GovernanceEC’s McGuinness: Basel commitment must be maintained

EC’s McGuinness: Basel commitment must be maintained

Capitalisation key to financial stability as EU set to enact Basel III capital requirements

On a wider ranging address, touching on capital requirements, climate disclosure and Brexit, Mairead McGuinness, European Commissioner for financial services, financial stability and capital markets union spoke of the need to implement final elements of Basel III.

“Our commitment to complete the Basel III reforms faithfully in the medium to long term hasn’t changed because of the pandemic. We are doing our commitment to implement in line with our international commitments,” she said during this year’s Isda annual general meeting.

Implementation of Basel III will be done through legislation to amend the capital requirements directive. The US Federal Reserve has also indicated it plans to complete its Basel III implementation this year as well.

The EU is considering amendments to the Central Securities Depositories Regulation (CSDR). A targeted consultation was completed in February and a report on the CSDR review is expected to come out this summer.

“More could be done to simplify the rules, strengthen competition, and ensure a more integrated post trading landscape in the European Union. Obviously, these improvements could increase the attractiveness of the EU as a place to do business,” she said.

As discussion around sustainable finance and climate related disclosures accelerates, McGuinness reiterated the EU’s commitment to a sustainable economy,

“The European Union is firmly committed to becoming a sustainable economy”.

“The European Green Deal sets out to make the EU climate neutral by 2050, mobilizing capital markets towards a greener economy is vital.”

Last year, the EU’s taxonomy for sustainable activities went into effect, creating a list of economic activities deemed environmentally sustainable. The goal of the taxonomy is to help firms plan for transition, prevent “greenwashing” and mitigate market fragmentation.

The Commission has also recently adopted a corporate sustainability reporting directive (CSRD) that will require firms to report their climate risks from a “double materiality perspective”.

“The new CSRD will contribute to clearer, more reliable reporting by companies on sustainability reporting, both their impact on people and the environment and how things like climate change affect their activities,” she said.

“We know that we need deeper, more liquid and more integrated EU capital markets to move towards a greener, more digital and more resilient to Europe.”

Addressing Brexit, McGuinness said the EU and UK will need to “build a durable and stable relationship” when it comes to financial services. The EU will examine equivalence on a case-by-case basis while also “taking into account the UK’s regulatory intentions.”

She added: “We will have to manage our significant level of interconnectedness with the UK strategically. And we should strive for good cooperation with the UK but we also need to avoid dependency that would translate into financial stability risks or reduce our regulatory autonomy”.

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