The European Securities Markets Authority (ESMA) has published today an amended version of its guidelines on enforcement of financial information. The Guidelines apply to national competent authorities’ (NCAs) enforcement of financial information which issuers, listed on regulated markets, are required to publish under the Transparency Directive.

Following a 2017 peer review on the implementation of certain aspects of the Guidelines, ESMA decided to amend the Guidelines in order to further harmonise the way NCAs enforce the financial disclosures of European issuers. The amendments mainly relate to NCAs’ methods for selecting the issuers whose financial information should be subject to examination (Guideline 5) and the procedures NCAs apply when they carry out such examination (Guideline 6).
Steven Maijoor, Chair, said:
“Ensuring that issuers provide investors with the full picture of their financial performance and situation is a prerequisite for transparent capital markets. Investors need to know the financial health of issuers in whom they may wish to invest.
“We need to ensure that the disclosure of financial information is comparable across the EU. Subjecting issuers to a similar level of scrutiny by national competent authorities enhances both market confidence and investor protection.”
The changes to ESMA’s Guidelines will require NCAs to further harmonise:
the way they select issuers for examination, by requiring that their selection should be based on a combination of:
a risk-based approach;
random selection; and
rotation;

the time period within which all issuers in an NCA’s jurisdiction should be examined following the peer review’s recommendation of a maximum period of 10-15 years; and
the way in which they undertake their examinations, including by requiring that a minimum proportion of examinations should cover the entire financial statement and entail interaction with the issuer.
ESMA’s amendments are intended to strengthen supervisory convergence across the EEA in the area of enforcement of financial information and prevent regulatory arbitrage and thus contribute to investor protection.
Next steps
The amendments to the Guidelines will now be translated into all the official languages of the EU, and a version of the amended Guidelines will be published on ESMA’s website in each language. The amendments to the Guidelines will become effective on 1 January 2022.
Compliments of the European Commission

Today, the United Kingdom leaves the European Union and becomes a third country. While we regret the decision of the United Kingdom to leave our Union, we fully respect this choice and are ready to move forward.
The diplomatic representation of the European Union from now on will be ensured by an EU Delegation, under my authority as High Representative of the Union for Foreign affairs and Security Policy.
I have appointed Ambassador João Vale de Almeida as Head of Delegation and I trust that he will be working tirelessly to ensure smooth cooperation between the European Union and the United Kingdom. The premises of the former Commission Representation in London will become those of the European Union Delegation. Operations start today.
In addition to the traditional responsibilities of an EU Delegation in a third country, such as EU diplomatic representation, EU coordination and reporting and promotion of the EU in the host country, the EU Delegation to the United Kingdom will have a key role in ensuring the implementation of the UK’s Withdrawal Agreement. Together with the embassies of EU Member States, it will also raise awareness on the rights of EU citizen’s in the United Kingdom after Brexit.
The United Kingdom will remain a key partner for the European Union. Our relationship is rooted in our shared values and interests that arise from geography, history and values anchored in our common European heritage.
The economic, social and political relationship between the European Union and the United Kingdom will not end. We are and will remain closely linked. Our wish is to build a new ambitious partnership across trade and economic cooperation, law enforcement and criminal justice, foreign policy, security and defence.
I look forward to what I hope will be very close cooperation with our British friends on our common challenges at the regional and global level.

