Today, the Commission proposed the Net-Zero Industry Act to scale up manufacturing of clean technologies in the EU and make sure the Union is well-equipped for the clean-energy transition. This initiative was announced by President von der Leyen as a part of the Green Deal Industrial Plan.
The Act will strengthen the resilience and competitiveness of net-zero technologies manufacturing in the EU, and make our energy system more secure and sustainable. It will create better conditions to set up net-zero projects in Europe and attract investments, with the aim that the Union’s overall strategic net-zero technologies manufacturing capacity approaches or reaches at least 40% of the Union’s deployment needs by 2030. This will accelerate the progress towards the EU’s 2030 climate and energy targets and the transition to climate neutrality, while boosting the competitiveness of EU industry, creating quality jobs, and supporting the EU’s efforts to become energy independent.
President of the European Commission, Ursula von der Leyen, said: “We need a regulatory environment that allows us to scale up the clean energy transition quickly.   The Net-Zero Industry Act will do just that. It will create the best conditions for those sectors that are crucial for us to reach net-zero by 2050: technologies like wind turbines, heat pumps, solar panels, renewable hydrogen as well as CO2 storage. Demand is growing in Europe and globally, and we are acting now to make sure we can meet more of this demand with European supply.” 
Together with the proposal for a European Critical Raw Materials Act and the reform of the electricity market design, the Net-Zero Industry Act sets out a clear European framework to reduce the EU’s reliance on highly concentrated imports. By drawing on the lessons learnt from the Covid-19 pandemic and the energy crisis sparked by Russia’s invasion of Ukraine, it will help increase the resilience of Europe’s clean energy supply chains.
The proposed legislation addresses technologies that will make a significant contribution to decarbonisation. These include: solar photovoltaic and solar thermal, onshore wind and offshore renewable energy, batteries and storage, heat pumps and geothermal energy, electrolysers and fuel cells, biogas/biomethane, carbon capture, utilisation and storage, and grid technologies, sustainable alternative fuels technologies, advanced technologies to produce energy from nuclear processes with minimal waste from the fuel cycle, small modular reactors, and related best-in-class fuels. The Strategic Net Zero technologies identified in the Annex to the Regulation will receive particular support and are subject to the 40% domestic production benchmark.
Key actions to drive net-zero technology manufacturing investments
The Net-Zero Industry Act is built on the following pillars:

Setting enabling conditions: the Act will improve conditions for investment in net-zero technologies by enhancing information, reducing the administrative burden to set up projects and simplifying permit-granting processes. In addition, the Act proposes to give priority to Net-Zero Strategic Projects, that are deemed essential for reinforcing the resilience and competitiveness of the EU industry, including sites to safely store captured CO2 emissions. They will be able to benefit from shorter permitting timelines and streamlined procedures.

Accelerating CO2 capture: the Act sets an EU objective to reach an annual 50Mt injection capacity in strategic CO2 storage sites in the EU by 2030, with proportional contributions from EU oil and gas producers. This will remove a major barrier to developing CO2 capture and storage as an economically viable climate solution, in particular for hard to abate energy-intensive sectors.

Facilitating access to markets:  to boost diversification of supply for net-zero technologies, the Act requires public authorities to consider sustainability and resilience criteria for net-zero technologies in public procurement or auctions.

Enhancing skills: the Act introduces new measures to ensure there is a skilled workforce supporting the production of net-zero technologies in the EU, including setting up Net-Zero Industry Academies, with the support and oversight by the Net-Zero Europe Platform. These will contribute to quality jobs in these essential sectors.

Fostering innovation: the Act makes it possible for Member States to set up regulatory sandboxes to test innovative net-zero technologies and stimulate innovation, under flexible regulatory conditions.
A Net-Zero Europe Platform will assist the Commission and Member States to coordinate action and exchange information, including around Net-Zero Industrial Partnerships. The Commission and Member States will also work together to ensure availability of data to monitor progress towards the objectives of the Net-Zero Industry Act. The Net-Zero Europe Platform will support investment by identifying financial needs, bottlenecks and best practices for projects across the EU. It will also foster contacts across Europe’s net-zero sectors, making particular use of existing industrial alliances.

To further support the uptake of renewable hydrogen within the EU as well as imports from international partners, today the Commission is also presenting its ideas on the design and functions of the European Hydrogen Bank. This sends a clear signal that Europe is the place for hydrogen production.
As announced in the Green Deal Industrial Plan, the first pilot auctions on renewable hydrogen production will be launched under the Innovation Fund in Autumn 2023. Selected projects will be awarded a subsidy in the form of a fixed premium per kg of hydrogen produced for a maximum of 10 years of operation. This will increase the bankability of projects and bring overall capital costs down. The EU auction platform can also offer “auctions-as-a-service” for Member States, which will also facilitate the production of hydrogen in Europe. The Commission is further exploring how to design the international dimension of the European Hydrogen Bank to incentivise renewable hydrogen imports. Before the end of the year, all elements of the Hydrogen Bank should be operational.
Next Steps
The proposed Regulation now needs to be discussed and agreed by the European Parliament and the Council of the European Union before its adoption and entry into force.
Background
The European Green Deal, presented by the Commission on 11 December 2019, sets the goal of making Europe the first climate-neutral continent by 2050. The EU’s commitment to climate neutrality and the intermediate goal of reducing net greenhouse gas emissions by at least 55% by 2030, relative to 1990 levels, are made legally binding by the European Climate Law.
The legislative package to deliver on the European Green Deal  provides a plan to put the European economy firmly on track to achieve its climate ambitions, with the REPowerEU Plan accelerating the move away from imported Russian fossil fuels. Alongside the Circular Economy Action Plan, this sets the framework for transforming the EU’s industry for the net-zero age.
The Green Deal Industrial Plan was presented on 1 February to boost net-zero industry and ensure the objectives of the European Green Deal are delivered on time. The plan sets out how the EU will sharpen its competitive edge through clean-tech investment, and continue leading on the path to climate neutrality. It responds to the invitation by the European Council for the Commission to make proposals to mobilise all relevant national and EU tools and improve framework conditions for investment, with a view to safeguarding the EU’s resilience and competitiveness. The first pillar of the Plan aims to create a predictable and simplified regulatory environment for net-zero industries. To this end, in addition to the Net-Zero Industry Act, the Commission is presenting a European Critical Raw Materials Act, to secure a sustainable and competitive critical raw materials value chain in Europe, and has proposed a reform of the electricity market design that will allow consumers to benefit from the low production costs of renewables.
Compliments of the European Commission.
The post Net-Zero Industry Act: Making the EU the home of clean technologies manufacturing and green jobs first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Today, the EU Commission proposes a comprehensive set of actions to ensure the EU’s access to a secure, diversified, affordable and sustainable supply of critical raw materials. Critical raw materials are indispensable for a wide set of strategic sectors including the net zero industry, the digital industry, aerospace, and defence sectors.
While demand for critical raw materials is projected to increase drastically, Europe heavily relies on imports, often from quasi-monopolistic third country suppliers. The EU needs to mitigate the risks for supply chains related to such strategic dependencies to enhance its economic resilience, as highlighted by shortages in the aftermath of the Covid-19 and the energy crisis following Russia’s invasion of Ukraine. This can put at risk the EU’s efforts to meet its climate and digital objectives.
The Regulation and Communication on critical raw materials adopted today leverage the strengths and opportunities of the Single Market and the EU’s external partnerships to diversify and enhance the resilience of EU critical raw material supply chains. The Critical Raw Materials Act also improves the EU capacity to monitor and mitigate risks of disruptions and enhances circularity and sustainability.
President of the European Commission, Ursula von der Leyen said: “This Act will bring us closer to our climate ambitions. It will significantly improve the refining, processing and recycling of critical raw materials here in Europe. Raw materials are vital for manufacturing key technologies for our twin transition – like wind power generation, hydrogen storage or batteries. And we’re strengthening our cooperation with reliable trading partners globally to reduce the EU’s current dependencies on just one or a few countries. It’s in our mutual interest to ramp up production in a sustainable manner and at the same time ensure the highest level of diversification of supply chains for our European businesses.”
Together with the reform of the electricity market design and the Net Zero Industry Act, today’s measures on critical raw materials create a conducive regulatory environment for the net-zero industries and the competitiveness of European industry, as announced in the Green Deal Industrial Plan.
Internal Actions
The Critical Raw Materials Act will equip the EU with the tools to ensure the EU’s access to a secure and sustainable supply of critical raw materials, mainly through:
Setting clear priorities for action: In addition to an updated list of critical raw materials, the Act identifies a list of strategic raw materials, which are crucial to technologies important to Europe’s green and digital ambitions and for defence and space applications, while being subject to potential supply risks in the future. The Regulation embeds both the critical and strategic raw materials lists in EU law. The Regulation sets clear benchmarks for domestic capacities along the strategic raw material supply chain and to diversify EU supply by 2030:

At least 10% of the EU’s annual consumption for extraction,
At least 40% of the EU’s annual consumption for processing,
At least 15% of the EU’s annual consumption for recycling,

Not more than 65% of the Union’s annual consumption of each strategic raw material at any relevant stage of processing from a single third country.

