How much do people trust their government? And to what degree do a government’s competence and values influence trust in public institutions? To measure and better understand what drives people’s trust in public institutions, the OECD conducted the first cross-national survey of more than 50,000 people in 22 countries*, aimed at helping governments better understand where citizen confidence is wavering, where it remains solid and what needs to be done to close the gap.
A report, Building Trust to Reinforce Democracy: Main Findings of the 2021 OECD Survey on Drivers of Trust in Public Institutions, analysing the survey findings will be released on Wednesday 13 July at 11.00 CET.
A webinar to discuss the findings will take place at 14.00 CET the same day. The webinar is open to media – register here.
Journalists can request a copy of the report under embargo, thereby undertaking to respect the OECD’s embargo procedures, by emailing embargo@oecd.org. Embargoed copies will be sent by email on Tuesday 12 July.
*Participating countries were: Australia, Austria, Belgium, Canada, Colombia, Denmark, Estonia, Finland, France, Iceland, Ireland, Japan, Korea, Latvia, Luxembourg, Mexico, The Netherlands, New Zealand, Norway, Portugal, Sweden and the United Kingdom.
Contacts:

Spencer Wilson, OECD Media Office | spencer.wilson@oecd.org
The OECD Media Office | news.contact@oecd.org
To get advance notification of other OECD reports and events, journalists can complete this short form.

Compliments of the OECD.
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The ECB is taking action to reduce the carbon footprint in its portfolio and push banks to better manage climate and environmental risks. Within our mandate, we are incorporating climate change considerations into our monetary policy and banking supervision.
Climate change matters for central banks. It is not only an existential threat to civilisation, it also entails severe risks for the economy. Floods, storms and wildfires have become more frequent. Extreme weather events damage infrastructure, destroy harvests and raise food prices.
To secure a liveable future, the European Union is committed to achieving climate neutrality by 2050. This will require enormous investment and innovation, and it has implications for inflation during the transition phase. It also makes parts of the capital stock redundant and creates financial risks.
So the ECB cannot ignore climate change. It has direct effects on price stability and is therefore at the core of the ECB’s primary mandate. It creates financial risks, which matter for both the ECB’s risk management of its own operations and for banking supervision. And with climate change being a priority for European lawmakers, the ECB shall take climate change into account, with reference to its objective to support the EU’s general economic policies without prejudice to price stability.
By doing so, the ECB can, within its mandate, act as a catalyst for greening the financial system. It can support the development of green capital markets, which are necessary to finance the transition to a low-carbon economy. And it can ensure that banks properly take climate-related risks into account in their lending decisions.

Chart 1
Global and European temperatures
(difference in degrees Celsius compared with pre-industrial levels)

Source: Annual global (land and ocean) temperature anomalies – HadCRUT (degrees Celsius) provided by Met Office Hadley Centre observations datasets.
Notes: Temperature anomalies are shown compared with the pre-industrial period between 1850 and 1899. The latest observation is for 2020.

From market neutrality to carbon neutrality
This week, the ECB presented the first milestone for incorporating climate change considerations into its monetary policy. One important measure concerns our private sector asset purchases. The ECB’s corporate bond portfolio has so far been guided by market neutrality and thus reflects the existing bond universe. However, it is companies from carbon-intensive sectors in particular that issue such bonds. This has led to a carbon bias in our portfolio and an accumulation of climate risks on our balance sheet. To reduce these risks, we will start tilting the reinvestments from maturing corporate bonds – around €30 billion every year – towards assets issued by companies with a better climate performance. This will gradually bring our corporate bond holdings onto a path that is aligned with the Paris Agreement and the EU climate neutrality objectives.
Additionally, we will limit the share of assets of high-carbon companies that can be pledged by a bank as collateral when borrowing from us. In the future, we will limit collateral to companies and debtors that are compliant with EU sustainable reporting standards.
These measures have two effects: first, they reduce our own climate-related financial risks and, second, they motivate bond issuers to improve their disclosures and reduce their carbon emissions. This will ultimately help steer capital towards supporting the green transition.
Testing banks’ resilience to climate stress
Climate change also plays a major role in our supervisory activities. Over the past few years, we have started to look much more closely at how climate change affects the banks under our supervision. Since we clarified our supervisory expectations in 2020 we have been pushing banks to improve how they manage and disclose climate and environmental risks.

Banks earn half of their income with heavy greenhouse emitters. This might be profitable today, but it won’t be tomorrow

As part of these efforts, we have now concluded a pioneering “bottom-up” climate stress test. We found that three in five banks still do not have a climate stress test framework in place. Only one in five banks consider climate risks when granting loans. And most banks rely heavily on proxy data to quantify their customers’ emissions with, on aggregate, half of banks’ income currently coming from heavy greenhouse gas emitters. This might be profitable today, but it won’t be tomorrow. So we will not stop reminding banks that they must take decisive action to address shortcomings and prepare for a timely transition to a carbon-neutral economy, while engaging closely with their clients.
Towards a greener financial system
Everyone involved in financial markets will need to prepare for the green transition and tackle the resulting risks. Our climate stress test proves, once again, that banks need to act boldly and urgently to better manage the risks from climate change. Our actions on the monetary policy side will not only reduce our own exposures to these risks, they will also encourage companies and banks to be more transparent about their carbon emissions – and ultimately to reduce them.
These efforts will make our financial system more resilient to the climate and environmental crises and better equipped for the green transition. There is still much more work to be done. This is only the beginning of a long journey. While the ECB’s actions are no substitute for ambitious and decisive action from governments and parliaments, within our mandate we have a duty to play our part, and we will do so.
This blog post appeared as an opinion piece in various newspapers and websites across Europe.
Authors:

Frank Elderson, Member of the ECB’s Executive Board

Isabel Schnabel, Member of the ECB’s Executive Board

Compliments of the European Central Bank.
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ECB to account for climate change in its corporate bond purchases, collateral framework, disclosure requirements and risk management, in line with its climate action plan
Measures aim to reduce financial risk related to climate change on the Eurosystem’s balance sheet, encourage transparency, and support the green transition of the economy

Measures to be regularly reviewed to check that they are fit for purpose and aligned with the objectives of the Paris Agreement and the EU’s climate neutrality objectives

The Governing Council of the European Central Bank (ECB) has decided to take further steps to include climate change considerations in the Eurosystem’s monetary policy framework. It decided to adjust corporate bond holdings in the Eurosystem’s monetary policy portfolios and its collateral framework, to introduce climate-related disclosure requirements and to enhance its risk management practices.
These measures are designed in full accordance with the Eurosystem’s primary objective of maintaining price stability. They aim to better take into account climate-related financial risk in the Eurosystem balance sheet and, with reference to our secondary objective, support the green transition of the economy in line with the EU’s climate neutrality objectives. Moreover, our measures provide incentives to companies and financial institutions to be more transparent about their carbon emissions and to reduce them.
“With these decisions we are turning our commitment to fighting climate change into real action”, says ECB President Christine Lagarde. “Within our mandate, we are taking further concrete steps to incorporate climate change into our monetary policy operations. And, as part of our evolving climate agenda, there will be more steps to align our activities with the goals of the Paris Agreement.”
The following concrete measures have been decided:

Corporate bond holdings: The Eurosystem aims to gradually decarbonise its corporate bond holdings, on a path aligned with the goals of the Paris Agreement. To that end, the Eurosystem will tilt these holdings towards issuers with better climate performance through the reinvestment of the sizeable redemptions expected over the coming years. Better climate performance will be measured with reference to lower greenhouse gas emissions, more ambitious carbon reduction targets and better climate-related disclosures.
Tilting means that the share of assets on the Eurosystem’s balance sheet issued by companies with a better climate performance will be increased compared to that by companies with a poorer climate performance. This aims to mitigate climate-related financial risks on the Eurosystem balance sheet. It also provides incentives to issuers to improve their disclosures and reduce their carbon emissions in the future.
The ECB expects the measures to apply from October 2022, and further details will follow shortly before then. The ECB will start publishing climate-related information on corporate bond holdings regularly as of the first quarter of 2023.
In any case, the volume of corporate bond purchases will continue to be determined solely by monetary policy considerations and their role in achieving the ECB’s inflation target.

Collateral framework: The Eurosystem will limit the share of assets issued by entities with a high carbon footprint that can be pledged as collateral by individual counterparties when borrowing from the Eurosystem. The new limits regime aims to reduce climate-related financial risks in Eurosystem credit operations. At first, the Eurosystem will apply such limits only to marketable debt instruments issued by companies outside the financial sector (non-financial corporations). Additional asset classes may also fall under the new limits regime as the quality of climate-related data improves. The measure is expected to apply before the end of 2024 provided that the necessary technical preconditions are in place. To encourage banks and other counterparties to prepare early, the Eurosystem will run tests of the limits regime ahead of its actual implementation. Further details, including the timeline, will be communicated in due course.
Additionally, the Eurosystem will, as of this year, consider climate change risks when reviewing haircuts applied to corporate bonds used as collateral. Haircuts are reductions applied to the value of collateral based on its riskiness.
In any case, all measures will ensure that ample collateral remains available, allowing monetary policy to continue to be implemented effectively.

Climate-related disclosure requirements for collateral: The Eurosystem will only accept marketable assets and credit claims from companies and debtors that comply with the Corporate Sustainability Reporting Directive (CSRD) as collateral in Eurosystem credit operations (once the directive is fully implemented). As the implementation of the CSRD has been delayed, the new eligibility criteria are expected to apply as of 2026.
This requirement will apply to all companies within the scope of the CSRD. It will help improve disclosures and generate better data for financial institutions, investors and civil society.
To encourage stakeholders to align with the new rules early on, the ECB will run test exercises one year ahead of actual implementation.
However, a significant proportion of the assets that can be pledged as collateral in Eurosystem credit operations, such as asset-backed securities and covered bonds, do not fall under the CSRD. To ensure a proper assessment of climate-related financial risks for those assets as well, the Eurosystem supports better and harmonised disclosures of climate-related data for them and, acting as a catalyst, engages closely with the relevant authorities to make this happen.