Compliments of the Delegation of the European Union to the United States

The European Commission is partnering with the European Investment Fund, part of the European Investment Bank Group (EIB), to launch the BlueInvest Fund today. During the BlueInvest Day conference in Brussels, EIB Vice-President Emma Navarro and Virginijus Sinkevičius, Commissioner for Environment, Oceans and Fisheries, launched a €75 million equity investment fund for the blue economy.
The BlueInvest Fund will be managed by the European Investment Fund and will provide financing to underlying equity funds that strategically target and support the innovative blue economy. This sector can play an important role in the transformation to a carbon-neutral economy by 2050, an ambition announced in the European Green Deal. The new programme is backed by the European Fund for Strategic Investments, the financial pillar of the Investment Plan for Europe.
The blue economy includes economic activities related to oceans, seas and coasts. It ranges from companies in the marine environment to land-based businesses producing goods or services that contribute to the maritime economy. The blue economy harbours many promising early-stage ventures and companies – often emanating from EU-funded R&D programmes. These companies develop solutions for renewable energy, sustainable seafood, blue biotechnology, maritime IT and much more.
The new fund is complemented by the European Commission’s BlueInvest platform, which supports investment readiness and access to finance for early-stage businesses, SMEs and scale-ups. Through the European Maritime and Fisheries Fund, the Commission also funds an additional €40 million grant scheme, to help blue economy SMEs with developing and bringing to market new innovative and sustainable products, technologies and services.
Virginijus Sinkevičius, European Commissioner for Environment, Oceans & Fisheries, said: “Oceans are the first in line to be hit by climate change, but they also hold many solutions to tackle climate emergency in every single marine industry, from fisheries and aquaculture, to offshore wind, wave and tidal energy, blue biotechnology and many other innovation-related fields. A €75 million equity investment fund is a tool to unlock the potential the blue economy holds both in contributing to the European Green Deal and ensuring economic growth of European SMEs developing innovative and sustainable products and services.”
EIB Vice-President, Emma Navarro, responsible for the Blue Economy, said:“Oceans are vital for life on Earth. But oceans are under threat and need to be protected. This is why we are developing innovative financing solutions to support the Blue economy. Solutions that allow us to provide financing for protecting the oceans and to turn the seas into a sustainable economic resource. The BlueInvest fund that we are launching today will give an important contribution to mobilize private investments to this sector and to get critical projects off the ground. It marks another important partnership between the EIF and the European Commission. ”
EIF Chief Executive, Alain Godard, said: “The oceans provide huge potential for economic growth, but this growth needs to be sustainable. The investments in the Blue Economy sector we signed today show how public funds in the EU can be deployed to attract private investment and catalyse the development of this sector. I am delighted that we can now launch the BlueInvest fund which combined with additional private capital will help to drive Europe’s Blue Economy agenda.”
Background
BlueInvest is a European Commission initiative that aims to improve access to finance and investment readiness for start-ups, early-stage businesses and SMEs active in the Blue Economy. Its features include an online community, investment readiness assistance for companies, investor engagement, events, an academy and a projects pipeline. More information here.
The European Investment Bank (EIB) is the long-term lending institution of the European Union owned by its Member States. It makes long-term finance available for sound investment in order to contribute towards EU policy goals.
The EIF is part of the European Investment Bank Group. Its central mission is to support Europe’s micro, small and medium-sized businesses by helping them to access finance. EIF designs and develops both venture and growth capital, guarantees and microfinance instruments which specifically target this market segment. In this role, EIF fosters EU objectives in support of innovation, research and development, entrepreneurship, growth and employment.
The Investment Plan for Europe focuses on boosting investment to generate jobs and growth by making smarter use of financial resources, removing obstacles to investment, and providing visibility and technical assistance to investment projects.
Compliments of the European Commission

This is a Joint Op-Ed by the European Union’s High Representative/Vice President Josep Borrell and the European Commission’s Head of UK Task Force Michel Barnier.