Creating secure and resilient EU critical raw materials supply chains: The Act will reduce the administrative burden and simplify permitting procedures for critical raw materials projects in the EU. In addition, selected Strategic Projects will benefit from support for access to finance and shorter permitting timeframes (24 months for extraction permits and 12 months for processing and recycling permits). Member States will also have to develop national programmes for exploring geological resources.
Ensuring that the EU can mitigate supply risks: To ensure resilience of the supply chains, the Act provides for the monitoring of critical raw materials supply chains, and the coordination of strategic raw materials stocks among Member States. Certain large companies will have to perform an audit of their strategic raw materials supply chains, comprising a company-level stress test.
Investing in research, innovation and skills:  The Commission will strengthen the uptake and deployment of breakthrough technologies in critical raw materials. Furthermore, the establishment of a large-scale skills partnership on critical raw materials and of a Raw Materials Academy will promote skills relevant to the workforce in critical raw materials supply chains. Externally, the Global Gateway will be used as a vehicle to assist partner countries in developing their own extraction and processing capacities, including skills development.
Protecting the environment by improving circularity and sustainability of critical raw materials: Improved security and affordability of critical raw materials supplies must go hand in hand with increased efforts to mitigate any adverse impacts, both within the EU and in third countries with respect to labour rights, human rights and environmental protection. Efforts to improve sustainable development of critical raw materials value chains will also help promoting economic development in third countries and also sustainability governance, human rights, conflict-resolution and regional stability.
Member States will need to adopt and implement national measures to improve the collection of critical raw materials rich waste and ensure its recycling into secondary critical raw materials. Member States and private operators will have to investigate the potential for recovery of critical raw materials from extractive waste in current mining activities but also from historical mining waste sites. Products containing permanent magnets will need to meet circularity requirements and provide information on the recyclability and recycled content.
International Engagement
Diversifying the Union’s imports of critical raw materials: The EU will never be self-sufficient in supplying such raw materials and will continue to rely on imports for a majority of its consumption. International trade is therefore essential to supporting global production and ensuring diversification of supply. The EU will need to strengthen its global engagement with reliable partners to develop and diversify investment and promote stability in international trade and strengthen legal certainty for investors. In particular, the EU will seek mutually beneficial partnerships with emerging markets and developing economies, notably in the framework of its Global Gateway strategy.
The EU will step up trade actions, including by establishing a Critical Raw Materials Club for all like-minded countries willing to strengthen global supply chains, strengthening the World Trade Organization (WTO), expanding its network of Sustainable Investment Facilitation Agreements and Free Trade Agreements and pushing harder on enforcement to combat unfair trade practices.
It will further develop Strategic partnerships: The EU will work with reliable partners to promote their own economic development in a sustainable manner through value chain creation in their own countries, while also promoting secure, resilient, affordable and sufficiently diversified value chains for the EU.
Next Steps
The proposed Regulation will be discussed and agreed by the European Parliament and the Council of the European Union before its adoption and entry into force.
Background
This initiative comprises a Regulation and a Communication. The Regulation sets a regulatory framework to support the development of domestic capacities and strengthen sustainability and circularity of the critical raw material supply chains in the EU. The Communication proposes measures to support the diversification of supply chains through new international mutually supportive partnerships. The focus is also on maximising the contribution of EU trade agreements, in full complementarity with the Global Gateway strategy.
The Critical Raw Materials Act was announced by President von der Leyen during her 2022 State of the Union speech, where she called to address the EU’s dependency on imported critical raw materials by diversifying and securing a domestic and sustainable supply of critical raw materials. It responds to the 2022 Versailles Declaration adopted by the European Council which outlined the strategic importance of critical raw materials to guarantee the Union’s strategic autonomy and European sovereignty. It also responds to the conclusions of the Conference on the Future of Europe and to the November 2021 resolution of the European Parliament for an EU critical raw materials’ strategy.
The measures build upon the 2023 criticality assessment, the foresight report focusing on strategic technologies, and the actions initiated under the 2020 Action Plan on critical raw materials. Today’s proposal is underpinned by the scientific work of the Commission’s Joint Research Centre (JRC). Together with the JRC Foresight study, the JRC also revamped the Raw Materials Information System which provides knowledge on raw materials, both primary (extracted/harvested) and secondary, for example from recycling. The tool provides information on specific materials, countries, as well as for different sectors and technologies and includes analyses for both supply and demand, current and future.
The Critical Raw Material Act is presented in parallel to the EU’s Net Zero Industry Act, which aims to scale up the EU manufacture of key carbon neutral or “net-zero” technologies to ensure secure, sustainable and competitive supply chains for clean energy in view of reaching the EU’s climate and energy ambitions.
Compliments of the European Commission.
The post Critical Raw Materials: ensuring secure and sustainable supply chains for EU’s green and digital future first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Governor Michelle W. Bowman at the Independent Community Bankers of America ICBA Live 2023 Conference, Honolulu, Hawaii | March 14, 2023 |
I would like to thank the ICBA for the invitation to speak with you today. It is a pleasure to be with you to discuss innovation in the U.S. financial system, the emerging trends that are shaping the industry, and the influence of regulatory approach on this evolution.1
Before turning to the main theme of my remarks, I would like to take a moment to acknowledge the events of the past week, and the actions taken by regulators in response. As you are aware, last Friday, March 10, the California Department of Financial Protection and Innovation closed Silicon Valley Bank. On March 12, the New York Department of Financial Services closed Signature Bank. In both cases, the Federal Deposit Insurance Corporation (FDIC) has been appointed as receiver. One significant factor leading to the stress and subsequent closure at each institution was the rapid outflow of deposits, specifically uninsured deposits above the FDIC-guaranteed amount of $250,000 per depositor, per account type.
On Sunday, several specific actions were announced that are intended to limit the direct and indirect risks to the U.S. financial system resulting from the closure of these two financial institutions. The Federal Reserve Board announced that it will make additional funding available to eligible depository institutions through a newly created Bank Term Funding Program.2 This program will offer one year loans to institutions that pledge U.S. Treasury securities, agency debt and mortgage-backed securities, and other qualifying assets as collateral. The facility will provide an additional source of liquidity to banks and eliminate the need for institutions to quickly sell these securities during a time of stress. The FDIC also took action to protect all depositors, including uninsured depositors, of both Silicon Valley Bank and Signature Bank. Beginning Monday morning, these depositors were able to access all of their funds on deposit with these banks. The federal regulators, including the FDIC, the Federal Reserve Board and U.S. Treasury Secretary Janet Yellen approved the actions to protect depositors.
The U.S. banking system remains resilient and on a solid foundation, with strong capital and liquidity throughout the system. The Board continues to carefully monitor developments in financial markets and across the financial system.
Now, turning to the main theme of my remarks today, I will discuss the imperative of fostering innovation in the banking system.
Often, when innovation is discussed within the context of the banking system, the focus is not on traditional banks engaged in core banking activities, like taking retail deposits and making loans. I think this perception misses the mark. Innovation has always been a priority for banks of all sizes and business models, from small community banks to the largest global systemically important banks (G-SIBs), and for good reason. Banks in the U.S. have a long history of developing and implementing new technologies. Innovation has the potential to make the banking and payments systems faster and more efficient, to bring new products and services to customers, and even to enhance safety and soundness. Yet, some have criticized the banking regulators for being hostile to innovation, at least when that innovation occurs within the regulated financial system. Regulators are continually learning about and adapting to new technologies, just as banks are, and regulators can play an important, complementary role, making the regulatory rules of the road clear and transparent to foster bank innovation.
Innovation does pose challenges within the regulated banking system, which can be amplified for community banks. Along with presenting new opportunities, innovation can introduce new risks and create new vulnerabilities. Banks, and really, any business today that adopts new technologies must be prepared to make corresponding improvements to manage these risks and vulnerabilities, including improvements to risk management, cybersecurity, and consumer compliance. Regulators must continue to promote efforts that are consistent with safe and sound banking practices and in compliance with applicable laws, including consumer protection laws. As I am sure you appreciate, this is not always an easy task, and the regulatory response to innovation must reflect the changes in how banks engage in this process.
It is absolutely critical that innovation not distract banks and regulators from the traditional risks that are omnipresent in the business of banking, particularly credit, liquidity, concentration, and interest rate risk.3 These more traditional risks are present in all bank business models but can be especially acute for banks engaging in novel activities or exposed to new markets, including crypto-assets.4 Whatever the cause, many traditional risks can be mitigated with appropriate risk-management and liquidity planning practices, and effective supervision, and without stifling the ability of banks to innovate.
Today, I will address three issues related to innovation. First, I will briefly discuss how bank regulation and supervision can best support responsible innovation. Second, I will touch on the unique challenges that apply to smaller and community banks pursuing innovation. Finally, I will mention a few key actions that the federal banking regulators have taken to date, and how I think about future regulatory and supervisory actions to support innovation. And before I conclude, I will also quickly touch on a few other issues that may be of interest to you.
Supporting Responsible Innovation
In the past, I have spoken about the principles that I believe should guide bank regulation and supervision.5 I have noted the value of independence—tempered by public accountability—in the Fed’s role as a bank supervisor. I have also stressed the need for clear rules of engagement and predictability in the bank applications process. And I have emphasized that transparency of expectations in rules and guidance are critical to a bank regulatory system that is fair and efficient. I think these principles are instructive when it comes to how regulators should address innovation.
As both consumer needs and their preferences in accessing financial services change, so too must the banking industry. Banks of all sizes see new opportunities to develop enhanced and customized products for their customers, introduce faster payments, and improve efficiency.
If our goal is a banking system that leverages the many benefits of innovation, regulators need to make deliberate choices about how we regulate and supervise. Further, we need to be aware of and sensitive to the unintended consequences of our regulatory framework. The Federal Reserve and the other federal banking agencies have an important role to play in helping ensure banks can innovate in a safe and sound manner, and that role includes transparency in expectations. And of course, we must ensure that regulation and supervision do not place unnecessary burdens on small banks. The vast majority of banks want to meet regulatory expectations. By publishing clear guidance and developing tools to help assist these banks, regulators can improve regulatory transparency and facilitate compliance.
Transparency is a tool that can serve the supervisory goal of promoting a safe, sound, and fair banking system, particularly when it comes to innovation. In exercising supervisory and regulatory authority, the federal banking agencies must be aware of not only the risks to the U.S. financial system, but also the harm that can be caused to U.S. consumers and businesses when we don’t achieve sufficient clarity and transparency in our expectations and when our regulations are disproportionately burdensome to the risks they are intended to address. With innovation, the risk is that a regulatory approach based on subjective, ad hoc judgments—as opposed to clear guidance and regulatory expectations—could cause new products and services to migrate to the shadow banking system. We have already seen a similar phenomenon in some markets, as with nonbank lending, which has proportionately increased when compared to bank lending in recent years.
A lack of transparency, and the corresponding limits on bank innovation, has adverse consequences for consumers, businesses, and communities. Therefore, it should be a regulatory priority to ensure our approach continues to support innovation that is conducted in a safe and sound manner and is consistent with applicable laws, including consumer protection.
The Innovation Challenges for Community Banks
I think everyone here today recognizes the valuable role that small banks play in the U.S. financial system, and just as important, in the communities they serve.6 Small banks provide credit and financial services to businesses and individuals through personalized services and relationship banking. Small banks have a deep commitment to their communities and understand their unique customers, including how they may weather the ups and downs of economic cycles.
If we look at the financial health of small banks today, we see an industry that is well-positioned to support economic growth. Across a broad range of metrics, including capital, liquidity, earnings, credit quality, and loan growth, small banks have been performing well.
But small banks also face unique challenges, especially when it comes to innovation. Small banks tend to have fewer resources to devote to these activities and fewer staff members with the technological expertise to develop products in-house. Therefore, small banks tend to be more reliant on third-party relationships to support innovation, including the critical relationship between small banks and their core service providers. However, third-party relationships can also increase operational risk, data security and cybersecurity vulnerabilities, and create other compliance issues. And of course, a bank’s use of third parties does not diminish its responsibility with respect to the activities conducted by the third-party service provider.
I think the principles I mentioned earlier can be particularly relevant when thinking about how regulators can support small bank innovation. Transparency in expectations is important for the smallest banks, who may view innovation as a strategic priority, but may lack the resources of larger peers to engage in innovation and third-party partnerships or cover costs of legal advice to address ambiguous regulatory expectations. One way we can adopt a tailored approach is by providing additional resources and tools for smaller institutions to assist with compliance. Regulators have already successfully developed compliance tools. These include the Board’s recently developed tools to assist community banks estimate their losses under the Current Expected Credit Loss, or CECL, accounting standard. The federal banking agencies also published a guide for community banks on conducting due diligence for financial technology companies.7
I think these types of efforts are very important as we introduce new regulations and requirements. Clear guidance and practical implementation tools can reduce the burden of regulation while also promoting compliance.
