Changeover in the European Institutions paves way for a more politicised sense of continuity

The European Parliament elections in May this year delivered a result that is set to fundamentally influence the way financial services legislation will be discussed in the European Parliament. Contrastingly, the incoming European Commission leadership – which is set to assume office on 1 November – represents a strong sense of continuity as far as EU financial services regulation is concerned, with Latvian former Prime Minister Valdis Dombrovskis nominated to remain in charge of the financial services portfolio.

The coming legislative cycle is likely going to be marked by this dichotomy of a more fractured and more politicised European Parliament on the one hand and a node of relative continuity and stability on the other hand in the European Commission. May’s parliamentary elections resulted in a distribution of seats that for the first time saw the big centre-right (EPP) and centre-left (S&D) political families no longer commanding a majority between each other. In the new Parliament, both groups saw their numbers diminished, chiefly to the benefit of the liberal (ALDE/Renew Europe) and Green groups. This in turn means that during the coming mandate, political trade-offs with both groups will become a much bigger staple of financial services policy-making than has historically been the case.

When it comes to some of the bigger items that are set to be on the agenda for the next legislative cycle – e.g. the next round of revisions of bank capital requirements to implement the Basel IV accord, a wide-spectrum of sustainable finance initiatives including on green bonds, eco-labelling for financial products, a sustainability taxonomy and integration of sustainability considerations in non-financial corporate disclosure rules, as well as renewed scrutiny over anti-money laundering standards – trade-offs that may need to be made in the interest of finding majorities in the European Parliament could result in a wider set of political views and priorities from across the spectrum coming through in financial services legislation.

With this said, the next legislative cycle will also see a bigger shift away from post-crisis regulation of financial services to regulation impacting corporate treasury being tied to bigger and overarching policy priorities that are being advanced at European level. Competition with China and the United States in the data and digital space as well as being at the forefront of climate change mitigation and adaption are only two of those priorities that are likely to significantly shape financial regulation in the coming five years. EU political leadership wanting to promote a more assertive global role for the EU vis-à-vis its international competitors will also see a strong focus on fair taxation and promoting European financial infrastructure and markets (and being more protective of non-EU influence), including autonomous European payments infrastructure with the ultimate objective of growing the role of the Euro as an international reserve currency.

For the time being, the legislative machinery has not yet gathered steam, but subject to a successful vetting process of nominees for posts as European Commissioners in the European Parliament, European policymakers will turn their attention to concrete initiatives of the next five years from November onwards.

Articles


Photo from Cash and Working Capital Management in the Corona crisis

Cash and Working Capital Management in the Corona crisis

This article deals with short-term measures to optimise working capital and liquidity management. The strengthening of the supply chain, a currently important measure for many companies, is illustrated by an example from the retail sector.

Read

Intragroup Financial Transactions and the Latest OECD Guidelines: Forewarned is Forearmed

For several years, the treasury operations have often been framed in the transfer pricing policy. However, during current survival operations, cash requirements increase and exceptional intragroup cash transactions may take place.

Read
Photo from Risk Matrix - Tools to Identify and Mitigate Risks

Risk Matrix - Tools to Identify and Mitigate Risks

Risk management in corporate treasury is more important than ever! It was and is essential to define risk areas and use scenarios to check what effects the current situation could have on the company to be prepared for appropriate measures.

Read
Photo from Treasury Insights 2020 - Results of the EACT Survey

Treasury Insights 2020 - Results of the EACT Survey

200 treasury professionals from across Europe shared their thoughts on treasury’s role and priorities as part of the EACT survey. Although some survey participants responded to the survey before the official lockdown in their respective countries, many companies had already implemented measures such as stopping business travel and moving to home working.

Read
Photo from Managing the Working Capital Gap

Managing the Working Capital Gap

Managing working capital is essential to every business under normal conditions, but even more so during a crisis.

Read