On 31 January 2020, the United Kingdom left the European Union. We lost a member of our family. It was a sad moment for us, for European citizens — and, indeed, for many British citizens.
Nevertheless, we have always respected the sovereign decision of 52% of the British electorate, and we now look forward to starting a new chapter in our relations.
Emotions aside, 1 February turned out to be historic but also undramatic. This is largely thanks to the Withdrawal Agreement that we negotiated with the UK, which enabled us to secure ‘an orderly Brexit’. One that — at least for now — minimises disruption for our citizens, businesses, public administrations — as well as for our international partners.
Under this agreement, the EU and the UK agreed on a transition period, until the end of 2020 at least, during which the UK will continue to participate in the EU’s Customs Union and Single Market, and to apply EU law, even if it is no longer a Member State. During this period, the UK will also continue to abide by the international agreements of the EU, as we made clear in a note verbale to our international partners.
So, with the transition period in place, there is a degree of continuity.This was not easy given the magnitude of the task.By leaving the Union, the UK automatically, mechanically, legally, leaves hundreds of international agreements concluded by or on behalf of the Union, to the benefit of its Member States, on topics as different as trade, aviation, fisheries or civil nuclear cooperation.
We now have to build a new partnership between the EU and the UK. That work will start in a few weeks, as soon as the EU27 have approved the negotiating mandate proposed by the European Commission, setting out our terms and ambitions for achieving the closest possible partnership with a country which will remain our ally, our partner and our friend.
The EU and the UK are bound by history, by geography, culture, shared values and principles and a strong belief in rules-based multilateralism. Our future partnership will reflect these links and shared beliefs. We want to go well beyond trade and keep working together on security and defence, areas where the UK has experiences and assets that are best used as part of a common effort. In a world of big challenges and change, of turmoil and transition, we must consult each other and cooperate, bilaterally and in key regional and global fora, such as the United Nations, the World Trade Organization, NATO or the G20.
It is perhaps a cliché but the basic truth is that today’s global challenges — from climate change, to cybercrime, terrorism or inequality — require collective responses.The more the UK is able to work in lockstep with the EU and together with partners around the world, the greater our chances of addressing these challenges effectively.
At the very core of the EU project is the idea that we are stronger together; that pooling our resources and initiatives is the best way of achieving common goals.Brexit does not change this, and we will continue to take this project forward as 27.
Together, the 27 Member States will continue to form a single market of 450 million citizens and more than 20 million businesses.
Together, we remain the largest trading bloc in the world.
Together, at 27, we are still the world’s largest development aid donor.
Our partners can be sure that we will stay true to an ambitious, outward-looking agenda — be it on trade and investment, on climate action and digital, on connectivity, on security and counter-terrorism, on human rights and democracy, or on defence and foreign policy.
We will continue to live up to our commitments.We will continue to stand by the agreements that link us to our international partners. We will continue implementing the Association Agreement with Georgia and we will continue to develop multilateral cooperation frameworks around the world.
The European Union will continue to be a partner you can trust. A steadfast defender of rules-based multilateralism, working with our partners to make the world more secure and fair.

Compliments of the European Union to the United States. First published on Medium.