The Evolving Regulatory Response to Innovation
Innovation allows banks to become more efficient and better meet customer demands. So, while bank regulators do not want to hinder innovation, we also have a responsibility to ensure that the banking industry adopts new technologies appropriately. To help balance these two goals, it is incumbent upon regulators to prioritize clear guidance to banks. Having clear (and public) regulatory expectations not only supports public accountability, but also gives banks greater flexibility to innovate and experiment with new technologies.
Across a range of activities, both banks and regulators are working to make innovation accessible to all banks, with clear guidance and additional tools and resources to help small banks. I’ll now turn to a few specific examples where regulators have been working to develop transparency and clear expectations.
Crypto-asset activities
Many bank customers have expressed interest in crypto-assets over the past several years, with some banks exploring how they can meet this customer demand. There are a multitude of design and use cases for new and innovative technologies, such as distributed ledger technology and crypto-assets, which can pose unique challenges for regulators. The variability of these activities complicates the development of clear regulatory expectations around safety and soundness and risk management, and raises questions about legal permissibility. The lack of clear and timely regulatory guidance creates a real challenge for banks interested in exploring these activities.
Crypto-asset activities remain an important focus for the Federal Reserve and other bank regulators. While some banks continue to explore offering crypto-asset-related products and services to their customers, the extreme volatility of these assets creates significant challenges for banks. These assets also vary widely in terms of their structure, the markets for trading, and whether they are backed by any assets. Until clear statutory and regulatory parameters exist to govern these types of assets and the exchanges on which they are traded, I think some of the uncertainties about how the banking system can engage in crypto activities will remain unsettled.
While there is more to do, there have been some helpful initial steps to provide clarity on regulatory expectations. First, the Board published guidance clarifying that all state member banks should notify their lead supervisory point of contact prior to engaging in crypto-asset-related activities.8 The letter also clarified the broad requirements of a firm’s obligations, including the need to analyze the legal permissibility of the activities, and to develop adequate systems, risk management, and controls to conduct these activities in a safe and sound manner and consistent with all applicable laws.
More recently, the bank regulators published additional guidance to highlight the risks of crypto-asset-related activities. In January, the federal agencies released a statement highlighting crypto-asset risks and recently issued a statement on liquidity risks resulting from crypto-asset market vulnerabilities.9 Federal Reserve staff continues to develop guidance on crypto-asset activities, including on custody, trade facilitation, loans collateralized by crypto-assets, and the issuance and distribution of stablecoins. I think these are critical next steps to provide clarity around regulatory expectations.
Third-party risk management
Third-party relationships can provide smaller banks access to new products, services, and technology. The scope of these partnerships can be quite broad, including fintech companies, partners who use the bank’s “Banking as a Service” products, cloud service providers, and many others. But third-party partnerships designed to bring innovation into a bank can also create risk-management and due diligence challenges, particularly with respect to identifying the risks that a third-party partner may pose and to managing these risks.
For small banks, these compliance problems can be amplified by a number of factors. Small banks may have limited experience and in-house expertise conducting due diligence on third-party partners like fintech companies. And small banks likely have limited leverage in negotiating contracts and informational rights with third-party partners. Small banks may also encounter friction with nonbank partners who fail to understand the bank’s ongoing responsibilities to ensure that even outsourced activities are conducted in a safe and sound manner and in compliance with consumer protection laws.
The Federal Reserve and other federal banking agencies can play an important role in helping banks continue to innovate through third-party partnerships. Specifically, the agencies have been working to develop joint guidance to clarify regulatory expectations around third-party risk management, which will be an important step in supporting innovation built on third-party partnerships.
This guidance could be particularly helpful for small banks. But clearer guidance and regulatory expectations will not fully address these challenges. Guidance alone cannot address the challenges that a small bank faces in conducting due diligence on third parties and the difficulty in negotiating a contract with larger nonbank service providers and partners.
ICBA has taken some important first steps in determining if there are opportunities to fill these knowledge gaps by leveraging collective action to help with due diligence. In addition, some interesting preliminary work has been done to consider whether a standards-setting organization, in the form of a public–private partnership, could expedite due diligence on third-party fintech partners. A centralized, standards-setting organization could help develop minimum standards to ensure better consistency in the diligence banks apply to these partnerships. I see a great deal of promise in these efforts, and I support continued work to develop these mechanisms to help small banks innovate through third-party partnerships. Another area in need of attention is in assisting small banks achieve similar treatment in their contracts in comparison to larger nonbank service providers and partners.
All banks should understand regulatory expectations with respect to due diligence, risk management, and ongoing compliance when engaging in third-party relationships. Banking regulators can support this approach by providing clear expectations and the tools smaller banks may need to help them meet these expectations. For example, in 2021 the Federal Reserve began providing state member banks with supervisory reports on their third-party partners that are subject to supervision under the Bank Service Company Act. These reports contain information that may provide helpful insight in assessing the performance of bank service providers, depending on the services used and the risk the services pose. As we are considering additional opportunities to provide resources in this space, your feedback and experience would be helpful to understand where we should focus our future efforts.
Bank service company oversight
Another area that complements third-party risk management is the agencies’ regulatory authority over bank service companies. While banks who engage in partnerships with third parties continue to bear responsibility for due diligence and compliance, we should also consider whether the bank itself, or the third-party service provider, is best positioned to address risks.
The regulatory burden of third-party relationships falls heavily on banks (particularly small banks), and sometimes bleeds over to their core service providers, because the core service providers often make the technical changes to core systems to enable integration with innovative new products and services. Core service providers are already subject to activities-based supervision under the Bank Service Company Act. But with the expansion of third-party relationships, it is worth considering whether this allocation of responsibility remains sound, or whether additional parties—like fintechs and other technology companies—should be subject to closer scrutiny for the products and services they provide to banks. If third parties provide products and services to bank customers, it also may be appropriate for these providers to bear greater responsibility for their own products and services, including to ensure that they are provided in a safe and sound manner and in compliance with financial and consumer laws and regulations.
Cybersecurity
We do not often talk about cybersecurity in the context of innovation, but improving cybersecurity can complement innovation. When a bank is planning to develop new technology or pursue innovation, those new activities often bring new risks. As you know, bankers often refer to cybersecurity as one of the top risks facing the banking industry, and the Federal Reserve has issued guidance and examination procedures on a range of cybersecurity issues to help banks prepare for cyber events when they occur.
Cyber threats constantly evolve, and banks’ cybersecurity efforts must be dynamic in response. Banks must respond to emerging threats by adapting risk-management practices, engaging with regulators and law enforcement when an attack occurs, and participating in training and exercises to ensure cyber preparedness. As I have noted in the past, the Federal Reserve continues to work closely with banks to support these efforts.10
Other Important Trends
Although I won’t be able to take questions today, I would like to address a few other issues that may be of interest to this group related to bank regulation and supervision.
Community Reinvestment Act reform.
As you all know, last May, the federal banking agencies issued a notice of proposed rulemaking that would amend the Community Reinvestment Act. The agencies received extensive comments on the proposal, including comments describing the costs and benefits of the proposal and how it would impact banks. Chair Powell noted last week that there is essentially agreement among the three agencies. While we are hard at work, it is expected that it will take some months to complete.
I am continuing to review and understand this proposal and the costs it will impose. From my perspective, it will be important to consider how the costs imposed by any final rule compare to the benefits of the rule, not just in the aggregate, but for institutions of different sizes and engaged in different banking activities.
Climate risk management and regulation.
Climate risk-management and regulation efforts include the recent launch of a climate scenario exercise for the largest firms and a climate guidance proposal for a broader range of large firms. The Federal Reserve’s role in this space is very limited and generally is confined to ensuring banks operate in a safe and sound manner, relying on appropriate risk management.
With respect to climate change risks, it is important to think carefully about the costs and benefits of any guidance and the scope such guidance may include. As proposed, the climate risk-management guidance would apply only to the largest firms. Of course, all banks below this threshold, including small banks, would remain subject to robust risk-management expectations, which includes managing all material risks. In many instances, these expectations may require banks to manage a range of related risks, especially from extreme weather and natural disasters.
Capital.
As you know, the banking agencies are currently engaged in a holistic bank capital standards review and are working to implement the Basel III “endgame” reforms. With respect to the Basel III capital reforms, the agencies recently reaffirmed their commitment to implement these standards to strengthen the resilience of the U.S. financial system. As I think you all know, there are no plans to propose changes to the community bank capital framework as part of this capital review. It remains to be seen how broad the proposal will be, and for the larger firms, which firms will be affected.
Bank merger policy.
There are significant consequences for firms when applications are not acted on in a timely manner, including increased operational risk, the additional expense associated with running two institutions in parallel over a longer period, employee retention issues, and perceived reputational risk. In my mind, this is an area that we need to improve; delays in the processing of applications are not exclusively an issue for large banks.
Small banks are also subject to timing issues when engaged in bank merger transactions. In fact, small banks that operate in more rural areas with few competitors who try to merge with other local banks can raise competitive concerns under the Federal Reserve’s traditional merger standards. As I’ve previously noted, one way to improve the timing of small bank merger transactions is by considering all competitors when evaluating the competitive effects of mergers.11 In many rural markets, credit unions, farm credit system institutions, banks without a branch presence, and nonbank lenders can all be significant competitors in different product markets. In some cases, these smaller banks face greater issues in pursuing merger transactions than larger banks that operate in dense urban centers with many bank competitors. For all banks engaged in merger transactions, delays should be the exception, not the rule.
Efforts to support minority depository institutions. Minority depository institutions, or MDIs, play an important role in our financial system. MDIs often provide credit and financial services to low and moderate income and minority communities. The Federal Reserve is committed to preserving minority ownership of depository institutions, and providing technical assistance to MDIs, through the Fed’s Partnership for Progress program. Federal Reserve staff frequently meets with MDI management teams to discuss emerging issues, provide technical assistance, explain supervisory guidance, and respond to management concerns. This engagement not only furthers our efforts to support these banks, but also provides valuable insight and feedback on the challenges facing MDIs. It is also an opportunity to gather feedback on regulatory proposals.
Overdraft fees.
Banks often provide limited overdraft protection to customers and historically have charged a fee for this service. Recently, as you know, this practice has come under some regulatory scrutiny. For example, many banks have taken a close look at their practices to ensure that they are subject to appropriate disclosures and are operated in a way that is fair to consumers.
The Federal Reserve’s approach in evaluating overdraft practices has been to prioritize compliance through the review of these practices, ongoing engagement with bank management, and most importantly, transparency in our regulatory expectations. Regulatory expectations should never come as a surprise to regulated institutions, and our examiners find that transparency is an effective tool to promote compliance.
I would like to address one specific overdraft practice that has been the focus of recent attention—authorize positive, settle negative (or APSN) transactions. These transactions occur when a bank authorizes a consumer’s point-of-sale transaction based on sufficient funds in the consumer’s account, but at the time the transaction posts, the consumer’s account has insufficient funds. In some cases, the institution imposes an overdraft fee on the consumer when this occurs.
Over the past decade, the Federal Reserve has focused on this issue as part of our supervisory activities. For example, in July 2018, we published an article in the Consumer Compliance Supervision Bulletin that explained our concerns that charging consumers overdraft fees based on APSN can constitute an unfair practice.12
At the same time, we recognize that some of this risk is driven by system limitations of the core service providers, which can pose a real challenge to community banks confronting this issue in their own transaction processing operations. In some cases, core service providers need to implement changes to their systems to allow banks to avoid charging these fees. While this issue is a narrow one in the context of broader discussions about overdraft fees, it is important. We encourage banks to continue working with their service providers to implement fixes to system-based issues, and we encourage service providers to support their bank clients in providing compliant products.
Conclusion
Innovation has long been a high priority for banks, and I expect it will continue to be a key issue for the future. New technologies have created significant opportunities for banks to become more efficient and competitive and to provide improved products and services for customers. While innovation brings new opportunities, it also introduces additional risks.
But a transparent regulatory posture for these activities can help banks of all sizes embrace new technologies, to the benefit of their customers and the broader economy. The specific innovations I mentioned today only scratch the surface of the technologies and innovations that banks are exploring, which also include the use of artificial intelligence and machine learning; efforts to develop faster payments, clearing, and settlement technologies; and many others. For all areas of innovation that banks are interested in pursuing, regulators should continue to prioritize timely, clear, and transparent guidance.
I would like to again thank the ICBA for the invitation to speak to you today, and also to recognize the incredible commitment and efforts of the bankers in this room and beyond in support of their communities and the ongoing strength of the U.S. economy.
Compliments of the U.S. Federal Reserve.
Footnotes:

1. The views expressed in these remarks are my own and do not necessarily reflect those of my colleagues on the Board of Governors of the Federal Reserve System or the Federal Open Market Committee. Return to text

2. Board of Governors of the Federal Reserve System, “Federal Reserve Board Announces It Will Make Available Additional Funding to Eligible Depository Institutions to Help Assure Banks Have the Ability to Meet the Needs of All Their Depositors,” news release, March 12, 2023. Return to text

3. As part of our ongoing outreach and dialogue to community banks, I along with colleagues at the Federal Reserve Bank of Kansas City conducted an “Ask the Fed” session this past December, discussing unrealized losses at community banks in a rising rate environment. Ask the Fed, a Program of the Federal Reserve System, “A Discussion of Unrealized Losses at Community Banks in a Rising Interest Rate Environment” (December 16, 2022). Return to text

4. See Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, “Joint Statement on Liquidity Risks to Banking Organizations Resulting from Crypto-Asset Market Vulnerabilities (PDF),” news release, February 23, 2023. Return to text

5. See Michelle Bowman, “Welcoming Remarks” (speech at the Midwest Cyber Workshop, organized by the Federal Reserve Banks of Chicago, Kansas City, and St. Louis, February 15, 2023); “Independence, Predictability, and Tailoring in Banking Regulation and Supervision” (speech at the American Bankers Association Community Banking Conference, February 13, 2023); “Brief Remarks on the Economy and Bank Supervision” (speech at the Florida Bankers Association Leadership Luncheon Events, January 10, 2023); “Large Bank Supervision and Regulation” (speech at the Institute of International Finance Event: In Conversation with Michelle Bowman, September 30, 2022); “Technology, Innovation, and Financial Services” (speech at the VenCent Fintech Conference, August 17, 2022); “My Perspective on Bank Regulation and Supervision” (speech at the Conference for Community Bankers sponsored by the American Bankers Association, February 16, 2021). Return to text

6. For purposes of these remarks, I will refer to regional banking organizations and community banking organizations as “small banks.” Return to text

7. Board of Governors of the Federal Reserve System, FDIC, and OCC, “Conducting Due Diligence on Financial Technology Companies: A Guide for Community Banks (PDF)” (Washington: Board of Governors, FDIC, OCC, August 2021). Return to text

