Ahead of International Women’s Day, the Commission published its 2021 report on gender equality in the EU, that shows the negative impact of the COVID-19 pandemic on women. The pandemic has exacerbated existing inequalities between women and men in almost all areas of life, both in Europe and beyond, rolling back on the hard-won achievements of past years. At the same time, gender equality has never been so high up on the EU’s political agenda, and the Commission has made significant efforts to implement the Gender Equality Strategy, adopted one year ago. To better monitor and track progress in each of the 27 Member States, the Commission is launching today a Gender Equality Strategy Monitoring Portal.
Vice-President for Values and Transparency, Věra Jourová, said today: “Women are at the frontline at the pandemic and they are more affected by it. We can’t afford sliding back; we must continue to push for fairness and equality. This is why EU has put women at the heart of recovery and obliged Member States to include gender equality in investments funded from Recovery and Resilience Facility.”
Commissioner for Equality, Helena Dalli, added: “Despite the disproportionate impact on women’s live due the COVID-19 crisis, we need to use this situation as an opportunity. We are determined to strengthen our efforts, continue progressing and not allow a backlash on all the gender equality gains made”.
COVID-19 impact on women
Today’s report highlights how the COVID-19 pandemic has proven to be a major challenge for gender equality:

Member States recorded a surge in domestic violence: For example, the number of reports on domestic violence in France increased by 32% during the first week of the lockdown, in Lithuania by 20% in the first three weeks. Ireland saw a five-fold increase in domestic violence orders and Spanish authorities reported an 18% rise in calls during the first fortnight of confinement.

Women were at the frontline tackling the pandemic: 76% of healthcare and social-care workers, 86% of personal care workers in health services are women. With the pandemic, women in these sectors saw an unprecedented rise in workload, health risk and challenges to work-life balance.

Women in the labour market were hit hard by the pandemic: Women are overrepresented in sectors that are worst affected by the crisis (retail, hospitality, care and domestic work), because these jobs cannot be done remotely. Women also had more difficulties re-entering the labour market during the partial recovery last summer 2020 with employment rates rising by 1.4% for men but only by 0.8% for women between the second and the third quarter 2020.

Lockdowns have significant impact on unpaid care and work-life balance: Women spent, on average, 62 hours per week caring for children (compared to 36 hours for men) and 23 hours per week doing housework (15 hours for men).

A striking lack of women in COVID-19 decision-making bodies: A 2020 study found that men greatly outnumber women in the bodies created to respond to the pandemic. Of 115 national dedicated COVID-19 task forces in 87 countries, including 17 EU Member States, 85,2% were made up mainly of men, 11.4% comprised mainly women, and only 3.5% had gender parity. At the political level, only 30% of health ministers in the EU are women. The Commission’s task force for the COVID-19 crisis is led by President von der Leyen and includes five other Commissioners, three of whom are women.