New EU rules on short-stay visas apply worldwide from 2 February 2020. They make it easier for legitimate travellers to apply for a visa to come to Europe, facilitating tourism, trade and business, while providing more resources for countering irregular migration risks and threats to internal security.
Which non-EU countries do the new rules apply to?
The changes apply to travellers from all countries which need visas to travel to the EU. Currently, citizens from 105 non-EU countries or entities are required to have a visa (full list available online). Nothing changes for countries benefitting from visa-free travel to the EU because the new rules do not apply to their citizens.
Which destination countries are covered by the update?
The rules cover short-stay visas for the 22 EU countries that are part of the Schengen area (Austria, Belgium, Czechia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain and Sweden), as well as for four associated countries: Iceland, Liechtenstein, Norway and Switzerland.A uniform short-stay visa issued by one of these countries covers travel throughout the 26 Schengen countries for up to 90 days in any 180-day period.
Why change the EU visa rules now?
The European Parliament and the Council agreed the changes in June 2019.
The tourism and travel industry plays a key role in the European economy. EU Member States are among the world’s leading tourist destinations – the number of visa applications processed has increased considerably over the last 9 years and continues to expand. Since 2009, the number of applications for EU visas has risen by 57% – from 10.2 million to over 16 million in 2018. At the same time, visa application procedures have not changed since 2010 and there was a need to make them less cumbersome, while maintaining the same level of security and control.
Visa fees have not been adapted since 2006 and a €60 fee no longer covers the costs of processing applications, in particular due to inflation.
Finally, by creating a link between visa procedures and cooperation on readmission, the revision gives the EU new tools for a dialogue with partner countries about migration. This possibility is part of the EU’s ongoing efforts in favour of a comprehensive and effective migration policy.
What are the main benefits for travellers?
With the new rules, travellers now benefit from a simpler and more user-friendly visa application procedure:
Visa applications can be submitted up to 6 months before the intended travel (9 months for seafarers), instead of 3 months previously, allowing travellers to better plan their trips;
Multiple-entry visas with long validity (from 1 to 5 years) are now easier to obtain, saving frequent travellers time and money, as they will have to apply for a new visa less often;
In most cases, an application can be submitted directly in the traveller’s country of residence, and where possible filled in and signed electronically (only hard copies were accepted until now), which will also save travellers time, money and hassle.
What are the new rules for issuing multiple-entry visas?
Frequent travellers with a positive visa history are to be granted multiple-entry visa with a gradually increasing validity period from 1 year to a maximum of 5 years.
Travellers’ fulfilment of entry conditions will be thoroughly and repeatedly verified in all cases, and only persons with a positive visa track record will be issued multiple-entry visas with a long validity.
Multiple-entry visas allow the holder to travel repeatedly to the EU during the period of validity of the visa.
How long will it take for the visa application to be processed?
The maximum time for visa applications to be processed remains unchanged at 15 days. The processing time may be longer only in individual cases, for instance where further scrutiny of the application is needed, and take up to maximum 45 days.
With which consulate should applicants lodge their visa application?
The rules remain the same. Applicants must lodge their application at the consulate of the country they intend to visit. Applicants planning to visit several Schengen states must apply at the consulate of the country where they will spend the longest period. Applicants planning on visiting several Schengen states for equal lengths of stay must apply at the consulate of the country whose external borders they will cross first when entering the Schengen area.In case the Schengen state of destination has no consulate in the country where the applicant resides, the applicant should check whether it is represented by another consulate.
Do visa applicants have to submit their application in person at a consulate?
In most cases, visa applications can be submitted in the applicant’s country of residence (either at a consulate or at the premises of an external service provider) and, where possible, the application form can be filled in and signed electronically. Under the new rules, applicants have to appear in person only when fingerprints are to be collected (i.e. every 59 months).
Can the application be submitted via an external service provider?
Most Member States use external service providers to collect visa applications and supporting documents. The large network of “visa application centres” means that applicants do not usually have to travel too far to lodge their application. Member States remain fully responsible for processing and deciding on visa applications.
What are the requirements for applying for a short stay visa?
The rules have not changed. In order to apply for a short stay visa to the EU, applicants must present:
A filled in and signed visa application form;
A passport issued in the last 10 years and valid for at least 3 months after the end of the stay;
An identity photograph;
Proof of possession of adequate and valid travel medical insurance;
Supporting documents relating to the purpose of the stay, evidence of means of support during the stay and accommodation.
Applicants must also pay the visa fee and, where applicable, have their fingerprints collected.
Do visa applicants need a travel medical insurance when travelling to the EU?
Yes, visa applicants must present a valid travel medical insurance when applying for a visa, as it was already the case under the previous rules.
What is the amount of the visa fee? What will the increased visa fee be used for?
The visa fee increases from €60 to €80. This increase is the first one since 2006 and it brings the fee broadly in line with the level where it would be today if it had been aligned to the general EU-wide inflation rate since 2006*.
The €60 fee no longer adequately covered the administrative costs (such as staffing, premises and equipment) for offering adequate service to the constantly growing numbers of applications. The increase in the visa fee will ensure there are sufficient financial resources to maintain a wide consular coverage worldwide and reinforce consular staff, speed up the application process and provide better quality service for travellers, upgrade IT equipment and software, and improve the capacity to detect potential security and irregular migration risks.
Importantly, for regular travellers, the fee increase will be partly offset by the new rules on long-validity visas: these travellers may actually save money under the new provisions, since they have to apply for visas less often.
Will the visa fee also increase for countries benefiting from lower fees under Visa Facilitation Agreements?
No. The increase of the general visa fee has no impact on the lower visa fee (€35) set in the Visa Facilitation Agreements concluded between the EU and a number of third countries, such as Armenia, Azerbaijan and Russia.
How does the revised visa fee compare to the fees charged by other countries?
By international standards, the €80 visa fee remains low. As a comparison, applying for a tourist visa to the United States costs €143 and €126 for China. Travellers to Australia have to pay €90 for their visa, while those going to New Zealand will be charged €146. A visa to Canada costs €68, to India €95, and to the UK €112 (January 2020).
Are there any visa fee waivers and reductions?
Yes, the visa fee is still waived for children below 6 years old, as was already the case under the previous rules. The visa fee for minors between the age of 6 and 12 years remains half of the general fee, and thus increases by €5 (to €40). In addition, it is now possible for Member States to waive the visa fee for minors between the age of 6 and 18 years.
How will the cooperation on readmission be linked to EU visa policy?
Over the past years, the EU has been stepping up activities to support Member States in returning people who have no right to stay in Europe. Even though readmission of own nationals is an obligation under international law, Member States have experienced difficulties in returning irregular migrants.
The revised visa rules introduce a new mechanism linking visa policy and cooperation on readmission. This will bring an important element into the EU’s discussions with partner countries.
Under the new rules, the Commission will conduct a regular assessment of how non-EU countries cooperate on readmission, taking into account indicators such as:
The number of return decisions issued to citizens of a given non-EU country;
The number of actual returns as a percentage of the number of return decisions issued;
The number of readmission requests accepted by the non-EU country as a percentage of the number of requests submitted to it; and
The level of practical cooperation in the different stages of the return procedure, including as regards the assistance provided in the identification of persons irregularly staying in the EU and the timely issuance of travel documents.
Member States which encounter substantial and persistent readmission problems with a given non-EU country may also notify the Commission of such a situation. In such cases, the Commission must assess the notification within one month.
On this basis, the Commission, together with Member States, can establish a more restrictive and temporary implementation of certain provisions of the Visa Code for the processing of visa applications from nationals of the country in question, such as the processing time, the length of validity of visas, the level of the visa fee and the fee waivers.
If a third country cooperates sufficiently on readmission, and taking account of the Union’s overall relations with the third country concerned, the Commission may also propose a more generous implementation of certain provisions of the Visa Code (lower visa fee, quicker processing times and multiple-entry visas with longer validity to be agreed upon by Member States in the Council).
Can nationals of non-EU countries which do not cooperate on readmission still apply for and obtain a visa to travel to the EU?
More restrictive implementation of certain procedural rules and the general rules on the issuing of multiple-entry visas will not call into question applicants’ basic right to submit an application for a visa or to be granted a visa.
When the Commission, together with the Member States, decides that the mechanism should be triggered, the restrictive implementation of certain rules will be adapted to the particular situation in each non EU-country. This could have an impact on the processing time, the length of validity of the visa to be issued, the level of the visa fee to be charged and the fee waivers.
Will the new rules affect the UK after the end of the transition period?
No. In 2019, the Visa Regulation was amended to grant UK nationals visa-free travel to the EU after the United Kingdom’s withdrawal from the European Union. This means that UK nationals will remain visa-free when travelling to the EU for short stays, so the revised visa rules will not apply to them.
Compliments of the Delegation of the European Union to the United States