8. Board of Governors of the Federal Reserve System, “SR 22-6 Letter / CA 22-6 Letter: Engagement in Crypto-Asset-Related Activities by Federal Reserve-Supervised Banking Organizations,” August 16, 2022. Return to text

9. Board of Governors of the Federal Reserve System, FDIC, and OCC, “Joint Statement on Crypto-Asset Risks to Banking Organizations (PDF)” (Washington: Board of Governors, FDIC, OCC, January 3, 2023); “Joint Statement on Liquidity Risks to Banking Organizations Resulting from Crypto-Asset Market Vulnerabilities (PDF),” February 23, 2023. Return to text

10. See Michelle W. Bowman, “Welcoming Remarks” (speech at the Midwest Cyber Workshop, organized by the Federal Reserve Banks of Chicago, Kansas City, and St. Louis, February 15, 2023). Return to text

11. See Michelle W. Bowman, “The New Landscape for Banking Competition” (speech at the 2022 Community Banking Research Conference, sponsored by the Federal Reserve, the Conference of State Bank Supervisors, and the Federal Deposit Insurance Corporation, St. Louis, Missouri, September 28, 2022). Return to text

12. See Board of Governors of the Federal Reserve System, Consumer Compliance Supervision Bulletin (PDF), (July 2018). Return to text

The post U.S. FED Speech by Governor Bowman on “The Innovation Imperative: Modernizing Traditional Banking” first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