Risk assessment and management: The Eurosystem will further enhance its risk assessment tools and capabilities to better include climate-related risks. For example, ECB analysis has shown that, despite the progress already achieved by the rating agencies, current disclosure standards are not yet satisfactory.
To improve the external assessment of climate-related risks, the Eurosystem will urge rating agencies to be more transparent about how they incorporate climate risks into their ratings and to be more ambitious in their disclosure requirements on climate risks. The Eurosystem is in close dialogue with the relevant authorities on this matter.
Additionally, the Eurosystem agreed on a set of common minimum standards for how national central banks’ in-house credit assessment systems should include climate-related risks in their ratings. These standards will enter into force by the end of 2024.

Looking ahead, the Governing Council is committed to regularly reviewing all the measures outlined above. It will assess their effects and adapt them, if necessary: (1) to confirm that they continue to fulfil their monetary policy objectives; (2) to ensure – within its mandate – that the relevant measures continue to support the decarbonisation path to reach the goals of the Paris Agreement and the EU climate neutrality objectives; (3) to respond to future improvements in climate data and climate risk modelling or changes in regulation; and (4) to address additional environmental challenges, within its price stability mandate.
Companies and governments need to do their part to address climate risks by enhancing disclosures and following up on their commitments to reduce carbon emissions.
The decisions described above are part of the climate action plan announced in July 2021. The ECB’s work is progressing as outlined in the climate roadmap, and may have to be aligned if and when the timetable in EU legislation changes.
The ECB is also including climate change considerations in areas of its work besides monetary policy, including banking supervision, financial stability, economic analysis, statistical data and corporate sustainability. With this commitment, we aim to make a real difference in three ways: (1) by managing and mitigating the financial risk of climate change and assessing its economic impact, (2) by promoting sustainable finance to support an orderly transition towards a low-carbon economy and (3) by sharing our expertise to help foster wider changes in economic behaviour.
An overview of ongoing actions can be found in the ECB-wide climate agenda (see annex).
Contact:

Daniel Weber | Daniel.Weber1@ecb.europa.eu

Compliments of the European Central Bank.
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Today, the Commission adopted a New European Innovation Agenda to position Europe at the forefront of the new wave of deep tech innovation and start-ups. It will help Europe to develop new technologies to address the most pressing societal challenges, and to bring them on the market. The New European Innovation Agenda is designed to position Europe as a leading player on the global innovation scene. Europe wants to be the place where the best talent work hand in hand with the best companies and where deep tech innovation thrives and creates breakthrough innovative solutions across the continent that will inspire the world.
By leading on innovation, in particular on the new wave of deep-tech innovation requiring breakthrough R&D and large capital investment, Europe will reinforce its central role in shaping the green and digital transitions. Deep tech innovation will reinforce Europe’s technological leadership and generate innovative solutions to pressing societal challenges, such as climate change and cyberthreats. Such innovations are likely to irrigate and benefit all sectors from renewable energy to agri-tech, from construction to mobility and health, thereby tackling food security, reducing energy dependency, improving people’s health and making our economies more competitive. The severe consequences of Russia’s war of aggression has given these issues even greater urgency and prompted strategic policy changes to ensure the EU’s prosperity and security.
Margrethe Vestager, Executive Vice-President for a Europe fit for the Digital Age, said: “We need to boost our innovation ecosystems to develop human-centered technologies. This new Innovation Agenda builds on the significant work done already on innovation in the last years and will help us accelerate our digital and green transition. The Agenda is rooted in the digital, physical and biological spheres and will enable us tackle better burning concerns, such as breaking the dependence from fossil fuels or securing our food supply in a sustainable way.”
Mariya Gabriel, Commissioner for Innovation, Research, Culture, Education and Youth, said: “The new European Innovation Agenda will ensure innovators, start-ups and scale-ups, their innovative businesses to become global innovation leaders. For more than a year we have consulted the stakeholders, such as innovation ecosystem leaders, startups, unicorns, women founders, women working in the capital venture, universities, and businesses. Together, we will make Europe the global powerhouse for deep-tech innovations and startups.”
Building on Europeans’ entrepreneurial mindset, scientific excellence, the strength of the single market and democratic societies, the New Innovation Agenda will in particular:

Improve access to finance for European start-ups and scale-ups, for example, by mobilising untapped sources of private capital and simplifying listing rules;
Improve the conditions to allow innovators to experiment with new ideas through regulatory sandboxes;
Help create  “regional innovation valleys” that will strengthen and better connect innovation players through Europe, including in regions lagging behind;
 Attract and retain talent in Europe, for example by training 1 million deep tech talents, increasing support for women innovators and innovating with start-up employees’ stock options;
Improve the policy framework through clearer terminology, indicators and data sets, as well as policy support to Member States.

The New European Innovation Agenda sets out 25 dedicated actions under five flagships:

Funding Scale-Ups will mobilise institutional and other private investors in Europe to invest in, and benefit from the scaling of European deep-tech start-ups.

Enabling innovation through experimentation spaces and public procurement will facilitate innovation through improved framework conditions including experimental approaches to regulation (e.g. regulatory sandboxes, test beds, living labs and innovation procurement).