The European Commission has today issued a recommendation to the Council to open negotiations on a new partnership with the United Kingdom.
This recommendation is based on the existing European Council guidelines and conclusions, as well as on the Political Declaration agreed between the EU and the United Kingdom in October 2019.
It includes a comprehensive proposal for negotiating directives, defining the scope and terms of the future partnership that the European Union envisages with the United Kingdom. These directives cover all areas of interest for the negotiations, including trade and economic cooperation, law enforcement and judicial cooperation in criminal matters, foreign policy, security and defence, participation in Union programmes and other thematic areas of cooperation. A dedicated chapter on governance provides an outline for an overall governance framework covering all areas of economic and security cooperation.
As EU negotiator, the Commission intends to continue work in close coordination with the Council and its preparatory bodies, as well as with the European Parliament, as was the case during the negotiations for the Withdrawal Agreement.
President of the European Commission Ursula von der Leyen said: “It’s now time to get down to work. Time is short. We will negotiate in a fair and transparent manner, but we will defend EU interests, and the interests of our citizens, right until the end.”
Michel Barnier,the European Commission’s Chief Negotiator,said: “We will negotiate in good faith. The Commission will continue working very closely with the European Parliament and the Council. Our task will be to defend and advance the interests of our citizens and of our Union, while trying to find solutions that respect the UK’s choices.”
Next steps
The Council will have to adopt the draft negotiating directives. This will formally authorise the Commission to open the negotiations as Union negotiator.
Background
On 31 January 2020, the United Kingdom withdrew from the European Union and the European Atomic Energy Community (Euratom).
The arrangements for the withdrawal are set out in the Withdrawal Agreement, which entered into force on 1 February 2020. It provides for a transition period during which EU law continues to apply to the United Kingdom until at least 31 December 2020, unless the Joint Committee established under the Withdrawal Agreement adopts, before 1 July 2020, a single decision extending the transition period for up to 1 or 2 years.
In the guidelines of 23 March 2018, the European Council restated the Union’s determination to have as close as possible a partnership with the United Kingdom in the future. According to these guidelines, such a partnership should cover trade and economic cooperation as well as other areas, in particular the fight against terrorism and international crime, as well as security, defence and foreign policy.
The framework for this future partnership between the European Union and the United Kingdom is set out in the Political Declaration.
Today’s recommendation by the European Commission is the first step in the negotiation process, as the Council is invited to authorise the Commission to formally open the negotiations for a new partnership with the United Kingdom.
Compliments of the European Commission