Despite the challenges arising from the COVID-19 crisis, the Commission made significant efforts to move forward with the implementation of the Gender Equality Strategy over the past year. In order to track progress more effectively across the EU, the Commission launched today the Gender Equality Strategy Monitoring Portal. A joint project developed by the Commission’s Joint Research Centre and the European Institute for Gender Equality (EIGE), the portal will allow to monitor individual EU Member States’ performance and compare that performance among the 27 Member States.
Background
The Gender Equality Strategy 2020-2025, adopted one year ago, is based on a vision for a Europe where women and men, girls and boys, in all their diversity, are free from violence and stereotypes and have the opportunity to thrive and to lead. It sets out key actions for the 5-year period and commits to ensure that the Commission will include an equality perspective in all EU policy areas.
In the past year, the Commission has stepped up fight against gender-based violence with the first-ever EU victims’ rights strategy and announced a proposal to combat gender-based violence (public consultation is open here). The proposal for a Digital Services Act, adopted in December 2020, clarifies platforms’ responsibility and contributes to address online violence.
The Commission has taken action to encourage women’s participation in the labour market. The Action Plan to implement the European Pillar of Social Rights puts gender equality at its core and establishes, amongst others, ambitious targets for women’s participation in the labour market and the provision of early childcare. On 4 March, the Commission put forward pay transparency measures to ensure equal pay for women and men for equal work.
In the Digital Education Action Plan and Updated Skills Agenda, the Commission announced a range of actions ensuring that girls and young women are equally present in ICT studies and digital skills development.
A gender equality perspective was also included into the next EU budget. Moreover, the new Recovery and Resilience Facility under the NextGenerationEU requires Member States to explain how their national recovery plans will contribute to promoting gender equality, thus helping to ensure a gender-responsive recovery in the EU.
In the past year, the Commission continued to support initiatives tackling gender stereotypes through its funding programmes, including the EU’s Rights, Equality and Citizenship programme. The Commission also strengthened gender equality outside of the EU by presenting, in November 2020, the new Gender Action Plan (GAP III) for 2021-2025, an ambitious agenda for gender equality and women’s empowerment in EU external action.
Today, the European Institute for Gender Equality (EIGE) published a report on the Covid-19 pandemic and intimate partner violence against women in the EU. Full details can be found in their press release.
Compliments of the European Commission.
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March 01, 2021 | WASHINGTON |
The Office of the United States Trade Representative today delivered President Biden’s 2021 Trade Agenda and 2020 Annual Report to Congress, detailing a comprehensive trade policy in support of the Administration’s effort to help the U.S. recover from the COVID-19 pandemic and build back better.
The President’s agenda will create millions of good-paying jobs and support America’s working families by tackling four national challenges: building a stronger industrial and innovation base so the future is made in America; building sustainable infrastructure and a clean energy future; building a stronger, caring economy; and advancing racial equity across the board.
The President wants a fair international trading system that promotes inclusive economic growth and reflects America’s universal values. Trade policy must respect the dignity of work and value Americans as workers and wage-earners, not only as consumers. The President’s trade agenda will restore U.S. global leadership by combatting forced and exploitative labor conditions, corruption, and discrimination against women and minorities around the world.
Through bilateral and multilateral engagement, the Biden Administration will seek to build consensus around trade policies that address the climate crisis, bolster sustainable renewable energy supply chains, level the playing field, discourage regulatory arbitrage, and foster innovation and creativity.
The full report can be viewed here.
A fact sheet outlining key highlights of the report is available here.
Background:
The 2021 Trade Policy Agenda and 2020 Annual Report of the President of the United States on the Trade Agreements Program are submitted to the Congress pursuant to Section 163 of the Trade Act of 1974, as amended.
Compliments of the Office of the United States Trade Representative. 
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International Women’s Day, March 8, marks a year from the start of widespread lockdowns in response to COVID-19. As an IMF blog warned back in July, women have borne the economic and social brunt of the pandemic. With many governments preparing budgets for the next fiscal year, we now have a golden opportunity to counter this inequity. We offer a starter kit for gender budgeting to help countries focus resources on women, and ensure future budgets are better for them than previous ones.
Government actions work
Examples abound of the disproportionate impact of lockdown policies on women and girls: one million Japanese women left the labor market when the pandemic hit, while labor force participation by men changed far less. In Chile, 76 percent of women reported spending more time on domestic chores since COVID-19 began. Mexico saw a 53 percent increase in emergency calls related to violence against women. The Malala Fund estimates that 20 million girls in developing countries may never return to the classroom after pandemic-related school shutdowns.
Bad as this is, it could have been even worse but for government actions. The UN’s COVID-19 Global Gender Response Tracker shows countries enacted nearly 1,000 policy measures to address challenges related to gender. These include paid leave for women, job protection measures, more flexible work, and income/in-kind support for the vulnerable households.
IMF research concludes these measures work. They increase women’s employment which, in turn, improves economic well-being for all. Such policies should be built upon. Failing to do so risks long-term scarring that will cement women’s disadvantage and harms the prospects for recovery.
Gender budgeting—a guide
But adopting such policies is only half the battle. Their impacts can be further amplified as part of a coherent gender strategy that is based on need, effectively designed, aligned with the budget process, and monitored and evaluated to improve implementation. This is the essence of gender budgeting.
Gender budgeting brings the powerful tool of national budgets to bear on gender inequalities. It integrates gender into the policies and processes of public financial management.
While strengthening gender budgeting is a continuous and long-term investment, we lay out an actionable toolkit—no matter a country’s previous experience—to jumpstart the process.
The starter kit
First, assemble evidence to assess the impact of the pandemic and lockdown on women and girls. A response without a sense of the size or location of the problem is like throwing a dart in the dark. How are the country’s female-dominated sectors faring? Do women rely more heavily on scaled-back public services?
