Atlantic Council and SIFMA Event with Valdis Dombrovskis
Atlantic Council and SIFMA
Resilient Financial Markets – Sharping the Rules Together
Monday, July 18, 2016
Key Topics & Takeaways
- Stability and Growth: Dombrovskis explained that the G20 agreed that the implementation of Basel III requirements should not lead to significantly higher capital requirements, and that the European Commission is committed to finalizing the implementation of Basel III while balancing financial stability objectives with economic growth.
- Call for Evidence: Dombrovskis stated that the Commission asked the financial services sector and other stakeholders to provide examples of how post-crisis reforms are working and where there are issues. He commented that the intention of the review is to assess whether the same regulatory benefits can be achieved in a more growth-friendly way that would eliminate duplicative requirements or gaps in regulation.
- Joint EU-U.S. Financial Regulatory Forum: Dombrovskis stressed the need for the U.S. and EU regulators and supervisors to better understand each other’s regulatory frameworks. He said the Forum would meet more often than the Financial Markets Regulatory Dialogue and allow for better links between regulators, bringing them closer to a common approach and allowing them to take into account each other’s reforms and avoid duplication.
Participants
- Valdis Dombrovskis, Vice President, European Commission
- John Rogers, Executive Vice President, Chief of Staff, and Secretary to the Board, Goldman Sachs; Chairman of the Board, SIFMA
Keynote Address
Valdis Dombrovskis, Vice President, European Commission
In his remarks, Dombrovskis acknowledged that the U.K. vote to leave the European Union (EU) indicated that the “unexpected has happened,” but stated that policymakers’ response to the referendum will be “crucial for Europe’s future.” Dombrovskis explained that he will continue Lord Jonathan Hill’s agenda with respect to strengthening the banking union, implementing the Capital Markets Union (CMU), and finalizing the Call for Evidence to ensure that regulatory reforms are implemented in a growth-friendly manner. In the meantime, he indicated that the European Commission’s (EC’s) first priority will be to ensure financial stability in the wake of the Brexit vote, noting that the uncertainty emanating from the UK referendum will weigh on economic growth in the UK and the EU and that the “pressure is real” to mitigate the adverse impacts resulting from the leave vote.
Dombrovskis also indicated that the European Commission will aim to: 1) implement an EU-wide deposit insurance scheme; 2) move forward with the CMU, which he said Europe needs “now more than ever;” and 3) improve EU-U.S. relations through an enhanced Financial Markets Regulatory Dialogue mechanism. He added that the joint EU-U.S. regulatory cooperation mechanism could help establish a joint approach to implementing international standards (such as Total Loss Absorbing Capacity and recovery and resolution standards for central counterparties) to “maintain a level playing field” for EU and U.S.-based firms. Such enhanced regulatory coordination, Dombrovskis argued, will help support economic growth on both sides of the Atlantic.
Questions
John Rogers, Executive Vice President, Chief of Staff, and Secretary to the Board of Goldman Sachs; and Chairman of SIFMA’s Board, moderated a question and answer session with Dombrovskis.
Brexit
Asked about the process going forward for the Brexit, Dombrovskis said the first steps must be taken by the UK as it decides whether it wants to remain a part of the single market. He stressed that this possibility exists but only under three conditions, that it: 1) maintain the freedom of movement for goods, services, capital and labor; 2) continue making financial contributions to the EU; and 3) respect EU regulations. Dombrovskis commented that for the financial services sector, the least disruptive scenario would be for the UK to remain a part of the single market. He called for the UK to make this decision and begin the Article 50 process to provide clarity to markets.
Balancing Financial Stability and Growth
Rogers noted that Dombrovskis recently commented on the importance that prudential requirements strike a balance between financial stability and the ability of institutions to finance economic growth. Dombrovskis explained that the G20 agreed that the implementation of Basel III requirements should not lead to significantly higher capital requirements, and that the European Commission is committed to finalizing the implementation of Basel III while also finding this balance.