As the night draws in this evening, the sun will set on more than 45 years of the United Kingdom’s membership of the European Union. For us, as Presidents of the three main EU institutions, today will inevitably be a day of reflection and mixed emotions – as it will for so many people.
Our thoughts are with all of those who have helped to make the European Union what it is today. Those who are concerned about their future or disappointed to see the UK leave. Those British members of our institutions who helped shape policies that made lives better for millions of Europeans. We will think of the UK and its people, their creativity, ingenuity, culture, and traditions, that have been a vital part of our Union’s tapestry.
These emotions reflect our fondness for the United Kingdom – something which goes far beyond membership of our Union. We have always deeply regretted the UK’s decision to leave but we have always fully respected it, too.  The agreement we reached is fair for both sides and ensures that millions of EU and UK citizens will continue to have their rights protected in the place they call home.
At the same time, we need to look to the future and build a new partnership between enduring friends. Together, our three institutions will do everything in their power to make it a success. We are ready to be ambitious.
How close that partnership will be depends on decisions that are still to be taken. Because every choice has a consequence. Without the free movement of people, there can be no free movement of capital, goods and services. Without a level playing field on environment, labour, taxation and state aid, there cannot be the highest quality access to the single market. Without being a member, you cannot retain the benefits of membership.
Over the next weeks, months and years we will have to loosen some of the threads carefully stitched together between the EU and the UK over five decades. And as we do so, we will have to work hard to weave together a new way forward as allies, partners and friends.
Whilst the UK will cease to be an EU member, it will remain part of Europe. Our shared geography, history and ties in so many areas inevitably bind us and make us natural allies.  We will continue to work together on foreign affairs, security and defence with a common purpose and shared mutual interests. But we will do it in different ways.  
We do not underestimate the task that lies before us but we are confident that with goodwill and determination we can build a lasting, positive and meaningful partnership.    
But tomorrow will also mark a new dawn for Europe.
The last few years have brought us closer together – as nations, as institutions and as people. They have reminded us all that the European Union is more than a market or economic power but stands for values that we all share and defend. How much stronger we are when we are together.
This is why the Member States of the European Union will continue to join forces and build a common future. In an age of great power competition and turbulent geopolitics, size matters. No country alone can hold back the tide of climate change, find the solutions to the digital future or have a strong voice in the ever-louder cacophony of the world.
But together, the European Union can.
We can because we have the largest internal market in the world. We can because we are the top trading partner for 80 countries. We can because we are a Union of vibrant democracies. We can because our peoples are determined to promote European interests and values on the world stage. We can because EU member states will leverage their considerable, collective economic power in discussions with allies and partners – the United States, Africa, China or India.
All of this gives us a renewed sense of shared purpose. We have a common vision of where we want to go and a commitment to be ambitious on the defining issues of our times. As set out in the European Green Deal, we want to be the first climate neutral continent by 2050, creating new jobs and opportunities for people in the process. We want to take the lead on the next generation of digital technologies and we want a just transition so that we can support the people most affected by change.
We believe only the European Union can do this. But we know we can only do it together: people, nations, institutions. And we, as Presidents of the three institutions, are committed to playing our part.  
That work continues as soon as the sun rises tomorrow.
Ursula von der Leyen
Pres. of the European Commission                      
Charles Michel
Pres. of the European Council                      
David Maria Sassoli
Pres. of the European Parliament
Compliments of the European Commission.
The article appeared among others in 24 Chasa, Alithia, De Volkskrant, Dnevnik, Frankfurter Allgemeine, Gazeta Wyborcza, In-Nazzion, Jutarnji List, Kronen Zeitung, La Repubblica, Latvijas Avize, Le Parisien, Le Quotidien, Le Soir, Lidové noviny, Maaseudun Tulevaisuus, Magyar Nemzet, Politiken, Publico, Svenska Dagbladet, The Times.