Presenting the evidence in a single document, such as a Gender Needs Assessment, can focus efforts. UN-Women shows it can be done quickly. In just one month, at the start of the pandemic, the agency performed a Gender Needs Assessment in Ukraine based on phone and online surveys.
Better by design
This evidence can be used to focus policy responses. However, the best policy intention in the world cannot overcome poor policy design. Gender Impact Assessments can strengthen that design by assessing the proportion of female beneficiaries, and potential barriers to access—in Austria and Canada, they are now part of all new budget proposals.
Such assessments can also highlight unintended gender bias. For example, a wage subsidy scheme might leave out informal sector workers—often predominantly female—or a tax policy could discourage women from working.
Allocating resources
Third, it is crucial to allocate sufficient resources to gender policies to transform goals into action. The IMF has supported increasing allocations towards women. For example, the IMF’s Egypt program included measures to support higher budget allocations for targeted cash transfers (many to women), and to improve public childcare services.
As governments prepare budgets for next year, anchoring gender policy goals through Budget Circulars and Gender Budget Statements ensures sufficient resources are channeled to these goals. An added benefit: they also provide confidence and transparency to the public. Philippines’ 2021 Budget Circular incorporates priority policy areas, including in health, nutrition, and social protection, that support women.
Track and evaluate
Finally, track expenditures and evaluate impacts. Tracking gender-focused funds in the budget, light-touch policy evaluations, and gender performance audits can provide timely feedback to course correct where needed, and ensure that policies are working. For example, Sierra Leone’s real-time audits effectively responded to the Ebola epidemic and highlighted issues in drug distribution and duplicated payments.
The IMF remains deeply committed to gender equality and has worked with 113 member countries on implementing budgetary practices, allocations, and tax policies to promote gender equality. Since the start of the pandemic, over 55 countries have invested in gender budgeting training with the Fund.
Almost all countries have gender equality goals, but an IMF survey finds only half have legal frameworks to carry them out. Only a quarter use established practices such as Gender Budget Statements and Gender Impact Assessments.
Some countries have already implemented gender budgeting, while others are novices, but all have room for improvement. Recovery from the pandemic is an opportunity to accelerate progress and reap the dividends.
Compliments of the IMF.
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The EU is taking measures to enhance corporate transparency of big multinational companies. Member states’ ambassadors today mandated the Portuguese presidency to engage in negotiations with the European Parliament for the swift adoption of the proposed directive on the disclosure of income tax information by certain undertakings and branches, commonly referred to as the public country-by-country reporting (CBCR) directive.
The directive requires multinational enterprises or standalone undertakings with a total consolidated revenue of more than €750 million in each of the last two consecutive financial years, whether headquartered in the EU or outside, to disclose publicly in a specific report the income tax they pay in each member state, together with other relevant tax-related information.
Banks are exempted from the present directive as they are obliged to disclose similar information under another directive.
In order to avoid disproportionate administrative burdens on the companies involved and to limit the disclosed information to what is absolutely necessary to enable effective public scrutiny, the directive provides for an complete and final list of information to be disclosed.
The reporting will have to take place within 12 months from the date of the balance sheet of the financial year in question. The directive sets out the conditions under which a company may obtain the deferral of such disclosure for a maximum of six years.
It also stipulates who bears the actual responsibility for ensuring compliance with the reporting obligation.
Member states will have two years to transpose the directive into national law.
Next steps
On the basis of the agreed negotiating mandate, the Portuguese presidency will explore with the European Parliament the possibility of an agreement for the swift adoption of the directive at second reading (“early second reading agreement”).
Background
The proposed directive, tabled in April 2016, is part of the Commission action plan on a fairer corporate tax system.
The European Parliament adopted its position at first reading on 27 March 2019.
Compliments of the Council of the European Union.
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The European Commission has today presented a proposal on pay transparency to ensure that women and men in the EU get equal pay for equal work. A political priority of President von der Leyen, the proposal sets out pay transparency measures, such as pay information for job seekers, a right to know the pay levels for workers doing the same work, as well as gender pay gap reporting obligations for big companies. The proposal also strengthens the tools for workers to claim their rights and facilitates access to justice. Employers will not be allowed to ask job seekers for their pay history and they will have to provide pay related anonymised data upon employee request. Employees will also have the right to compensation for discrimination in pay.
New measures, which take into account the impact of COVID-19 pandemic on both, employers but also on women, who have been hit in particular hard, will increase awareness about pay conditions within the company and give more tools to employers and workers to address the pay discrimination at work. This will address a number of substantial factors contributing to the existing pay gap and is particularly relevant during COVID-19 pandemic, which is reinforcing gender inequalities and puts women into greater risk of poverty exposure.
President of the European Commission, Ursula von der Leyen, said: “Equal work deserves equal pay. And for equal pay, you need transparency. Women must know whether their employers treat them fairly. And when this is not the case, they must have the power to fight back and get what they deserve.”
Vice-President for Values and Transparency, Vera Jourová said: “It is high-time both women and men are empowered to claim their right. We want to empower job seekers and workers with tools to demand fair salary and to know and claim their rights. This is also why employers must become more transparent about their pay policies. No more double standards, no more excuses.”
Commissioner for Equality, Helena Dalli, said: “The pay transparency proposal is a major step toward the enforcement of the principle of equal pay for equal work or work of equal value between women and men. It will empower workers to enforce their right to equal pay and lead to an end to gender bias in pay. It will also allow for the detection, acknowledgment and addressing of an issue that we wanted to eradicate since the adoption of the Treaty of Rome in 1957. Women deserve due recognition, equal treatment and value for their work and the Commission is committed to ensuring that workplaces meet this objective.”
Pay transparency and better enforcement of equal pay
The legislative proposal focuses on two core elements of equal pay: measures to ensure pay transparency for workers and employers as well as better access to justice for victims of pay discrimination.
Pay transparency measures:

Pay transparency for job-seekers – Employers will have to provide information about the initial pay level or its range in the job vacancy notice or before the job interview. Employers will not be allowed to ask prospective workers about their pay history.

Right to information for employees – Workers will have the right to request information from their employer on their individual pay level and on the average pay levels, broken down by sex, for categories of workers doing the same work or work of equal value.

Reporting on gender pay gap – Employers with at least 250 employees must publish information on the pay gap between female and male workers in their organisation. For internal purposes, they should also provide information on the pay gap between female and male employees by categories of workers doing the same work or work of equal value.

Joint pay assessment – Where pay reporting reveals a gender pay gap of at least 5% and when the employer cannot justify the gap on objective gender neutral factors, employers will have to carry out a pay assessment, in cooperation with workers’ representatives.

Better access to justice for victims of pay discrimination:

Compensation for workers – workers who suffered gender pay discrimination can get compensation, including full recovery of back pay and related bonuses or payments in kind.

Burden of proof on employer – it will be by default for the employer, not the worker, to prove that there was no discrimination in relation to pay.

Sanctions to include fines – Member States should establish specific penalties for infringements of the equal pay rule, including a minimum level of fines.

Equality bodies and workers’ representatives may act in legal or administrative proceedings on behalf of workers as well as lead on collective claims on equal pay.