One year ago today, Russia launched its unprovoked, unjustifiable and illegal war of aggression against Ukraine.
Within hours of the invasion, the OECD Council condemned Russia’s large-scale aggression against Ukraine in the strongest possible terms as a clear violation of international law and a serious threat to the rules-based international order, expressing its solidarity with the Ukrainian people.
Since then, building on our work together over several decades, the OECD has continued to further broaden, deepen and strengthen our engagement and cooperation with Ukraine.
We have worked with our Members to support the reception and integration of Ukraine’s refugees and displaced persons, and to help address their needs with a particular focus on educational and employment continuity.
We have worked with donors and other partners on the international coordination of support to Ukraine.
We have worked closely with the government of Ukraine in support of its rebuilding, reconstruction and reform agenda.
We were pleased to welcome President Volodymyr Zelensky, virtually from Kyiv, to our annual Ministerial Council meeting and Prime Minister Denys Shmyhal to our final Council meeting of 2022.
We have formally recognised Ukraine as a prospective Member, committing to an initial accession dialogue designed to increase its adherence to OECD standards and participation in OECD bodies.
We have established the new OECD-Ukraine Liaison Office, initially from Paris.
Today I can announce the official opening of the OECD-Ukraine Liaison office in Kyiv.
From 1 March 2023, the office will start operating from its premises hosted by the Embassy of the Slovak Republic to Ukraine in Kyiv.
I thank Slovakia most sincerely for this important support and also warmly recognise the financial support provided by Poland, Lithuania, Latvia, Romania as well as Slovakia to enable the establishment and operation of this office.
At full capacity, a team of four OECD officials will coordinate the implementation of a new OECD-Ukraine Country Programme on the ground from Kyiv.
As we go forward, the most immediate focus must remain on securing, as soon as possible, a comprehensive, just and lasting peace for the people of Ukraine, consistent with international law and with the terms of the UN resolution passed with the overwhelming support of its Members yesterday. Such a peace is not only in the best interest of the people of Ukraine, but of people all around the world, including the people of Russia.
In the meantime, the OECD will continue to support Ukraine’s determined efforts to plan and prepare now for the reconstruction and recovery effort, to help rebuild better, stronger and consistent with the values of a free, open, market based democracy and the high standards expected of a prospective Member of the OECD.
Compliments of the OECD.
The post OECD | Statement by the OECD Secretary-General on Ukraine first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The United States and the European Union share the most comprehensive and dynamic economic relationship in the world. Our partnership is based on shared values and principles, including the responsibility to protect our planet for future generations and defend our workers. Today, the United States and the European Union are taking new steps to deepen our economic relationship as we build the clean energy economies of the future and address shared economic and national security challenges.
Building the Clean Economies of the Future
The United States and European Union are committed to addressing the climate crisis, accelerating the global clean energy economy, and building resilient, secure, and diversified clean energy supply chains. Both parties recognize that these objectives are at the heart of the U.S. Inflation Reduction Act and the EU Green Deal Industrial Plan. By building and strengthening our own clean energy industrial bases and investing in the industries of the future, the United States and the European Union will create good-paying jobs and spark virtuous cycles of innovation that drive down costs for clean energy technologies in the global market, making those technologies more affordable and advancing a global just energy transition that will leave no community behind.
The EU-U.S. Task Force on the Inflation Reduction Act has productively deepened our partnership on these common goals, and has taken practical steps forward on identified challenges to align our approaches on strengthening and securing supply chains, manufacturing, and innovation on both sides of the Atlantic.
We will deepen our cooperation on diversifying critical mineral and battery supply chains, recognizing the substantial opportunities on both sides of the Atlantic to build out these supply chains in a strong, secure, and resilient manner. To that end, we intend to immediately begin negotiations on a targeted critical minerals agreement for the purpose of enabling relevant critical minerals extracted or processed in the European Union to count toward requirements for clean vehicles in the Section 30D clean vehicle tax credit of the Inflation Reduction Act. This kind of agreement would further our shared goals of boosting our mineral production and processing and expanding access to sources of critical minerals that are sustainable, trusted, and free of labor abuses. Cooperation is also necessary to reduce unwanted strategic dependencies in these supply chains, and to ensure that they are diversified and developed with trusted partners.
We further recognize the need to make bold investments to build clean energy economies and industrial bases, including in electric vehicle batteries and clean hydrogen. Today, the United States and the European Commission announced the launch of the Clean Energy Incentives Dialogue to coordinate our respective incentive programs so that they are mutually reinforcing. Both sides will take steps to avoid any disruptions in transatlantic trade and investment flows that could arise from their respective incentives. We are working against zero-sum competition so that our incentives maximize clean energy deployment and jobs—and do not lead to windfalls for private interests. The Clean Energy Incentives Dialogue will become a part of the EU-U.S. Trade and Technology Council where it will also facilitate information-sharing on non-market policies and practices of third parties—such as those employed by the People’s Republic of China (PRC)—to serve as the basis for joint or parallel action and coordinated advocacy on these issues in multilateral or other fora.
We are committed to achieving an ambitious outcome in the Global Arrangement on Sustainable Steel and Aluminum negotiations by October 2023. The arrangement will ensure the long-term viability of our industries, encourage low-carbon intensity steel and aluminum production and trade, and restore market-oriented conditions globally and bilaterally. Together, we will incentivize emission reductions in these carbon-intensive sectors and level the playing field for our workers. The arrangement will be open to all partners demonstrating commitment to countering non-market excess capacity and reducing carbon-intensity in these sectors.
We are working together to support countries around the world as they develop their economies to deliver inclusive and resilient growth, while fostering sustainable pathways to net zero emissions as well as boosting the security of global supply chains. Through the G7 Partnership for Global Infrastructure and Investment, we are identifying opportunities to generate significantly more public and private financing for quality climate and energy security investments in developing countries. We are also advancing an ambitious agenda to evolve the multilateral development banks, starting with the World Bank, to better respond to global challenges like climate change, while also enhancing their work on poverty alleviation and meeting the Sustainable Development Goals.
Recognizing our shared history as well as our joint visions for the future, we believe that people to people exchanges strengthen the transatlantic partnership, especially for younger generations. We will discuss how to deepen our cooperation.
Standing Together to End Russia’s War Against Ukraine
The United States and the European Union have taken a strong and united stand against Russia’s illegal, unjustifiable, and unprovoked war against Ukraine. We, along with a broad coalition of partners, have imposed swift and sweeping sanctions that are reducing Russia’s revenue to fund its war and its military-industrial base. Putin thought that he would divide us, and yet we are more united than ever. We stand together in our unwavering support for Ukraine for as long as it takes.
One year ago, the United States and the European Commission launched a new partnership to rapidly reduce Europe’s dependence on Russian fossil fuels and accelerate Europe’s green transition. This partnership has exceeded our goals, delivering more than double the U.S. liquefied natural gas supplies to Europe than our baseline pledge. We note the significant European efforts to diversify their energy supplies and accelerate the energy transition, which have helped limit the impact of the global energy crisis in Europe. We will continue to work together to advance energy security and sustainability in Europe by diversifying sources, lowering energy consumption, and reducing Europe’s dependence on fossil fuels. We will also continue our close coordination to support Ukraine’s energy security through its further integration into Europe’s energy markets. We will continue our cooperation for stable and balanced global markets and security of supply and step up the clean energy transition globally, including by efforts to reduce methane emissions in the energy sector.
We have also taken unprecedented, coordinated, and effective sanctions and other economic measures together to further degrade Russia’s capacity to wage its illegal war and its military-industrial system. We are deepening our joint work to aggressively enforce our sanctions and export control measures and also to end and deter circumvention and backfill, including by expanded authorities to close down Russia’s access to all inputs that can support its war machine. As part of this, we are taking new steps together to target additional third-country actors across the globe to disrupt support for Russia’s war from any corner of the world where it is identified. We are working in lockstep to limit Russian revenue even further while ensuring continued energy supplies to emerging market and developing countries via the G7+ price cap for seaborne Russian-origin crude oil and petroleum products. We will continue to work together to strengthen our economic restrictions to ensure that the costs to Russia of its illegal war continue to grow.
The United States and European Union are working to ensure that Ukraine has the security, economic, and humanitarian support it needs for as long as it takes. We have worked together to supply the Ukrainian Armed Forces with the military equipment and training it needs to defend itself from Russian aggression. We, together with Ukraine, are co-chairing the Multi-agency Donor Coordination Platform, and, in line with its European path, are helping advance Ukraine’s reform agenda, laying the foundation for sustainable growth and reconstruction, and ensuring assistance is delivered in a coherent, transparent, and accountable manner. We remain committed to providing and mobilizing international support including from the private sector for Ukraine’s economic and financial stability. We support the International Monetary Fund delivering an ambitious program by end March 2023 to provide necessary budget support to Ukraine throughout and beyond 2023.
Strengthening Economic Security and National Security
The United States and the European Union are working to reinforce, through transatlantic cooperation, our essential security interests and the resilience of our economies. We affirm that our cooperation to strengthen our economic security and national security should be rooted in maintaining the rules-based system. We will continue our work through the U.S.-EU Trade and Technology Council and the G7 and strengthen our bilateral coordination by tasking our Sherpas to formulate key recommendations on economic security by the summer.
We will continue work to strengthen our economic security, responding to concrete threats we have identified. The United States and the European Union share concerns about the challenges posed by, among other issues, economic coercion, the weaponization of economic dependencies, and non-market policies and practices. We will continue our work through the U.S.-EU Trade and Technology Council and the G7 to strengthen coordination with each other and other likeminded partners to diversify our supply chains, and to increase our collective preparedness, resilience, and deterrence to non-market policies and practices and to economic coercion.
We are increasing our cooperation to prevent the leakage of sensitive emerging technologies, as well as other dual-use items, to destinations of concern that operate civil-military fusion strategies. Our respective existing controls related to exports, inbound investment, and research cooperation are essential tools and need to be upgraded to correspond to a changing geostrategic environment. We have a common interest in preventing our companies’ capital, expertise, and knowledge from fueling technological advances that will enhance the military and intelligence capabilities of our strategic rivals, including through outbound investment. As we develop and upgrade our toolkit, we will coordinate efforts across the Atlantic to avoid the backfilling of any controlled exports and investments and will continue to share lessons and seek to align our approaches where feasible to maximize the effectiveness of our efforts.
Compliments of the European Commission.
The post Joint Statement by President Biden and President von der Leyen first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The United States and the European Union share the most comprehensive and dynamic economic relationship in the world. Our partnership is based on shared values and principles, including the responsibility to protect our planet for future generations and defend our workers. Today, the United States and the European Union are taking new steps to deepen our economic relationship as we build the clean energy economies of the future and address shared economic and national security challenges. 
Building the Clean Economies of the Future
The United States and European Union are committed to addressing the climate crisis, accelerating the global clean energy economy, and building resilient, secure, and diversified clean energy supply chains. Both parties recognize that these objectives are at the heart of the U.S. Inflation Reduction Act and the EU Green Deal Industrial Plan. By building and strengthening our own clean energy industrial bases and investing in the industries of the future, the United States and the European Union will create good-paying jobs and spark virtuous cycles of innovation that drive down costs for clean energy technologies in the global market, making those technologies more affordable and advancing a global just energy transition that will leave no community behind.
The EU-U.S. Task Force on the Inflation Reduction Act has productively deepened our partnership on these common goals, and has taken practical steps forward on identified challenges to align our approaches on strengthening and securing supply chains, manufacturing, and innovation on both sides of the Atlantic.
We will deepen our cooperation on diversifying critical mineral and battery supply chains, recognizing the substantial opportunities on both sides of the Atlantic to build out these supply chains in a strong, secure, and resilient manner. To that end, we intend to immediately begin negotiations on a targeted critical minerals agreement for the purpose of enabling relevant critical minerals extracted or processed in the European Union to count toward requirements for clean vehicles in the Section 30D clean vehicle tax credit of the Inflation Reduction Act. This kind of agreement would further our shared goals of boosting our mineral production and processing and expanding access to sources of critical minerals that are sustainable, trusted, and free of labor abuses. Cooperation is also necessary to reduce unwanted strategic dependencies in these supply chains, and to ensure that they are diversified and developed with trusted partners.
We further recognize the need to make bold investments to build clean energy economies and industrial bases, including in electric vehicle batteries and clean hydrogen. Today, the United States and the European Commission announced the launch of the Clean Energy Incentives Dialogue to coordinate our respective incentive programs so that they are mutually reinforcing. Both sides will take steps to avoid any disruptions in transatlantic trade and investment flows that could arise from their respective incentives. We are working against zero-sum competition so that our incentives maximize clean energy deployment and jobs—and do not lead to windfalls for private interests. The Clean Energy Incentives Dialogue will become a part of the EU-U.S. Trade and Technology Council where it will also facilitate information-sharing on non-market policies and practices of third parties—such as those employed by the People’s Republic of China (PRC)—to serve as the basis for joint or parallel action and coordinated advocacy on these issues in multilateral or other fora.
We are committed to achieving an ambitious outcome in the Global Arrangement on Sustainable Steel and Aluminum negotiations by October 2023. The arrangement will ensure the long-term viability of our industries, encourage low-carbon intensity steel and aluminum production and trade, and restore market-oriented conditions globally and bilaterally. Together, we will incentivize emission reductions in these carbon-intensive sectors and level the playing field for our workers. The arrangement will be open to all partners demonstrating commitment to countering non-market excess capacity and reducing carbon-intensity in these sectors.
We are working together to support countries around the world as they develop their economies to deliver inclusive and resilient growth, while fostering sustainable pathways to net zero emissions as well as boosting the security of global supply chains. Through the G7 Partnership for Global Infrastructure and Investment, we are identifying opportunities to generate significantly more public and private financing for quality climate and energy security investments in developing countries. We are also advancing an ambitious agenda to evolve the multilateral development banks, starting with the World Bank, to better respond to global challenges like climate change, while also enhancing their work on poverty alleviation and meeting the Sustainable Development Goals.
Recognizing our shared history as well as our joint visions for the future, we believe that people to people exchanges strengthen the transatlantic partnership, especially for younger generations. We will discuss how to deepen our cooperation.
Standing Together to End Russia’s War Against Ukraine
The United States and the European Union have taken a strong and united stand against Russia’s illegal, unjustifiable, and unprovoked war against Ukraine. We, along with a broad coalition of partners, have imposed swift and sweeping sanctions that are reducing Russia’s revenue to fund its war and its military-industrial base. Putin thought that he would divide us, and yet we are more united than ever. We stand together in our unwavering support for Ukraine for as long as it takes.
One year ago, the United States and the European Commission launched a new partnership to rapidly reduce Europe’s dependence on Russian fossil fuels and accelerate Europe’s green transition. This partnership has exceeded our goals, delivering more than double the U.S. liquefied natural gas supplies to Europe than our baseline pledge. We note the significant European efforts to diversify their energy supplies and accelerate the energy transition, which have helped limit the impact of the global energy crisis in Europe. We will continue to work together to advance energy security and sustainability in Europe by diversifying sources, lowering energy consumption, and reducing Europe’s dependence on fossil fuels. We will also continue our close coordination to support Ukraine’s energy security through its further integration into Europe’s energy markets. We will continue our cooperation for stable and balanced global markets and security of supply and step up the clean energy transition globally, including by efforts to reduce methane emissions in the energy sector.
We have also taken unprecedented, coordinated, and effective sanctions and other economic measures together to further degrade Russia’s capacity to wage its illegal war and its military-industrial system. We are deepening our joint work to aggressively enforce our sanctions and export control measures and also to end and deter circumvention and backfill, including by expanded authorities to close down Russia’s access to all inputs that can support its war machine. As part of this, we are taking new steps together to target additional third-country actors across the globe to disrupt support for Russia’s war from any corner of the world where it is identified. We are working in lockstep to limit Russian revenue even further while ensuring continued energy supplies to emerging market and developing countries via the G7+ price cap for seaborne Russian-origin crude oil and petroleum products. We will continue to work together to strengthen our economic restrictions to ensure that the costs to Russia of its illegal war continue to grow.
The United States and European Union are working to ensure that Ukraine has the security, economic, and humanitarian support it needs for as long as it takes. We have worked together to supply the Ukrainian Armed Forces with the military equipment and training it needs to defend itself from Russian aggression. We, together with Ukraine, are co-chairing the Multi-agency Donor Coordination Platform, and, in line with its European path, are helping advance Ukraine’s reform agenda, laying the foundation for sustainable growth and reconstruction, and ensuring assistance is delivered in a coherent, transparent, and accountable manner. We remain committed to providing and mobilizing international support including from the private sector for Ukraine’s economic and financial stability. We support the International Monetary Fund delivering an ambitious program by end March 2023 to provide necessary budget support to Ukraine throughout and beyond 2023.
Strengthening Economic Security and National Security
The United States and the European Union are working to reinforce, through transatlantic cooperation, our essential security interests and the resilience of our economies. We affirm that our cooperation to strengthen our economic security and national security should be rooted in maintaining the rules-based system. We will continue our work through the U.S.-EU Trade and Technology Council and the G7 and strengthen our bilateral coordination by tasking our Sherpas to formulate key recommendations on economic security by the summer.
We will continue work to strengthen our economic security, responding to concrete threats we have identified. The United States and the European Union share concerns about the challenges posed by, among other issues, economic coercion, the weaponization of economic dependencies, and non-market policies and practices. We will continue our work through the U.S.-EU Trade and Technology Council and the G7 to strengthen coordination with each other and other likeminded partners to diversify our supply chains, and to increase our collective preparedness, resilience, and deterrence to non-market policies and practices and to economic coercion.
We are increasing our cooperation to prevent the leakage of sensitive emerging technologies, as well as other dual-use items, to destinations of concern that operate civil-military fusion strategies. Our respective existing controls related to exports, inbound investment, and research cooperation are essential tools and need to be upgraded to correspond to a changing geostrategic environment. We have a common interest in preventing our companies’ capital, expertise, and knowledge from fueling technological advances that will enhance the military and intelligence capabilities of our strategic rivals, including through outbound investment. As we develop and upgrade our toolkit, we will coordinate efforts across the Atlantic to avoid the backfilling of any controlled exports and investments and will continue to share lessons and seek to align our approaches where feasible to maximize the effectiveness of our efforts.