In June 2016, the ECB launched its corporate sector purchase programme, through which it purchased corporate bonds in an effort to improve the financing conditions of euro area firms. In this article, I argue that the programme was successful. In particular, by increasing prices and reducing yields in the targeted bond market segment, the programme encouraged investors to shift their investments towards similar but somewhat riskier bonds. This reduced borrowing costs for many firms, including those whose bonds were not eligible for direct purchase by the ECB.
The corporate arm of the ECB’s quantitative easing
When interest rates are already so low that conventional rate cuts cannot further stimulate the economy, central banks may directly intervene in financial markets by buying assets from both the sovereign and the corporate sectors. That is exactly what the ECB started doing in March 2015. In that month, the ECB began purchasing assets issued by euro area central governments, agencies and European institutions. Then, in June 2016, it expanded the purchases to the corporate sector via the corporate sector purchase programme, or CSPP.
The aims of the CSPP were twofold. The first was straightforward: to signal that the ECB was committed to providing further stimulus to the economy. The second was somewhat more complex. Through the CSPP, the ECB wanted to lower the yield on the bonds that were targeted for purchase. However, mainly through the working of the so-called portfolio rebalancing channel, it also wanted to influence other asset prices, in particular those of corporate bonds not eligible for its own purchases. In this way, the ECB could support the financing conditions of all firms borrowing in the bond market (Draghi 2015, ECB 2017).
The portfolio rebalancing channel mainly works through investors shifting their investments away from the segment in which the ECB is making purchases. The idea is that investors, facing a scarcity of eligible bonds due to the ECB’s asset purchases, are encouraged to reallocate their holdings to other, riskier, bonds. This portfolio “rebalancing” in turn leads to higher prices and lower yields also for bonds in non-eligible market segments (Vayanos and Vila 2009, Krishnamurthy and Vissing-Jorgensen 2011, Hancock and Passmore 2011).[2]
While we know in theory how the rebalancing channel works, do we have any indication that it works in practice? In a recent research paper, I address this question through an empirical analysis (Zaghini, 2019). In particular, I analyse the evolution of the prices and quantities of bonds in three different market segments after the implementation of the CSPP: bonds actually purchased, eligible bonds not purchased, and bonds that were not eligible. Below I describe the article’s main findings. The main conclusion is that the CSPP, through the portfolio rebalancing channel, significantly reduced the cost of borrowing for euro area firms.
Portfolio rebalancing at work
In a nutshell, under the CSPP the Eurosystem purchases bonds issued by non-bank corporations registered in the euro area, denominated in euro, and that have at least an investment-grade rating. It purchases them both in the primary market (i.e. upon issuance) and in the secondary market.[3] I examine the effect of the CSPP by looking at changes in corporate bond spreads (the difference between the actual bond yield and an equivalent risk-free rate): if the implementation of the programme leads to a decline in such spreads, it will have succeeded in reducing borrowing costs for firms.
A first look at the evidence seems encouraging. Immediately after the announcement of the CSPP in March 2016, spreads on secondary market trades declined in both eligible and non-eligible market segments (see Chart 1). Initially, spreads on eligible bonds declined faster than those on non-eligible bonds, suggesting a larger improvement in the funding conditions for investment-grade firms. However, by June 2017 the gap had narrowed significantly, to the point of disappearance, thus hinting at better funding conditions also for lower rated firms.
While the evidence in Chart 1 is telling, bond spreads depend on many factors, such as the riskiness of the issuer, the amount placed and the maturity of the bond. Thus, in order to isolate the spread component due to the CSPP, I rely on a model proposed by Sironi (2003) and Zaghini (2016) for the euro area primary bond market. The model takes into account a large number of bond features and firm characteristics. In addition, it also considers the market conditions on the exact issuance date of every single bond. This makes it possible to isolate the effects of the CSPP on the bonds’ spreads quite precisely.
The empirical analysis shows that after a large signalling effect upon announcement (which saw spreads decrease by 36 basis points), the effect of the CSPP purchases on bond yields strengthened over time. In the first six months of the programme, from July to December 2016, eligible bonds enjoyed a spread (around 70 basis points) significantly lower than that on non-eligible bonds. This applied to all eligible bonds, regardless of whether or not they were purchased on the primary market by the ECB. By contrast, non-eligible bonds recorded a slight deterioration of their financing conditions. However, the difference between the two sets of bond spreads vanished in 2017. Indeed, in the first two quarters of that year non-eligible bonds caught up significantly, their spreads decreasing by around 50 basis points.
The spread dynamics estimated by the model are fully consistent with the theory on how the portfolio rebalancing channel works. In the first six months of the CSPP, the ECB purchased a great deal of eligible bonds. Doing so drove up prices (and accordingly reduced the spreads) in that market segment, crowding out other investors. Those investors then reached for the non-eligible bonds which are close substitutes, but have higher expected returns. Due to the higher demand for non-eligible bonds, that segment also saw prices increase and yields decrease.
In addition to price dynamics, the changes over time in the quantities of bonds issued in the two market segments suggest that the portfolio rebalancing channel was working. First there was a significant rise in both the number of bonds and the total volume issued in the eligible market segment in the second half of 2016. Then this was followed by a similar increase in the non-eligible segment in the first half of 2017. While the former increase was entirely driven by the additional demand from the ECB, the latter was purely market-driven and so due to the working of the rebalancing channel, since it only involved bonds which were not targeted by the ECB.
Concluding remarks
The announcement and actual deployment of the CSPP provide a good case study of the effects of large-scale asset purchase programmes. This analysis of developments in estimated bond spreads and amounts issued in the primary market shows that the programme eventually influenced the whole corporate bond market.
Indeed, in a first phase the CSPP only had an effect on the bonds directly targeted – immediately improving the funding conditions of eligible corporations, and gradually crowding out the other investors in that segment. Six months into the programme, the effect spilled over to non-eligible bonds. This was possible because the scarcity brought about in the eligible bond segment pressed investors to rebalance their portfolios towards other similar, but riskier, segments – in particular towards non-eligible corporate bonds. In this way the programme had an effect on both market segments. As a result, it achieved a more far-reaching improvement in the borrowing conditions of euro area corporations.
Compliments of the European Central Bank