The proposal takes into account the current difficult situation of employers , in particular in private sector, and maintains proportionality of measures while providing flexibility for small and medium enterprises (SMEs) and encouraging Member States to use available resources for reporting of data. The annual costs of pay reporting for the employers are estimated to be from €379 to €890 or companies with 250+ employees.
Next steps
Today’s proposal will now go to the European Parliament and the Council for approval. Once adopted, Member States will have two years to transpose the Directive into national law and communicate the relevant texts to the Commission. The Commission will carry out an evaluation of the proposed Directive after eight years.
Background
The right to equal pay between women and men for equal work or work of equal value has been a founding principle of the European Union since the Treaty of Rome in 1957. The requirement to ensure equal pay is set out in Article 157 TFEU and in Directive on the principle of equal opportunities and equal treatment of men and women in matters of employment and occupation.
The European Commission adopted a Recommendation on strengthening the principle of equal pay between men and women through transparency in March 2014. Despite this, the effective implementation and enforcement of this principle in practice remains a major challenge in the European Union. The European Parliament and the Council have repeatedly called for action in this area. In June 2019, the Council called on the Commission to develop concrete measures to increase pay transparency.
President von der Leyen announced binding pay transparency measures as one of her political priorities for this Commission. This commitment was reaffirmed in the Gender Equality Strategy 2020-2025 and today the Commission is presenting a proposal to that end.
Compliments of the European Commission.
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The European Commission has today adopted a Communication providing Member States with broad guidance on the conduct of fiscal policy in the period ahead. It provides guiding principles for the proper design and quality of fiscal measures. It sets out the Commission’s considerations regarding the deactivation or continued activation of the general escape clause. It also provides general indications on the overall fiscal policy for the period ahead, including the implications of the Recovery and Resilience Facility (RRF) for fiscal policy.
The Commission is committed to ensuring a coordinated and consistent policy response to the current crisis. This requires credible fiscal policies that address the short-term consequences of the coronavirus pandemic and support the recovery, while not endangering fiscal sustainability in the medium-term. This Communication aims to support those objectives.
Guidance for coordinated fiscal policies
The coordination of national fiscal policies is essential to support the economic recovery. The Communication specifies that fiscal policy should remain agile and adjust to the evolving situation. It warns against a premature withdrawal of fiscal support, which should be maintained this year and next. It provides that once health risks diminish, fiscal measures should gradually pivot to more targeted and forward-looking measures that promote a resilient and sustainable recovery and that fiscal policies should take into account the impact of the RRF. Finally, fiscal policies should take into account the strength of the recovery and fiscal sustainability considerations.
This guidance will facilitate Member States in the preparation of their stability and convergence programmes, which should be presented to the Commission in April 2021. The guidance will be further detailed in the Commission’s European Semester spring package.
Considerations for the deactivation or continued activation of the general escape clause
The Commission proposed the activation of the general escape clause in March 2020 as part of its strategy to respond quickly, forcefully and in a coordinated manner to the coronavirus pandemic. It allowed Member States to undertake measures to deal adequately with the crisis, while departing from the budgetary requirements that would normally apply under the European fiscal framework.
The Communication sets out the Commission’s considerations for how a future decision on the deactivation of the clause or its continued activation for 2022 should be taken. In the view of the Commission, the decision should be taken following an overall assessment of the state of the economy based on quantitative criteria. The level of economic activity in the EU or euro area compared to pre-crisis levels (end-2019) would be the key quantitative criterion for the Commission in making its overall assessment of the deactivation or continued application of the general escape clause. Therefore, current preliminary indications would suggest to continue applying the general escape clause in 2022 and to deactivate it as of 2023.
Following a dialogue between the Council and the Commission, the Commission will assess the deactivation or continued activation of the general escape clause on the basis of the 2021 Spring Forecast, which will be published in the first half of May.
Country-specific situations will continue to be taken into account after the deactivation of the general escape clause. In case a Member State has not recovered to the pre-crisis level of economic activity, all the flexibilities within the Stability and Growth Pact will be fully used, in particular when proposing fiscal policy guidance.
Making the best use of the Recovery and Resilience Facility
The Communication provides some general indications on Member States’ fiscal policy in 2022 and over the medium-term, including the link with the funds of the RRF. The RRF will play a crucial role in helping Europe recover from the economic and social impact of the pandemic and will help to make the EU’s economies and societies more resilient and secure the green and digital transitions.
The RRF will make €312.5 billion available in grants and up to €360 billion available in loans to Member States to support the implementation of reforms and investments. This will provide a sizeable fiscal impulse and help mitigate the risk of divergences in the euro area and the EU.
The implementation of the Recovery and Resilience Facility will also have important implications for national fiscal policies. Expenditure financed by grants from the RRF will provide a substantial boost to the economy in the coming years, without increasing national deficits and debt. It will also spur Member States to improve the growth-friendliness of their fiscal policies. Public investment funded by RRF grants should come on top of existing levels of public investment. Only if the RRF finances additional productive and high quality investment, will it contribute to the recovery and lift potential growth, in particular when combined with structural reforms in line with the country-specific recommendations.
Member States should make best use of the unique window of opportunity provided by the RRF to support the economic recovery, foster higher potential growth and improve their underlying fiscal positions in the medium to long term.
Public debate on the economic governance framework
The crisis brought about by the coronavirus pandemic has highlighted the relevance and importance of many of the challenges that the Commission sought to discuss and address in the public debate on the economic governance framework. Relaunching the public consultation on the framework will allow the Commission to reflect on these challenges and draw lessons. The Communication confirms the Commission’s intention to relaunch the public debate on the economic governance framework once the recovery takes hold.
Members of the College said:
Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People said: “There is hope on the horizon for the EU economy, but for now the pandemic continues to hurt people’s livelihoods and the wider economy. To cushion this impact and to promote a resilient and sustainable recovery, our clear message is that fiscal support should continue as long as needed. Based on current indications, the general escape clause would remain active in 2022 and be deactivated in 2023. Member States should make the most of the Recovery and Resilience Facility, as this gives them a unique chance to support their economy without burdening public finances. Timely, temporary and targeted measures will allow a smooth return to sustainable budgets in the medium-term.”
Paolo Gentiloni, Commissioner for Economy said: “Our decision last March to activate the general escape clause was a recognition of the gravity of the unfolding crisis. It was also a statement of our determination to take all necessary steps to tackle the pandemic and support jobs and companies. One year on, the battle against COVID-19 is not yet won and we must ensure that we do not repeat the mistakes of a decade ago by pulling back support too soon. For 2022, it is clear that fiscal support will still be necessary: better to err towards doing too much rather than too little. At the same time, fiscal policies should be differentiated according to the pace of each country’s recovery and their underlying fiscal situation. Crucially, as funding from Next Generation EU begins to flow, governments should ensure that national investment spending is preserved and strengthened through EU grants.”
Compliments of the European Commission.
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Welcome address by Fabio Panetta, Member of the Executive Board of the ECB, at the Third Annual Joint Conference of the Deutsche Bundesbank, European Central Bank and Federal Reserve Bank of Chicago on CCP Risk Management | Frankfurt am Main, 3 March 2021 |

Introduction[1]

