Eurogroup noted that the Banking Union remains incomplete and agreed, as an immediate step, that the work on the Banking Union should focus on strengthening the crisis management and deposit insurance framework, with the aim of completing the legislative work during this institutional cycle. Other important projects, such as the establishment of the third and outstanding pillar of the Banking Union – European Deposit Insurance Scheme (EDIS) – and further progress on market integration, would be re-assessed subsequently, after the CMDI reform.
In its latest report on the Banking Union, the European Parliament also supported the need for a review of the crisis management and deposit insurance framework to improve its functioning and predictability to manage bank failures.
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The interconnectedness of the global financial system makes it possible that a cyber incident at one financial institution (or an incident at one of its third-party service providers) could have spill-over effects across borders and sectors.
Cyber incidents are rapidly growing in frequency and sophistication. At the same time, the cyber threat landscape is expanding amid digital transformation, increased dependencies on third-party service providers and geopolitical tensions.
Recognising that timely and accurate information on cyber incidents is crucial for effective incident response and recovery and promoting financial stability, the G20 asked the FSB to deliver a report on achieving greater convergence in cyber incident reporting (CIR).
Drawing from the FSB’s body of work on cyber, including engagement with external stakeholders, the report identifies commonalities in CIR frameworks and details practical issues associated with the collection of cyber incident information from FIs and the onward sharing between financial authorities. These practical issues include:

operational challenges arising from the process of reporting to multiple authorities;
setting appropriate and consistent qualitative and quantitative criteria/thresholds for reporting;
establishing an appropriate culture to report incidents in a timely manner;
inconsistent definitions and taxonomy related to cyber security;
establishing a secure mechanism to communicate on cyber incidents; and
legal or confidentiality constraints in sharing information with authorities across borders and sectors.

This report sets out 16 recommendations to address these issues with a view to promote best practices in cyber incident reporting.
Recommendations mapped to identified issues and challenges

Identified issues and challenges:
Operational challenges
Setting reporting criteria
Culture of timely reporting
Early assessment challenges
Secure communications
Cross-border and cross-sectoral issues

A
Design of CIR Approach

1
Establish and maintain objectives for CIR
Significant

2
Explore greater convergence of CIR frameworks
Moderate

Significant
Significant

3
Adopt common data requirements and reporting formats
Profound

Moderate
Moderate

4
Implement phased and incremental reporting requirements
Minor

Significant
Significant

5
Select appropriate incident reporting triggers

Profound

6
Calibrate initial reporting windows

Profound

7
Provide sufficient details to minimise interpretation risk

Profound

8
Promote timely reporting under materiality-based triggers

Significant
Moderate

B
Supervisory activities and collaboration between authorities

9
Review the effectiveness of CIR and CIRR processes

Significant
Minor

10
Conduct ad-hoc data collection

Moderate

11
Address impediments to cross-border information sharing

Profound

C
Industry engagement

12
Foster mutual understanding of benefits of reporting
Moderate

Profound
Minor

13
Provide guidance on effective CIR communication

Moderate

D
Capability Development (individual and shared)

14
Maintain response capabilities which support CIR

Significant
Moderate

15
Pool knowledge to identify related cyber events and cyber incidents

Significant
Significant

16
Protect sensitive information
Significant

Significant

Compliments of the Financial Stability Board.The post FSB | Recommendations to Achieve Greater Convergence in Cyber Incident Reporting: Final Report first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Tomorrow, the European Centre for Algorithmic Transparency (ECAT) will be officially inaugurated by the Commission’s Joint Research Centre in Seville, Spain. The inauguration will be marked with a launch event that will be broadcast here.
The event brings together representatives from EU institutions, academia, civil society and industry to discuss the main challenges and the importance at a societal level of having oversight of how algorithmic systems are used. Following a video message by Commissioner for the Internal Market Thierry Breton, the audience will dive into the current and planned work of ECAT, including a preliminary showcase of its potential through live demos.
The role of ECAT under the Digital Services Act
The Digital Services Act imposes risk management requirements for companies designated by the European Commission as Very Large Online Platforms and Very Large Online Search Engines. Under this framework, designated platforms will have to identify, analyse and mitigate a wide array of systemic risks on their platforms, ranging from how illegal content and disinformation can be amplified through their services, to the impact on the freedom of expression or media freedom. Similarly, specific risks around gender-based violence online and the protection of minors online and their mental health must be assessed and mitigated. The risk mitigation plans of designated platforms’ and search engines will be subject to an independent audit and oversight by the European Commission.
ECAT will provide the Commission with in-house technical and scientific expertise to ensure that algorithmic systems used by the Very Large Online Platforms and Very Large Online Search Engines comply with the risk management, mitigation and transparency requirements in the DSA. This includes, amongst other tasks, the performance of technical analyses and evaluations of algorithms. An interdisciplinary team of data scientists, AI experts, social scientists and legal experts will combine their expertise to assess their functioning and propose best practices to mitigate their impact. This will be crucial to ensure the thorough analysis of the transparency reports and risk self-assessment submitted by the designated companies, and to carry out inspections to their systems whenever required by the Commission.
This mission could not be attained without proper research and foresight capacity, which are also inherent to ECAT’s approach. JRC researchers will build on and further advance their longstanding expertise in the field of Artificial Intelligence (AI), which has already been instrumental in the preparation of other milestone pieces of regulation like the AI Act, the Coordinated Plan on AI and its 2021 review. ECAT researchers will not only focus on identifying and addressing systemic risks stemming from Very Large Online Platforms and Very Large Online Search Engines, but also investigate the long-term societal impact of algorithms.
Background
On 15 December 2020, the Commission made the proposal on the DSA together with the proposal on the Digital Markets Act (DMA) as a comprehensive framework to ensure a safer, more fair digital space for all. Following the political agreement reached by the EU co-legislators in April 2022, the DSA entered into force on 16 November 2022. The deadline for platforms and search engines to publish the number of their monthly active users was on 17 February 2023. The Commission is now in process of analysing the publications with a view to designating Very Large Online Platforms and Very Large Online Search Engines, which will have four months from the designation to comply with all DSA obligations and in particular to submit their first risk assessment. By 17 February 2024 the DSA will apply to all intermediary services; by the same date Member States are required to appoint Digital Services Coordinators.
The DSA applies to all digital services that connect consumers to goods, services, or content. It creates comprehensive new obligations for online platforms to reduce harms and counter risks online, introduces strong protections for users’ rights online, and places digital platforms under a unique new transparency and accountability framework. Designed as a single, uniform set of rules for the EU, these rules will give users new protections and businesses legal certainty across the whole single market. The DSA is a first-of-a-kind regulatory toolbox globally and sets an international benchmark for a regulatory approach to online intermediaries.
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