The Governing Council of the European Central Bank (ECB) today launched a review of its monetary policy strategy. The monetary policy strategy was adopted in 1998 and some of its elements were clarified in 2003.
Since 2003 the euro area and the world economy have been undergoing profound structural changes. Declining trend growth, on the back of slowing productivity and an ageing population, as well as the legacy of the financial crisis, have driven interest rates down, reducing the scope for the ECB and other central banks to ease monetary policy by conventional instruments in the face of adverse cyclical developments. In addition, addressing low inflation is different from the historical challenge of addressing high inflation. The threat to environmental sustainability, rapid digitalisation, globalisation and evolving financial structures have further transformed the environment in which monetary policy operates, including the dynamics of inflation.
In the light of these challenges, the Governing Council has decided to launch a review of its monetary policy strategy, in full respect of the ECB’s price stability mandate as enshrined in the Treaty.
“As our economies are undergoing profound changes, it is the time for a strategy review to ensure we deliver on our mandate in the best interest of Europeans,” said ECB President Christine Lagarde.
The Governing Council will take stock of how the monetary policy strategy has supported the fulfilment of the ECB’s mandate under the Treaty over the years and consider whether any elements of the strategy need to be adjusted. The quantitative formulation of price stability, together with the approaches and instruments by which price stability is achieved, will figure prominently in this exercise. The review will also take into account how other considerations, such as financial stability, employment and environmental sustainability, can be relevant in pursuing the ECB’s mandate. The Governing Council will review the effectiveness and the potential side effects of the monetary policy toolkit developed over the past decade. It will examine how the economic and monetary analyses through which the ECB assesses the risks to price stability should be updated, also in view of ongoing and new trends. Finally, it will review its communication practices.
The process is expected to be concluded by the end of the year. The Governing Council will be guided by two principles: thorough analysis and open minds. Accordingly, the Eurosystem will engage with all stakeholders.
Compliments of the European Central Bank

The Presidents of the three main EU institutions will meet on Thursday in Bazoches to debate the future of the EU as well as current geopolitical challenges.

European Parliament President David Sassoli, European Council President Charles Michel and European Commission President Ursula von der Leyen will meet in Bazoches-sur-Guyonne (France) at the Jean Monnet House, a symbolic place for the history of European integration.
They will discuss the future of the EU, including the upcoming Conference on the Future of Europe, current geopolitical challenges as well as the climate and digital transitions.
President Sassoli said: “We stand at a new departure for Europe. The internal and external challenges facing us remind us all that the European Union is more than a market or economic power, but stands for values that we all share and defend. Our reflections should not forget how much stronger we can be when we act together.”
The three Presidents will wind up the discussions with a joint statement, to be delivered in the European Parliament in Brussels on the morning of Friday 31 January at 11:00. More details will follow.
Compliments of the European Commission