It is with great pleasure that I welcome you to the third conference on central counterparty (CCP) risk management, organised by the ECB together with the Deutsche Bundesbank and the Federal Reserve Bank of Chicago. This event has become an increasingly relevant international forum to discuss key challenges surrounding central clearing.
In my remarks today, I will reflect on key developments since we met a year ago. The coronavirus (COVID-19) pandemic is naturally foremost in my mind – the turmoil that hit financial markets last spring has underlined the need for robust and resilient market infrastructures such as CCPs. The end of the transition period following the United Kingdom’s departure from the European Union is of course another crucial change, and I will discuss its implications for financial stability in the EU in relation to central clearing. I will then argue that these developments show the urgent need for the EU to develop a deep and integrated single capital market.
The need for robust and resilient CCPs
Since the G20 agreed to make central clearing mandatory for over-the-counter (OTC) derivatives at the 2009 Pittsburgh summit, CCPs have become central pieces of the global financial infrastructure. Some CCPs are systemically relevant for multiple jurisdictions in view of the direct and indirect clients they serve worldwide and their interconnectedness with systemically important global banks.
We have seen progress in making global CCPs safer and more resilient, starting with the safeguards introduced to address the shortcomings that the global financial crisis revealed. Today, clearing risks are much lower than they were ten years ago. And the robustness that CCPs have displayed since the outbreak of the pandemic shows that regulatory efforts are paying off.
We should, however, continue to strengthen the resilience of CCPs. Last March we saw spikes in volatility and trading activity, coupled with a surge in liquidity and credit risk at the global level. Such situations call for closer cross-border regulatory, supervisory and oversight cooperation between CCPs, banks and public authorities.
To prevent market fragmentation and preserve financial stability, both domestically and internationally, in the face of such adverse shocks, CCPs must meet the highest standards of financial and operational risk management. And an enhanced dialogue is necessary between CCPs, clearing banks and clients to ensure that, while managing their risks prudently, they each consider the impact that their actions may have on others and on the entire financial system.
Central clearing is critical for sharing and managing risks effectively, and thus for supporting economic growth. Euro-denominated central clearing must not be a source of instability in the euro area or hamper the transmission of monetary policy. If disruptions in systemically important clearing services are not managed appropriately, they could be channelled through the large payment flows between CCPs and their participants, with knock-on effects on the smooth functioning of our payment and banking systems. The reverberations could reach financial markets and the instruments we rely on to perform central banking activities.
The post-Brexit clearing landscape
We need to consider carefully the implications of the United Kingdom’s departure from the EU, in particular in relation to the derivatives transactions of EU entities.
The City of London has long been a leading central clearing hub for EU banks and their clients, who have relied on UK CCPs for the clearing of OTC derivatives of all asset classes and in all currencies. UK CCPs hold a dominant position for the clearing of euro-denominated interest rate derivatives and credit default swaps, with a market share of about 80% and 40% respectively.
Brexit has made it urgent to consider the extent to which the EU should depend on non-EU countries for critical market infrastructure. With respect to derivatives clearing, since 1 January 2021 UK CCPs have been temporarily considered equivalent to EU CCPs from an oversight and regulatory perspective, so as to avoid potential cliff-edge financial stability risks. This equivalence decision by the European Commission is valid for 18 months, until 30 June 2022.[2] Meanwhile, industry stakeholders are encouraged to reduce their EU exposures to UK CCPs. The Commission has set up a working group with EU authorities and industry to address the issues involved and to facilitate the transfer of derivatives contracts denominated in euro or other EU currencies to EU CCPs.
From a supervisory perspective, UK CCPs have been recognised as third-country CCPs by the European Securities and Markets Authority (ESMA).[3] And two UK CCPs have been recognised as being systemically important for the EU (Tier 2 CCPs). In line with the provisions of the European Market Infrastructure Regulation, this means that they are subject to ESMA’s supervision.