Accelerating and strengthening innovation in European Innovation Ecosystems across the EU will support the creation of regional innovation valleys and help Member States and regions direct at least EUR 10 billion to concrete interregional innovation projects, including in deep-tech innovation for key EU priorities. It will also support Member States to foster innovation in all regions through the integrated use of cohesion policy and Horizon Europe instruments.

Fostering, attracting and retaining deep tech talents will ensure the development and flow of essential deep tech talents in and to the EU through a series of initiatives including an innovation intern scheme for startups and scale-ups, an EU talent pool to help startups and innovative businesses find non-EU talent, a women entrepreneurship and leadership scheme and a pioneering work on startup employees’ stock options.

Improving policy making tools will be the key for development and use of robust, comparable data sets and a shared definitions (startups, scale-up) that can inform policies at all levels across the EU and for ensuring better policy coordination at the European level through the European Innovation Council Forum.

Building on the substantive work that have been done already to foster innovation in the EU, the New European Innovation Agenda aims to accelerate the development and scaling up of innovation across the Union through a coherent set of actions.
Background
Innovation policy is a crucial policy area with significant EU initiatives and investments.
This is complemented by the work on European Research Area (ERA) aiming to build a true European single market for research and innovation. The measures put forward in this communication, grouped under five flagship areas will leverage the strengths of the EU’s Single Market, strong industrial base, talents, stable institutions and democratic societies to drive deep tech innovation in Europe, and deliver on the opportunities offered by the twin transition and the need for future strategic autonomy.
Deep-tech innovation is rooted in cutting edge science, technology and engineering, often combining advances in the physical, biological and digital spheres and with the potential to deliver transformative solutions in the face of global challenges. The deep tech innovations that are emerging from a growing cohort of innovative startups in the EU have the potential to drive innovation across the economy.
The toolkit of EU innovation policy has expanded over the years and the institutional landscape has changed with it. With its Innovative Europe pillar, Horizon Europe has given rise to both existing and new tools to support start-ups, scale-ups and Small and Medium-Sized Enterprises (SMEs). The European Innovation Council (EIC) established in 2021 and with a budget of €10 billion, aims to support innovation throughout the whole innovation lifecycle, from the early stages of research to proof of concept, technology transfer, and the financing and scaling up of start-ups and SMEs. The European Institute of Innovation and Technology (EIT) took on additional tasks by establishing new Knowledge and Innovation Communities (KICs) such as on culture and creative sector, putting more emphasis on addressing regional imbalances, and looking at increasing the entrepreneurial and innovation capacity of higher education institutions. Via the European Innovation Ecosystems initiative of Horizon Europe, the EU also aims to create more connected and efficient innovation ecosystems to support the scaling-up of companies, encourage innovation and stimulate cooperation among national, regional and local innovation actors.
Russia’s invasion of Ukraine has given the need of innovation even greater urgency. It has also spurred additional support to the Ukrainian innovation community – scientists and researchers who have been key contributors to EU research and innovation. The EU has set up €20 million support for Ukrainian start-ups through the European Innovation Council. This complements the ‘European Research Area for Ukraine’ (ERA4Ukraine), Horizon4Ukraine and ERC for Ukraine initiatives, as well as the dedicated fellowship scheme of €25 million under the Marie Skłodowska Curie Actions (MSCA) for displaced researchers of Ukraine.
Compliments of the European Commission.
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The European Commission has today proposed a new €1 billion macro-financial assistance (MFA) operation for Ukraine as the first part of the exceptional MFA package of up to €9 billion announced in the Commission’s communication of 18 May 2022 and endorsed by the European Council of 23-24 June 2022.
Today’s proposal is part of the extraordinary effort by the EU, alongside the international community, to help Ukraine to address its immediate financial needs following the unprovoked and unjustified aggression by Russia. It will complement the support already provided by the EU, including a €1.2 billion emergency MFA loan paid out in the first half of the year. Taken together, the two strands of the programme would bring the total MFA support to Ukraine since the beginning of the war to €2.2 billion, and could reach up to €10 billion once the full package of exceptional MFA to Ukraine becomes operational.
Under the proposal, MFA funds will be made available to Ukraine in the form of long-term loans on favourable terms. The assistance will support Ukraine’s macroeconomic stability and overall resilience in the context of Russia’s military aggression and the ensuing economic challenges. In a further expression of solidarity, the EU budget will cover the interest costs on this loan. As for all previous MFA loans, the Commission will borrow funds on international capital markets and transfer the proceeds on the same terms to Ukraine. This loan to Ukraine will be backed for 70% of the value by amounts set aside from the EU budget.
As soon as the European Parliament and the Council approve today’s proposal and the corresponding Memorandum of Understanding and Loan Agreement with the Ukrainian authorities are signed, the Commission will swiftly make available the amount of €1 billion to Ukraine.
This financial assistance comes in addition to the unprecedented support provided by the EU to date, notably humanitarian, development and defence assistance, the suspension of all import duties on Ukrainian exports for one year or other solidarity initiatives, e.g. to address transport bottlenecks so that exports, in particular of grains, could be ensured.
Members of the College said:
President Ursula von der Leyen said: ”The EU continues standing by Ukraine and its brave people. Today, we propose a €1 billion tranche of the new macro-financial assistance package for Ukraine. This first part of the assistance announced in May will allow us to give an immediate answer to the urgent needs of Ukraine. The EU will keep on providing relief to Ukraine and in the longer-term support its reconstruction as a democratic and prosperous country”.
Valdis Dombrovskis, Executive Vice-President for An Economy that Works for People said: “This latest financial assistance and first part of the €9 billion financial support package again demonstrates the EU’s firm commitment to support Ukraine and its people in the face of Russia’s continued illegal aggression. These loans will allow Ukraine to meet more of its immediate massive financing needs, with the EU showing further solidarity by covering the interest costs.”
Josep Borrell, High Representative/Vice-President for a Stronger Europe in the World said: “Putin’s unjustified war against Ukraine is putting massive economic pressure on the Ukrainian people. The European Union is acting with great speed to support Ukraine’s financial stability and assist it in rebuilding its future within the European family. With this emergency package, we are sending a strong message: The European Union continues to stand with Ukraine and its people.”
Johannes Hahn, Commissioner for Budget and Administration, said: “With this proposal, we continue to make best use of the EU budget to support our neighbour and ally Ukraine under the current extremely challenging circumstances. We count on rapid agreement by the European Parliament and Council which would enable us to make the first payment to Ukraine swiftly faced with urgent funding needs.”
Paolo Gentiloni, Commissioner for Economy, said: “The European Commission is committed to supporting Ukraine in shoring up its finances as the country continues to defend itself against the Russian aggressor. This proposal marks another concrete step in making good on that commitment, making available €1 billion that can be rapidly disbursed to Ukraine. We will in parallel continue to work swiftly on a proposal for the second part of the exceptional macro-financial assistance, as announced in May.”
Background
The EU has already provided significant assistance to Ukraine in recent years under its MFA programme. Since 2014, the EU has provided over €5 billion to Ukraine through five MFA programmes to support the implementation of a broad reform agenda in areas such as the fight against corruption, an independent judicial system, the rule of law, and improving the business climate. In addition, earlier this year the Commission granted an MFA emergency loan of €1.2 billion, for which the Commission raised funds in two private placements in the first half of 2022. On 18 May, the Commission set out plans in a Communication for the EU’s immediate response to address Ukraine’s financing gap, as well as the longer-term reconstruction framework.
To finance the MFA, the Commission borrows on capital markets on behalf of the EU, in parallel to its other programmes, most notably NextGenerationEU and SURE. The possible borrowing for Ukraine is foreseen in the Commission’s funding plan for the second half of 2022.
Macro-financial assistance (MFA) operations are part of the EU’s wider engagement with neighbouring countries and are intended as an exceptional EU crisis response instrument. They are available to EU neighbourhood countries experiencing severe balance-of-payments problems. In addition to MFA, the EU supports Ukraine through several other instruments, including humanitarian aid, budget support, thematic programmes, and technical assistance and blending facilities to support investment.
Compliments of the European Commission.
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Posted on May 16, 2022 |
New Policies Will Strengthen Our Economic Partnership, and Update Rules of Global Economy
Read the U.S.-EU Joint Statement here.
The U.S.-EU Trade and Technology Council (TTC) held its second ministerial meeting in Saclay – Paris, France on May 15-16, 2022. U.S. co-chairs, Secretary of State Antony J. Blinken, Secretary of Commerce Gina Raimondo, and United States Trade Representative Katherine Tai were joined by EU Co-Chairs European Commission Executive Vice Presidents Margrethe Vestager and Valdis Dombrovskis to review progress, meet with a range of U.S. and EU stakeholders, and advance Transatlantic cooperation and democratic approaches to trade, technology, and security that deliver for people on both sides of the Atlantic.
Thanks to the close and enduring ties between the United States and the European Union, we have resolved long-standing bilateral issues, including disagreements on tariffs, and leveraged the strength of our partnership to counter non-market, trade distortive practices, and respond swiftly to Putin’s war with unprecedented sanctions and export control measures. Building on these successes, the United States and European Union, home to 780 million people who share democratic values and the largest economic relationship in the world, will advance the TTC agenda on a number of critical economic and technology policies and initiatives designed to strengthen our bilateral economies, meet current geopolitical challenges and update the rules of the global economy.
TTC working groups are deepening U.S.-EU cooperation by expanding access to digital tools for small- and medium-sized enterprises and securing critical supply chains such as semiconductors. They are collaborating closely on emerging technology standards, climate and clean tech objectives data governance and technology platforms, information and communications technology services’ (ICTS) security and competitiveness, and the misuse of technology threatening security and human rights. The TTC working groups are also coordinating on export controls, investment screening and security risks, and a range of global trade challenges, including countering the harmful impact of non-market, trade-distortive policies and practices on technological development and competitiveness in sectors of shared priority. To ensure that the government dialogues are informed by the broad perspectives of the U.S. and EU communities inform their work, the TTC working groups are continuing robust engagement with a diverse range of stakeholders, including those in industry, labor organizations, think tanks, non-profit organizations, environmental constituencies, academics, and other civil society members.
During their ministerial meeting, the U.S. and EU TTC co-chairs reviewed the outcomes generated by the joint working groups and announced key outcomes including:

Deeper information exchange on exports of critical U.S. and EU technology, with an initial focus on Russia and other potential sanctions evaders, coordination of U.S. and EU licensing policies, and cooperation with partners beyond the United States and the European Union;
Development of a joint roadmap on evaluation and measurement tools for trustworthy Artificial Intelligence and risk management, as well as a common project on privacy-enhancing technologies;
Creation of a U.S.-EU Strategic Standardization Information (SSI) mechanism to enable information sharing on international standards development;
An early warning system to better predict and address potential semiconductor supply chain disruptions as well as a Transatlantic approach to semiconductor investment aimed at ensuring security of supply and avoiding subsidy races;
A dedicated taskforce to promote the use of trusted/non-high-risk ICTS suppliers through financing for deployments in third countries;
A new Cooperation Framework on issues related to information integrity in crises, particularly on digital platforms, with a focus on ongoing issues related to Russian aggression, including Russia’s actions to manipulate and censor information;
A stakeholder-focused Trade and Labor Dialogue to discuss policy options to promote internationally recognized labor rights and to help workers and firms make successful digital and green transitions, remain globally competitive, and enjoy broad and inclusive prosperity;
An early dialogue on shared trade concerns regarding third-countries measures or initiatives and an early stage consultation mechanism regarding bilateral barriers that may disadvantage the transatlantic economy;
A policy dialogue aimed at developing responses to global food security challenges caused by Russian aggression in Ukraine; and
A U.S.-EU guide to cybersecurity best practices for small- and medium-sized companies, whose business is impacted disproportionally from cyber threats.

Compliments of The White House.
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The Commission welcomes the adoption by the European Parliament of the Digital Services Act and Digital Markets Act, proposed by the Commission in December 2020.
The Digital Services Package sets out a first comprehensive rulebook for the online platforms that we all depend on in our daily lives. These new rules will be applicable across the whole of the EU and will create a safer and more open digital space, grounded in respect for fundamental rights.
Executive Vice-President for a Europe Fit for the Digital Age, Margrethe Vestager, said: “The European Parliament has adopted a global first: Strong, ambitious regulation of online platforms. The Digital Services Act enables the protection of users’ rights online. The Digital Markets Act creates fair, open online markets. As an example, illegal hate speech can also be dealt with online. And products bought online must be safe. Big platforms will have to refrain from promoting their own interests, share their data with other businesses, enable more app stores. Because with size comes responsibility – as a big platform, there are things you must do and things you cannot do.”
Commissioner for the Internal Market Thierry Breton said: “10 years ago, a page was turned on ‘too big to fail‘ banks. Now — with DSA & DMA — we’re turning the page on ‘too big to care‘ platforms. We are finally building a single digital market, the most important one in the ‘free world‘. The same predictable rules will apply, everywhere in the EU, for our 450 million citizens, bringing everyone a safer and fairer digital space.”
The adoption of the Digital Services Package in the first reading by the European Parliament follows the political agreement that has been reached by the co-legislators on the Digital Markets Act on 24 March and the Digital Services Act on 23 April this year. The new rules will be enforced by the Commission for the largest online platforms active in the EU. The Commission is taking all necessary steps to be ready to take up this role upon the entry into force of the rules.
Next Steps
Following the adoption of the Digital Services Package in the first reading by the European Parliament, both texts now have to be formally adopted by the Council of the European Union. After their signature, the Digital Services Act and the Digital Markets Act will be published in the Official Journal. Both acts will enter into force 20 days after their publication in the Official Journal, in autumn this year.
Background
The Commission made its proposals on the Digital Services Act and the Digital Markets Act on 15 December 2020.The European Parliament and Council reached a political agreement on 24 March 2022 on the Digital Markets Act, and on 23 April on the Digital Services Act. Updated Q&A documents are available for the DSA and the DMA.
Compliments of the European Commission.
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The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has published the results of its fourth stress test exercise of Central Counterparties (CCPs). The results confirm the overall resilience of European Union (EU) CCPs, as well as third-country Tier 2 CCPs, to credit, concentration and operational risks under the tested scenarios and implemented framework. However, the stress test also identified areas where some CCPs may need to strengthen their risk management frameworks, or where further supervisory work should be prioritised, including on concentration and operational risks.
The report’s key findings are:

CCPs have sufficient buffers to withstand adverse market developments in combination with the default of the two clearing members with the largest exposures;
Gaps are identified between the necessary and available buffers for concentration risks for some CCPs, particularly in commodity derivatives markets;
CCPs remained overall resilient despite increased market volatility in the wake of Russia’s invasion of Ukraine;
For operational risk, differences in terms of risk sources, exposures and mitigation tools across CCPs are observed and need to be further assessed on an individual basis before issuing potential recommendations; and
Most of the analysed operational events stem from third-party services, whereas a number of critical third-party service providers have the potential to affect the critical functions of multiple CCPs in a correlated manner.

