For the Germans it was all meant to be different. At the beginning of the year, their 6 month (July to December) Presidency of the European Council, was intended to be about the finalisation of the Basel transposition and changes to MiFID/R. With the COVID-19 outbreak in Europe, everything changed and their well made plans had to be fundamentally revised. The Commission postponed both Basel and MiFID/R and brought forward quick fixes on the capital requirements legislation as well as on financial markets texts, including incidentally MiFID, but also the prospectus and securitisation legislations.
The banking quick fix was hammered through in record time before the summer recess, in order to give banks the needed breathing space to continue playing their role lending to the rest of the economy. The financial markets set came later and was more fittingly renamed a recovery package. Work has been progressing on this with impressive speed at the European Parliament and at the Council, where tribute needs to be paid, among others, to the Presidency. A deal was reached last week that is due to be formally approved by Member States at Ambassador level. Member States now just have to wait for the Parliament to start negotiations between the co-legislators. An agreement is expected before the end of the year. This will probably be remembered as one of the main legislative achievements of the German Presidency.
That does not mean that nothing is happening on other legislative fronts in financial services. Work is ongoing at the technical level on the finalisation of the banking union, awaiting compromises on very political issues like the risk reduction/risk sharing balance. With bank lending soaring during the confinement period and a number of loans souring, NPLs are on the rise, including those for non-systemic banks. The crisis management framework is being discussed again between Member States. The same holds true for EDIS, the European Deposit Insurance Scheme, that has been as good as on ice for years now.
The Council has also started working on the recent legislative proposals on cybersecurity and crypto assets as well as on DLT infrastructures. These issues are expected to keep Member States and the Parliament busy for the months to come.
But the German Presidency is also preparing significant groundwork for the future. On AML, Member States have been working through various versions of Council conclusions that are dealing with further harmonisation of the regulatory framework as well as the creation, the architecture and the powers of a future European AML supervisor. These conclusions are expected to be adopted on 4 November at the next ECOFIN Council meeting. The Council is hereby sharing with the Commission its expectations for future legislation that the latter is preparing for Q1 of 2021.
Following the presentation of the Commission action plan for the deepening of the capital markets union, Ministers recently had a first exchange of views, which is to be followed by Council conclusions before the end of the year. Similarly to the above, Member States are directing towards the Commission their expectations regarding specific legislative proposals due over the next two years.
The Germans are in the middle of their Presidency, but with the banking quick fix finalised and the financial markets recovery package well on its way, a good part of the heavy lifting has been done. Now the rest needs to be safely brought to conclusion.
By Antoine Kremer