This set-up helps to ensure that Tier 2 CCPs comply with EU regulatory standards. During this 18-month period of equivalence, ESMA will assess whether this set-up is sufficient to address risks to EU financial stability emanating from these two systemically important UK CCPs. As part of its responsibility for issuing the euro, the Eurosystem – which comprises the ECB and national central banks of the euro area – will develop its own stance on the matter and will contribute to ESMA’s assessment. At the end of this process, ESMA may recommend that the Commission deny the UK CCPs recognition to provide certain clearing services or activities in the EU if they pose excessive risks to financial stability. If this recommendation were to affect euro-denominated clearing services, the Eurosystem’s agreement would also be required.
The ECB will consider the costs and benefits of any such measure very carefully, as we are well aware of its far-reaching impact on derivatives markets as well as the challenges this would pose for all involved. Requiring more critical services to be provided by EU CCPs would also make our domestic clearing landscape more systemically important, and would increase cross-border risks within the EU. In such a scenario, the current framework for supervising EU CCPs – which still largely relies on national authorities and gives ESMA and the Eurosystem a limited role – would not be fit for purpose. In this situation, it would be essential for EU authorities to have control over clearing activities that are systemic to the EU and critical to the transmission and conduct of monetary policy. This would require the EU dimension of CCP supervision to be scaled up.
Investors are adapting to the post-Brexit landscape. For example, in January 2021 the trading of euro-denominated shares moved from London to venues in Amsterdam and Paris. This followed the Markets in Financial Instruments Regulation (MiFIR) requiring that shares listed in the EU only be traded by EU market participants on EU-regulated venues, or on third-country infrastructures considered “equivalent” by the Commission. The trading of EU carbon contracts is also expected to move from London to Amsterdam. For OTC derivatives, the redistribution of trading has been less clear-cut in direction, with dealers moving some activities to EU trading venues and others to US venues, the latter having equivalence arrangements with both the EU and the United Kingdom.
Towards a well-functioning capital markets union in the EU
The events of the past year – the pandemic and Brexit – have put renewed emphasis on the need for the EU to have a well-functioning capital markets union. In fact, EU leaders have agreed to finance the recovery from the pandemic by borrowing collectively through financial markets.
The issuance of high-quality euro-denominated sovereign bonds under the Next Generation EU (NGEU) recovery fund is a step towards achieving deeper, more complete and liquid capital markets and establishing a European safe asset. As the Commission intends to raise 30% of the €750 billion recovery fund by issuing green bonds, NGEU is also expected to contribute to further developing sustainable and green finance.
In parallel, the Commission has set out 16 specific actions to boost the EU’s capital markets union, which are aligned with many of the ECB’s own priorities.[4] These actions aim to deepen and further integrate European capital markets, in order to allow investors, savers, firms and market infrastructures alike to access a full range of services and products, regardless of where they are in the EU.
A deep, single capital market will also strengthen the international role of the euro,[5] as further developed euro-denominated markets, derivatives and benchmarks will reduce transaction costs, curb spreads and mitigate rollover risks. This will in turn attract foreign investors and widen the possibilities of using the euro in international transactions.
Conclusion
Let me conclude. Assessing potential vulnerabilities in the light of current challenges is key to making financial markets and infrastructures more resilient.
Authorities and market participants are reflecting on the lessons to be learned from the pandemic and this will be a key topic of today’s discussions. Our panellists will provide insights on CCP margin practices and the related funding and operational complexities that emerged last spring and which we need to address.
This conference will also provide an opportunity to discuss the direct and indirect implications of climate change for central clearing. Cash and derivatives markets have already developed products to facilitate sustainable investments and help hedge against climate risks.
Our panellists will also consider the changing clearing landscape, including some of the regulatory and supervisory cooperation issues I have mentioned and the global dimension of this debate.
Given the challenges currently faced by economies and financial markets, finding the right mix of internal capacity building, cooperation and innovation will be crucial to make central clearing even more resilient. I am sure this conference will give rise to a fruitful exchange of views.
Thank you for your attention.