Klaus Löber, Chair of the CCP Supervisory Committee, said:
“ESMA’s fourth stress test found that the European clearing market is resilient and capable of withstanding severe stress scenarios, although certain areas need further strengthening. CCPs’ resilience was confirmed during the real-life market stress following Russia’s invasion of Ukraine.
“CCPs are of critical importance to the stability of the financial system and the failure of one CCP has the potential to cause serious systemic risk across the EU. Therefore, stress testing CCPs is a key supervisory tool to understand the clearing industry, identify issues relevant for financial stability and eventually mitigate systemic risk, contributing to ESMA’s mission.”
CCP stress test scenarios and outcomes
A total of 15 CCPs were covered by the exercise, including two UK CCPs qualifying as Tier 2 CCPs. The exercise assessed credit and concentration risk and included a new operational risk component that aimed to assess the resilience of CCPs to operational events and failures of third-party service providers.
Operational risk analysis
ESMA identified varying degrees of operational reliability for the CCPs included in the exercise and identified specific CCPs where further work should be conducted to understand the drivers of these differences, the root causes of the events, and the remediation actions taken.
ESMA also evaluated the exposure of CCPs to critical third-party service providers and the ability of CCPs to reduce risk through operational risk management tools. Through this process, ESMA identified differences across CCPs in their relative level of third-party risk as well as the critical third-party service providers with the highest systemic importance for the CCP sector. Further work is needed to analyse exposures to third-party service providers both at an individual CCP level, as well as system wide, to further strengthen operational resilience.
Credit Stress Test
Two default scenarios, combined with the common ESRB market stress scenario, were run on two different reference dates, 19 March (end of day) and 21 April 2021 (intraday snapshot).
For 19 March 2021, the impact due to concentration and specific wrong-way risk stemming from cleared positions was also included in the baseline scenario calculations. The first scenario concerned a Cover-2 default per CCP, where the default of two clearing member groups under common price shocks is assumed separately for each CCP. The second scenario was an All-CCPs Cover-2 default, involving a default of the same two groups for all CCPs in the system, designed to assess the resilience of CCPs collectively to the market stress scenario. ESMA did not detect any major systemic risk concerns under the tested credit scenarios.
Concentration Stress Test
The European-wide concentration analysis performed on 19 March 2021 shows that concentrated positions represent a significant risk for CCPs. For most asset classes, concentrated position risk is clustered in one or two CCPs. The analysis found that concentration risk is factored in explicitly in a majority of CCPs, through dedicated margin add-ons.
Concentration modelled for commodity derivatives and the equity segment (securities and derivatives) is significant, with around 7bn EUR of concentration risk calculated for each asset class. There is a large coverage gap between the system-wide estimated market impact and margin add-ons for commodity derivatives and to a lesser extent for equity products. The concentration risk for emission allowances stands at 2.5bn EUR and is not adequately covered per the ESMA methodology.
Russia’s invasion of Ukraine
During the time of finalisation of the exercise, Russia’s invasion of Ukraine led to extreme market movements for instruments across the commodities and energy markets. ESMA concludes that the ESRB scenario is overall of greater or comparable severity for most asset classes, but of a lesser severity for some products, especially for power and gas derivatives. ESMA, in coordination with national competent authorities, also closely monitored the financial impacts that the invasion has had on CCPs. Overall, ESMA notes that CCPs remained resilient during the crisis, despite the extreme prices and increased market volatility.
Next steps
As with previous exercises, the ESMA stress test exercise for CCPs was not aimed at assessing the compliance of the CCPs with regulatory requirements, nor at identifying any potential deficiency of the stress testing methodology of individual CCPs. However, in line with the EMIR mandate, where the assessments expose shortcomings in the resilience of one or more CCPs, ESMA will issue the necessary recommendations.
Compliments of the European Securities and Markets Authority.
The post ESMA stress test of Central Counterparties finds clearing system resilient first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Today marks a historic moment in digital regulation with the landslide vote by the European Parliament adopting the Digital Services Act (DSA) and Digital Markets Act (DMA) which I have been working on together with my teams from the very first day of my mandate.
These two Acts, agreed upon in record time, have resonated around the world as landmarks – with front-page media coverage in many countries and even high-level political acknowledgements including by a former US President.
The EU is the first jurisdiction in the world to set a comprehensive standard for regulating the digital space. 
We have created a common framework for digital services, which must be respected in the same way everywhere in a single market of 450 million consumers.
Europe is the first single digital market in the “free world”, with clear and predictable rules
Europe is the first single digital market in the so-called “free world”.
And in our European single market — which is also one of the largest democracies in the world, if not the largest — the DSA and the DMA will strengthen the rule of law and provide better protection for our citizens and provide new opportunities for our businesses in the digital space.
This means in concrete terms:

New strong obligations to tackle all forms of illegal content: counterfeit or dangerous products, incitement to violence, hate speech; as an intermediary, you might not be liable, but certainly you need to be responsible;
An innovative framework for the protection of fundamental rights and the fight against harmful content and disinformation;

More trust and protection for consumers in online marketplaces;
 More protection for social network users, especially children;
More opportunities for innovative businesses and a wider choice of innovative products and services;
A new framework for online advertising to limit the use of data and protect the most vulnerable users, especially children;
And finally, one point that I think is essential: opening up the “black box” of algorithms that are at the heart of platforms’ systems.