Compliments of the European Commission

IMPORTANT NOTE IN THIS CONTEXT: The EACC Network is at the center of #TransatlanticBusinessRelations, if you are not a member yet we invite YOU to join us to be part of this important conversation and to be where the action is when it comes to implementing the ambitious goals set by this agreement. More here https://eaccny.com/membership. Don’t miss out! We look forward to hearing from you.
The post EU & US Manage to Overcome Trade Tensions – Joint Statement by President Biden and President von der Leyen first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Europe must speed up its green and digital transition. For that, we need to complete the Capital Markets Union to provide effective financing. This is the plea made by the five Presidents of the ECB, EIB, European Council, European Commission and Eurogroup in a joint post

The European Union is determined to fast-forward its green and digital transition. What we decide today will affect the generations to come. It is our collective responsibility to get it right. Creating net-zero industries, boosting technological competitiveness, and diversifying supply chains will be paramount for Europe’s continued prosperity and strategic sovereignty in the coming decades.
The financing needs are huge, and the lion’s share will need to come from private capital. The role of public investment is to give policy direction and to incentivise massive crowding-in of private capital, including through, but not limited to, the involvement of the European Investment Bank Group and national promotional banks.
We have been too slow on the Capital Markets Union
The Single Market has underpinned Europe’s prosperity since its creation 30 years ago by eliminating obstacles to trade within the EU and attracting foreign investment. And the Economic and Monetary Union has been a further driver of market integration. But we have been too slow for too long on one essential building block: the Capital Markets Union.
Right now, banks in Europe provide the bulk of investment funding. They alone, however, cannot help the EU win the global investment race, especially in comparison with the United States. Bank loans account for 75% of corporate borrowing in the EU and bond markets for 25% – while the inverse is true in the United States.
Our start-ups and scale-ups are looking for capital. Businesses, especially SMEs, are struggling to find the patient and risk-bearing funding they need to invest in the green and digital transition. For example, the EU’s stock market capitalisation is less than half that of the United States, in percentage of GDP, and lower than that of Japan, China and the United Kingdom. Yet, Europeans save much more than Americans.
It is our responsibility to make sure that European companies have the financing opportunities they seek, here, in the EU. We need a Capital Markets Union that channels Europe’s vast savings into tomorrow’s engines of growth. We must overcome the current patchwork of national frameworks, and in some cases underdeveloped capital markets, to unlock their full potential. This will strengthen the EU as an investment destination and make the euro an even more attractive currency.
The EU has already taken some decisive steps in creating a Single Market for capital. Still, we need to step up our efforts and our ambitions to remove remaining barriers to cross-border finance and allow for deeper harmonisation. This includes more aligned insolvency laws, more easily accessible financial information, simplified access to capital markets, particularly for smaller companies, robust market infrastructures, and more-integrated capital markets supervision.
Deepening the Capital Markets Union requires a collective effort, involving policymakers and market participants across the EU. It needs strong political will and ownership at all levels of government. It needs the European Parliament and the Member States in the Council to urgently finalise negotiations on key legislative texts. It requires courage and openness to change. We are determined to see progress going through.
Time is of the essence. We have made notable progress toward Europe’s financial integration in the past two decades, but it is time to show greater ambition. A genuine Capital Markets Union is within reach. The coming decades will see the greatest industrial transformation of our times. Our long-term competitiveness will depend on it. Let’s make sure we have the capital to make it happen.
This ECB Blog post appeared as an opinion piece in various newspapers and on websites across Europe.
Authors:

Paschal Donohoe, President of the Eurogroup

Werner Hoyer, President of the European Investment Bank

Christine Lagarde, President of the European Central Bank

Charles Michel, President of the European Council

Ursula von der Leyen, President of the European Commission

Compliments of the European Central Bank.
The post ECB | Channelling Europe’s savings into growth first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Introductory remarks by Fabio Panetta, Member of the Executive Board of the ECB, at the meeting of the Euro Cyber Resilience Board for pan-European Financial Infrastructures | Frankfurt am Main, 8 March 2023 |
The proliferation of cyber threat actors combined with an increase in remote working and greater digital interconnectedness is raising the risk, frequency and severity of cyberattacks.[1] Increasingly, cyber criminals are launching ransomware attacks and demanding payment in crypto. Cyberattacks related to geopolitical developments – Russia’s aggression against Ukraine in particular – have also become a more common feature of the cyber-threat landscape.
The Euro Cyber Resilience Board for pan-European Financial Infrastructures (ECRB) has played a key role in protecting the security and integrity of the financial system from these threats. The last three years have shown that we can work under adverse conditions towards a common goal. Our financial infrastructures have proven their resilience to cyber threats. But this does not mean we can become complacent or any less vigilant in the face of cyber threats. We simply cannot afford to fall behind the curve: cybersecurity must be the backbone of digital finance.
Today I will take stock of the ECRB’s work. I will then discuss current cyber threats and emerging risks before outlining the implications for our work in the future.
The contribution of the Euro Cyber Resilience Board
The ECRB brings together private and public stakeholders across pan-European financial infrastructures, critical service providers, central banks and other authorities. This offers a unique prism through which the ECRB can identify and fix any weaknesses which cyberattacks could potentially exploit in order to propagate, which in turn would cause systemic ripples throughout the European financial ecosystem.
Let me give three examples of why the ECRB is such a useful forum for cooperation.
First, in the area of information sharing, the ECRB’s Cyber Information and Intelligence Sharing Initiative (CIISI-EU)[2] allows members to exchange information about cyber threats and mitigation in a secure and trusted group environment.
Second, the ECRB has established a crisis coordination protocol that facilitates cooperation and coordination, allowing members to exchange and respond to major cyber threats and incidents.
Third, in the area of training and awareness, the ECRB conducts joint assessments and training sessions to increase common knowledge and understanding. A key pillar of the ECB’s cyber strategy for financial infrastructures is the TIBER-EU framework for threat-led penetration testing, also known as red teaming. In June 2022 the ECRB organised a dedicated roundtable on TIBER-EU where members shared their experience of these kinds of exercises.[3]
In view of their systemic role in the financial system, we will continue to focus on pan-European financial infrastructures. Nonetheless, financial infrastructures are increasingly interdependent through horizontal and vertical links and common participants. They are also reliant on information and communication technology and on third-party service providers. As a result, these infrastructures are exposed to common risks and vulnerabilities through which cyberattacks could propagate swiftly if they are not rigorously managed. The ECRB allows us to join forces to address these risks on a sector-wide level.
Adapting to a constantly changing cyber threat landscape
Let me now turn to the cyber threat landscape.
Threats are becoming increasingly complex. Recent attacks call for constant vigilance at an operational level, and the continuous reassessment of regulatory and oversight frameworks to see whether they need to be updated.[4] Significant but unpredictable shifts can occur at any time. We must therefore be prepared to understand them and to adapt quickly in order to mitigate the financial ecosystem’s susceptibility to cyberattacks.
The ECRB has identified supply chain attacks and ransomware as key threats in the current environment, and artificial intelligence (AI) as an emerging threat. We have also witnessed how geopolitical developments, most recently Russia’s aggression against Ukraine, have weaponised cyberspace. The most prominent examples are distributed denial-of-service (DDoS) attacks against government and financial entities.[5]
Let me discuss the key current and emerging threats in more detail.
Supply chain attacks
The financial ecosystem’s reliance on third-party products and services is a key risk, especially when financial entities outsource critical functions to them. An attack on these third parties or on their products and services can disrupt and harm the financial infrastructures that rely on them, with spillovers to interconnected entities.
When such third-party products and services are widely used in the financial ecosystem, a cyberattack can have widespread, possibly systemic effects by having an impact on multiple financial entities at once. That is why cyber threat actors target these third parties. In so doing, they can compromise numerous financial entities simultaneously.
The recent cyberattack on the third-party provider ION Cleared Derivatives shows how an attack on one software provider may cascade onto their clients. In this specific case, the disruptions to the trading and clearing of financial derivatives remained limited, but we cannot ignore scenarios where the attacks could have propagated quickly, disrupting the financial system.
This case signalled the need for financial entities to review their third-party providers, the providers of these third-parties, their cyber resilience levels and the systemic impact that may ensue from a cyberattack on any of these providers. In particular, it is vital to assess critical service dependencies on third-party products and services which could be disrupted or even terminated as a result of a cyberattack. Mitigating measures need to be put in place.
Against this background, the G7 recently updated its Fundamental Elements for Third-Party Cyber Risk Management in the Financial Sector[6]. In addition, the ECRB set up a working group in 2022 to support third-party cyber risk management.
We must have a cyber resilience mindset at all times. The question we must ask is not if a cyberattack will happen, but whether we are ready to respond when it happens. Over the past year, the ECRB has worked on a conceptual model for how the financial infrastructure ecosystem could manage such a crisis if it occurred. It has also developed protocols and networks aimed at supporting a collective, consistent and comprehensive response to a cyber crisis by stakeholders.
Ransomware
The proliferation of ransomware is one of the most significant challenges currently facing financial entities. Not only may ransomware attacks result in financial loss, they may also severely disrupt operations. Even after a ransom is paid, there is no guarantee the decryption key will actually work or that the stolen data will not be publicly disclosed or further misused to extort victims’ customers, for example.
Ransomware attacks are growing more sophisticated and damaging, which in turn may enable ransomware threat actors to obtain even more resources. 2022 was one of the most active years for ransomware activity.[7] However, it was also the first year that the majority of victims of ransomware attacks decided not to pay up[8], which indicates that the approach towards ransomware attacks is changing.
Authorities globally are stepping up their efforts to counter ransomware. For instance, the G7 issued Fundamental Principles on Ransomware Resilience in October 2022[9].
We need to tackle ransomware attacks from various angles.
First, every firm must be ready to repel ransomware attacks, either through the use of proper cyber hygiene practices or by ensuring that data is backed up regularly and is kept up-to-date and tamper-proof.
Second, enforcement agencies need to conduct forensic analyses, locate attackers and join forces to prosecute them.
Third, crypto-assets – especially unbacked crypto-assets, which are used to make ransomware payments owing to the anonymity and money laundering possibilities they offer[10] – need to be strictly regulated.[11] Similarly, crypto-asset transfers must be traceable.
The proposed EU Regulation for Markets in Crypto-Assets (MiCA) and revision to the Regulation on information accompanying transfers of funds, which extends the “travel rule”[12] to crypto-assets, are important steps. However, to be effective and prevent regulatory arbitrage, regulation must be stepped up globally.[13] Implementation of the Financial Action Task Force (FATF) guidance for crypto-assets and its enforcement at international level are therefore crucial.[14]
In addition, all firms need to have the highest level of cyber controls in place to prevent attacks from being successful and to detect and recover from ransomware attacks. Moreover, insurance firms can lend their support by obtaining assurances from their clients that they have high-level cyber resilience plans in place before providing cyber risk insurance policies, thus ensuring that these very same policies do not lower firms’ incentives to prepare for cyberattacks.
Artificial Intelligence (AI)
Even if we do not realise it, the use of artificial intelligence (AI) is already widespread. We use AI every day, including on our phones, in our homes and at the workplace. And firms use it to harness big data.
AI can help to strengthen cybersecurity, for instance, by improving the detection of highly sophisticated cyberattacks through its ability to identify abnormal system behaviour compared with an established baseline. This is the kind of potential that we need to leverage.
But AI can also multiply cyber risks by, for instance, helping malicious individuals, even those who have limited or no technical skills, draft very convincing phishing emails or identify topics that will achieve the maximum engagement from those being targeted. To make matters worse, AI can even create and fix code that can be used to exploit and compromise the endpoint.[15] This opens up new possibilities for malicious individuals to use AI to launch cyberattacks. Although AI development firms try to install safeguards to prevent its unethical use, they can be circumvented.
The risks from AI need to be clearly understood and addressed through regulation and oversight. By exchanging information among its members and organising roundtables and training, the ECRB is in a strong position to raise awareness of risks at an early stage and accumulate knowledge of these types of threats. For its part, the European Commission has proposed a Regulation on artificial intelligence that aims to address some of the key risks associated with AI.[16]