Compliments of the European Central Bank.
The post ECB | Fabio Panetta Speech: Central clearing and the changing landscape first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Much of Europe rang in the start of 2021 with new lockdowns and weak economic activity. This same period saw the roll out of effective vaccines. While the end of the pandemic will remain a race between the virus and vaccines, there is now light at the end of the tunnel.
At the same time, government programs aimed at supporting lives and livelihoods have been highly successful. Amid the pandemic’s enormous human toll, these measures provided critical lifelines to people and have preserved the structure of the economy and the income of workers. The massive policy support saved millions of European firms, accounting for over 30 million jobs.
However, as the pandemic persists and measures—such as loan repayment moratoria—expire, bankruptcies could rise, leading to a surge in unemployment and nonperforming loans.
To support a rebound and strong recovery in 2021, emergency programs and lifelines will need to be maintained, but they also need to adapt.

‘Europe now needs to gradually change the support to firms from providing liquidity toward strengthening their equity.’

Relief policies for businesses
Almost a year into the pandemic, many European companies, especially micro and small enterprises in high-contact sectors, continue to reel from the shock of COVID-19. With containment measures preventing many firms from operating at full capacity or at all, government support programs—such as job retention schemes, which at their peak benefitted 54 million people—have been essential for businesses and people to survive. Liquidity (ready cash) provided to companies prevented cascading bankruptcies. It allowed banks to extend loans rather than amplify the downturn by adding a credit crunch.
In a recent IMF staff study (see presentation here), which covers 26 European countries (of which 21 are EU members), we estimate that without policy support, the share of illiquid firms in Europe would have more than doubled and that of insolvent firms would have almost doubled by end-2020.
But many companies are still short of equity
Public support so far is estimated to have filled 60 percent of European firms’ liquidity needs because of the COVID-19 shock, but only 30 percent of the equity shortfalls (the extent to which firms’ debt exceeds their assets). Even with this scale of support, the share of insolvent firms as a share of total firms is estimated to have increased by 6 percentage points. Equity shortfalls are largest for micro firms and small businesses, with current policies absorbing only one quarter of the equity gaps versus over two fifths for larger corporations.
Without additional equity support, some 15 million jobs are at risk. About 2 to 3 percent of GDP will be needed to close the equity gap and provide firms sufficient equity so they would no longer be in difficulty, focusing only on the firms that were solvent before COVID-19. Both private and public sector action is required.
How can this be done?
Liquidity support cannot address equity shortfalls. Policymakers will have to move the dial from debt-increasing liquidity support to more equity support for those firms that have good prospects after the pandemic.
Individual countries are coming up with innovative equity programs, but they face many implementation challenges. The public sector is not well placed to assess the viability of a large number of small businesses nor to monitor their performance. This will involve avoiding that public support is more attractive for bad than good firms—adverse selection—and preventing firms from mismanaging their business once they have received state support—moral hazard. Targeting support—something that is hard to do—will be critical to avoid wasting taxpayers’ money and should be improved. Mechanisms that target firms more accurately are likely to be more complicated, reducing take-up and timeliness of the aid. Another difficulty is how to ensure that the private sector does its part.
Involving banks, which know their clients and routinely assess business plans, is an important principle that can help address adverse selection. Incentivizing private investors to contribute equity mitigates moral hazard. Here are some examples:

France’s proposed program of participatory, subordinated loans envisions a central role for banks in selecting viable firms and retaining a share of these loans on their books—ensuring “skin in the game.”
In Italy’s program for small and medium-sized enterprises, private equity injections are encouraged by tax incentives and the government’s contribution is capped to a fraction of the private investors’ capital increase, who have to remain invested for some years.
Adequate contributions and burden sharing by investors is required by Ireland’s support scheme for small businesses, whereby Enterprise Ireland—a government agency—assesses firms’ plans to restore long-term viability with the help of market appraisals.

Healthier firms, stronger recovery
Europe now needs to gradually change the support to firms from providing liquidity toward strengthening their equity. For those firms that have to restructure debt or be liquidated, out-of-court debt restructurings and insolvency regimes will need to be enhanced. Healthier firms will forestall a return of “doom loops” between Europe’s real and financial sectors. Most importantly, healthier firms will create more jobs. Upskilling, training, and job search programs should help displaced workers find new jobs in sectors that are expanding. Countries will also need to invest in the green and digital transitions to boost resilience and productivity. This course of action will ensure a strong and lasting recovery after the pandemic.
Compliments of the IMF.
The post IMF | Staying Afloat: New Measures to Support European Businesses first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Today, the Commission approved 226 projects in all 27 Member States that will support their efforts in designing and implementing national reforms to enhance growth. These support actions are delivered in the framework of the Technical Support Instrument (TSI) and will have a total budget of €102.6 million for the year 2021 to promote economic, social and territorial cohesion in the European Union.
Commissioner for Cohesion and Reforms, Elisa Ferreira, said: “Reforms are necessary to better the environment for businesses, reinforce the healthcare systems, strengthen social and educational systems and overall enhance the resilience of Member States and stakeholders when facing difficult challenges and global crises. The Technical Support Instrument is a powerful tool that can enable Member States to carry out the reforms they need for a sustainable growth.”
The TSI is the Commission’s main instrument to provide technical support to reforms in the EU. It is part of the Multiannual Financial Framework (MFF) 2021-2027 and of the Recovery Plan for Europe. It builds on the success of its predecessor, the Structural Reform Support Programme (SRSP), which since 2017 has provided more than 1.000 technical support projects in all Member States.
Reforms eligible for TSI support include, yet are not limited to, public administration, governance, tax policies, business environment, financial sector, labour market, education systems, social services, health care, green transition – e.g. the Renovation Wave – and digital services. Strengthening the institutional and administrative capacity to design and implement reforms and investments is essential to foster resilience and underpin recovery.
With an increased budget of €864 million over the period 2021-2027, the TSI can also provide technical support to help Member States prepare and implement the Recovery and Resilience Plans (RRPs), thus ensuring that they are better equipped to access financing of the Recovery and Resilience Facility (RRF). In total, more than 60% of the pre-selected TSI projects for 2021 are related to the implementation of the RRPs, while 30% focus on the Green Deal and 44% on the digital transition.
TSI support also helps Member States in effectively addressing the challenges identified in the Country-specific Recommendations.
All the information can be found in the adopted implementing Decision C(2021)1335 and first TSI Annual Work Programme.
Compliments of the European Commission.
The post EU Commission supports reform projects in Member States for more jobs and sustainable growth first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.