Call for Evidence
Rogers asked about the European Commission’s Call for Evidence on the impact of post-crisis financial regulations. Dombrovskis stated that the Commission asked the financial services sector and other stakeholders to provide examples of how post-crisis reforms are working and where there are issues. He commented that the intention of the review is to assess whether the same regulatory benefits can be achieved in a more growth-friendly way that would eliminate duplication or gaps in regulation.
Investment Plan for Europe
Rogers asked about the European Commission’s proposed Investment Plan for Europe, and whether the responses to the Call for Evidence might be considered as part of the plan. Dombrovskis outlined the goals of the Investment Plan as facilitating investment, improving infrastructure, and promoting fiscally-responsible policies. He said it would aim to improving the investment environment by looking at barriers at the EU and member state level.
The Joint EU-US Financial Regulatory Forum
Asked about the announcement of the renaming of the Financial Markets Regulatory Dialogue to the Joint EU-US Financial Regulatory Forum and whether this would include more substantive changes to the dialogues, Dombrovskis stressed the need for the U.S. and EU regulators and supervisors to understand each other’s regulatory frameworks. He said the Forum would meet more often and allow for better links between regulators, bringing them closer to a common approach and allowing them to take into account each other’s reforms and avoid duplication.
Securitization
Responding to a question about the European Commission’s efforts to revitalize Europe’s securitization market, Dombrovskis highlighted the Commissions proposed framework for simple, transparent and standardized securitizations. He said it includes lessons from the crisis on the assets and transparency of securitized products, and that the proposal is currently being discussed by the EU’s legislators.
London’s Future as a Clearing Center
In response to a question from the audience regarding the European Central Bank’s proposed location policy for central clearinghouses, Dombrovskis explained that the European Court of Justice ruled that EU member states cannot discriminate against one another, but acknowledged that this issue may be put back on the table in light of Brexit.
Margin for Uncleared Swaps
Dombrovskis stated that the EU remains “fully committed” to implementing the international standards for margin requirements on uncleared derivatives. He stated that the Commission will put forth a revised proposal by the end of July, but explained that the fragmented legislative process in the EU will require additional time before the standards can be adopted in Europe.
For more information on this event, please click here.
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Atlantic Council and SIFMA
Resilient Financial Markets – Sharping the Rules Together
Monday, July 18, 2016
Key Topics & Takeaways
- Stability and Growth: Dombrovskis explained that the G20 agreed that the implementation of Basel III requirements should not lead to significantly higher capital requirements, and that the European Commission is committed to finalizing the implementation of Basel III while balancing financial stability objectives with economic growth.
- Call for Evidence: Dombrovskis stated that the Commission asked the financial services sector and other stakeholders to provide examples of how post-crisis reforms are working and where there are issues. He commented that the intention of the review is to assess whether the same regulatory benefits can be achieved in a more growth-friendly way that would eliminate duplicative requirements or gaps in regulation.
- Joint EU-U.S. Financial Regulatory Forum: Dombrovskis stressed the need for the U.S. and EU regulators and supervisors to better understand each other’s regulatory frameworks. He said the Forum would meet more often than the Financial Markets Regulatory Dialogue and allow for better links between regulators, bringing them closer to a common approach and allowing them to take into account each other’s reforms and avoid duplication.
Participants
- Valdis Dombrovskis, Vice President, European Commission
- John Rogers, Executive Vice President, Chief of Staff, and Secretary to the Board, Goldman Sachs; Chairman of the Board, SIFMA
Keynote Address
Valdis Dombrovskis, Vice President, European Commission
In his remarks, Dombrovskis acknowledged that the U.K. vote to leave the European Union (EU) indicated that the “unexpected has happened,” but stated that policymakers’ response to the referendum will be “crucial for Europe’s future.” Dombrovskis explained that he will continue Lord Jonathan Hill’s agenda with respect to strengthening the banking union, implementing the Capital Markets Union (CMU), and finalizing the Call for Evidence to ensure that regulatory reforms are implemented in a growth-friendly manner. In the meantime, he indicated that the European Commission’s (EC’s) first priority will be to ensure financial stability in the wake of the Brexit vote, noting that the uncertainty emanating from the UK referendum will weigh on economic growth in the UK and the EU and that the “pressure is real” to mitigate the adverse impacts resulting from the leave vote.