Chart 1
Cyber threat landscape for financial market infrastructures in Europe

Note: Threats are arranged in descending order of estimated severity.

Conclusion
As we realised some years ago, cyber threats are here to stay. Many highly-adaptable threat actors exist who will systematically try to exploit any weakness or vulnerability for illegal purposes. Existing threats are becoming more dangerous and new threats are on the horizon. We therefore need to adapt our operational and cyber resilience frameworks constantly at the individual level as well as collectively through strict regulation, enforcement and prosecution. Future cooperation between public and private institutions will also be crucial. The ECRB can make a decisive contribution to this effort in relation to the financial system.
Compliments of the European Central Bank.

Footnotes:
1. See Forbes (2022), “The Pandemic’s Lasting Effects: Are Cyber Attacks One of Them?”, 20 July.
2. See European Central Bank (2020), “Cyber Information and Intelligence Sharing Initiative (CIISI-EU). Cyber information and intelligence sharing: a practical example”.
3. See European Central Bank (2022), ”Key takeaways from the ECRB roundtable on red teaming (TIBER-EU)”.
4. See Financial Times (2023), “The financial system is alarmingly vulnerable to cyber attack”, 6 February.
5. See Reuters (2023), “Russian ‘hacktivists’ briefly knock German websites offline”, 25 January.
6. See “G7 Fundamental Elements for Third-Party Cyber Risk Management in the Financial Sector”, October 2022.
7. See Techcrunch (2022), “Ransomware is a global problem that needs a global solution”, November.
8. See Security Week (2023), “Ransomware revenue plunged in 2022 as more victims refuse to pay up”, January.
9. See “G7 Fundamental Elements of Ransomware Resilience for the Financial Sector”, October 2022.
10. According to recent reports, ransomware attackers extorted at least €430 million in 2022, while the number of ransomware strains saw a sharp increase. The actual amount extorted may be even higher, as may the number of attacks. See “The 2023 Crypto Crime Report”, Chainalysis, February 2023.
11. See Panetta, F. (2022), “Crypto dominos: the bursting crypto bubbles and the destiny of digital finance”, keynote speech at the Insight Summit held at the London Business School, 7 December.
12. The “travel rule” requires that information on the source of the asset and its beneficiary travels with the transaction and is stored on both sides of the transfer. See European Parliament (2022), “Crypto-assets: deal on new rules to stop illicit flows in the EU”, 29 June.
13. See Panetta, F. (2023), “Caveat emptor does not apply to crypto”, Financial Times, 4 January.
14. See Financial Action Task Force (2021), ”Updated Guidance for a Risk-Based Approach for Virtual Assets and Virtual Asset Service Providers”, October.
15. See Forbes (2023), “Does ChatGPT pose a cybersecurity threat? Here’s the AI bot’s answer”, February.
16. See European Commission, “Regulatory framework proposal on artificial intelligence”. The proposed rules will address risks specifically created by AI applications, propose a list of high-risk applications, set clear requirements for AI systems for high-risk applications, define specific obligations for AI users and providers of high-risk applications, propose a conformity assessment before the AI system is put into service or placed on the market, propose enforcement after such an AI system is placed in the market, and propose a governance structure at European and national level.
The post ECB Speech | The Quick and the Dead: building up cyber resilience in the financial sector first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

On 7 March 2023, the European Commission carried out unannounced inspections at the premises of companies and an association active in the fragrance industry in various Member States. In parallel, the Commission has sent out formal requests for information to several companies active in the same sector.
The inspections and requests for information concern possible collusion in relation to the supply of fragrances and fragrance ingredients. Fragrances are used in the manufacture of consumer products such as household and personal care products.
The Commission has concerns that companies and an association in the fragrance industry worldwide may have violated EU antitrust rules that prohibit cartels and restrictive business practices (Article 101 of the Treaty on the Functioning of the European Union).
The Commission has been in contact with the Antitrust Division of the US Department of Justice, the UK Competition and Markets Authority and the Swiss Competition Commission in relation to this matter and the inspections were conducted in consultation with them. The Commission officials were accompanied by their counterparts from the national competition authorities of the Member States where the inspections were carried out.
Unannounced inspections are a preliminary investigatory step into suspected anticompetitive practices. The fact that the Commission carries out such inspections does not mean that the companies are guilty of anti-competitive behaviour nor does it prejudge the outcome of the investigation itself. The Commission respects the rights of defence, in particular the right of companies to be heard in antitrust proceedings.
There is no legal deadline to complete inquiries into anticompetitive conduct. Their duration depends on a number of factors, including the complexity of each case, the extent to which the undertakings concerned co-operate with the Commission and the exercise of the rights of defence.
Under the Commission’s leniency programme companies that have been involved in a secret cartel may be granted immunity from fines or significant reductions in fines in return for reporting the conduct and cooperating with the Commission throughout its investigation. Individuals and companies can report cartel or other anti-competitive behaviour on an anonymous basis through the Commission’s whistle-blower tool. Further information on the Commission’s leniency programme and whistle-blower tool is available on DG Competition’s website.
Compliments of the European Commission.
The post Antitrust: EU Commission confirms unannounced inspections in the fragrance sector first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.