Dombrovskis also indicated that the European Commission will aim to: 1) implement an EU-wide deposit insurance scheme; 2) move forward with the CMU, which he said Europe needs “now more than ever;” and 3) improve EU-U.S. relations through an enhanced Financial Markets Regulatory Dialogue mechanism. He added that the joint EU-U.S. regulatory cooperation mechanism could help establish a joint approach to implementing international standards (such as Total Loss Absorbing Capacity and recovery and resolution standards for central counterparties) to “maintain a level playing field” for EU and U.S.-based firms. Such enhanced regulatory coordination, Dombrovskis argued, will help support economic growth on both sides of the Atlantic.
Questions
John Rogers, Executive Vice President, Chief of Staff, and Secretary to the Board of Goldman Sachs; and Chairman of SIFMA’s Board, moderated a question and answer session with Dombrovskis.
Brexit
Asked about the process going forward for the Brexit, Dombrovskis said the first steps must be taken by the UK as it decides whether it wants to remain a part of the single market. He stressed that this possibility exists but only under three conditions, that it: 1) maintain the freedom of movement for goods, services, capital and labor; 2) continue making financial contributions to the EU; and 3) respect EU regulations. Dombrovskis commented that for the financial services sector, the least disruptive scenario would be for the UK to remain a part of the single market. He called for the UK to make this decision and begin the Article 50 process to provide clarity to markets.
Balancing Financial Stability and Growth
Rogers noted that Dombrovskis recently commented on the importance that prudential requirements strike a balance between financial stability and the ability of institutions to finance economic growth. Dombrovskis explained that the G20 agreed that the implementation of Basel III requirements should not lead to significantly higher capital requirements, and that the European Commission is committed to finalizing the implementation of Basel III while also finding this balance.
Call for Evidence
Rogers asked about the European Commission’s Call for Evidence on the impact of post-crisis financial regulations. Dombrovskis stated that the Commission asked the financial services sector and other stakeholders to provide examples of how post-crisis reforms are working and where there are issues. He commented that the intention of the review is to assess whether the same regulatory benefits can be achieved in a more growth-friendly way that would eliminate duplication or gaps in regulation.
Investment Plan for Europe
Rogers asked about the European Commission’s proposed Investment Plan for Europe, and whether the responses to the Call for Evidence might be considered as part of the plan. Dombrovskis outlined the goals of the Investment Plan as facilitating investment, improving infrastructure, and promoting fiscally-responsible policies. He said it would aim to improving the investment environment by looking at barriers at the EU and member state level.
The Joint EU-US Financial Regulatory Forum
Asked about the announcement of the renaming of the Financial Markets Regulatory Dialogue to the Joint EU-US Financial Regulatory Forum and whether this would include more substantive changes to the dialogues, Dombrovskis stressed the need for the U.S. and EU regulators and supervisors to understand each other’s regulatory frameworks. He said the Forum would meet more often and allow for better links between regulators, bringing them closer to a common approach and allowing them to take into account each other’s reforms and avoid duplication.
Securitization
Responding to a question about the European Commission’s efforts to revitalize Europe’s securitization market, Dombrovskis highlighted the Commissions proposed framework for simple, transparent and standardized securitizations. He said it includes lessons from the crisis on the assets and transparency of securitized products, and that the proposal is currently being discussed by the EU’s legislators.
London’s Future as a Clearing Center
In response to a question from the audience regarding the European Central Bank’s proposed location policy for central clearinghouses, Dombrovskis explained that the European Court of Justice ruled that EU member states cannot discriminate against one another, but acknowledged that this issue may be put back on the table in light of Brexit.
Margin for Uncleared Swaps
Dombrovskis stated that the EU remains “fully committed” to implementing the international standards for margin requirements on uncleared derivatives. He stated that the Commission will put forth a revised proposal by the end of July, but explained that the fragmented legislative process in the EU will require additional time before the standards can be adopted in Europe.
For more information on this event, please click here.