The DSA and DMA will allow us to have more transparency, more information and if that is not enough, to go directly to inspect the these “black boxes”  to find the information that the regulator needs to ensure the implementation and monitoring of platform obligations. Also vetted researchers will gain access to data to conduct research that will support our enforcement tasks.
Turning the page on “too big to care” platforms
Ten years ago, a page was turned on the so-called “too big to fail” banks.
Today, a new page is being turned, that of the “too big to care” platforms.
Russian disinformation, the revelations about the Capitol Hill attack, online harassment and hateful content… demonstrate the urgency of the DSA.
The difficulties experienced by SMEs, particularly against the abuses of gatekeepers, which undermines fair and free consumer and business choice, the race to conquer the Metaverse, etc., remind us of the urgency of the DMA.
In the future, very large platforms will have to perform an in-depth risk assessment and propose adequate measures to minimise these risks.
Gatekeeper platforms will have to finally adapt their technologies and business models to give more choice to consumers and stop creating obstacles to smaller innovative tech companies: no need to wait for a case by case decision, their obligations of interoperability, sideloading, no self-preferencing and more are by now clearly spelled out and will apply immediately. 
Enforcement is key
Introducing new obligations on platforms and rights for users would be pointless if they are not properly enforced.
The new harmonised rules will apply directly and uniformly anywhere in Europe. The Commission’s specialised teams will centrally supervise very large platforms and very large online search engines as well as gatekeepers, coupled with effective and dissuasive sanctions.
Each platform, big and small, will have to have a legal representative in Europe. So we will now know who to call if there is a problem. And each Member State will have a regulator with the necessary powers to enforce the rules. Orders sent by national public authorities will be more effective to tackle illegal content and get information about the wrongdoer, in particular cross-borders. We will also rely on a network of trusted flaggers, such as NGOs, hotlines or rightsholders, to ensure that platforms react to the flagged illegal content as a priority. Class actions against platforms breaking the rules will be made easier, and damaged consumers can be compensated.
New powers for the Commission to investigate and sanction platforms
For the first time, the European Commission will become the supervisor of “gatekeepers” and very large platforms and very large online search engines.
Under the DSA, the Commission will be able to apply supervisory fees on very large platforms and very large online search engines to cover the costs of these supervisory and enforcement tasks.  
Within the Commission, my teams will be responsible for designating these platforms, monitoring the application of the new rules and enforcing them – including new powers to investigate and sanction platforms.
Sanctions will be gradual and unprecedented in their scope. Fines will amount to up to 6% of the global turnover of the conglomerate for DSA violations.
And in the event of serious and repeated breaches, national courts can go as far as a ban on operating on European territory. These sanctions will be extremely clear.
Under the DMA, sanctions can go up to 10% of the global turnover and even beyond up to 20% that for repeated offenders, that may be also subject to the ultimate remedy of divestitures and structural separation when they systematically undermine their obligations.
The direct enforcement by the Commission of these internal market rules against private companies represents a historic and exciting new step for the Commission in particular.
But we are not starting from a blank sheet. I have had the pleasure to note in my everyday work with DG CONNECT (Directorate-General for Communications Networks, Content and Technology)that it has rightly earned its reputation for the quality of its policy work and its deep technical expertise, and can also build on its long-standing experience in enforcing internal market rules, for example through the so-called Article 7 procedures for electronic communications, working closely with National Regulatory Authorities.
A sneak peek at the future organisation implementing the DSA & DMA
Dedicated teams within DG CONNECT will be organised around thematic domains – including the societal aspects, the technical aspects, and the economic aspects.
To name a few examples: issues such as risk assessments and audits will be handled by the societal issues team.
The technical team will take responsibility for issues such as interoperability of messenger services or the use of non-fungible tokens for product tracing, or the development of standards supporting the new rules.
Finally, the economic team will cover DMA-related unfair trading practices, such as data access or so-called FRAND conditions; or ensuring respect to the DSA-related liability exemptions or“know-your-business customer” rules for marketplaces.
As platforms do not create challenges in only one (societal, technical, economic) level, but problems appear usually in combination, these three teams will work closely together, coordinated by a sort of “program office” that will also deal with international issues and litigation.
Building up specific expertise
It is also clear, we will need to increase our staffing levels and build up specific expertise, in particular in data science and algorithms.
We have started to gear the internal organisation to this new role, including by shifting existing resources, and we also expect to ramp up recruitment next year and in 2024 to staff the dedicated DG CONNECT team with over 100 full time staff, combining both DSA and DMA – the DMA together with DG Competition.
A share of this head count will be financed, for DSA-related tasks, through a fee, which I initiated, that the Commission will collect from very large online platforms and very large online search engines to cover the additional costs needed for their supervision.
A high-profile European Centre for Algorithmic Transparency
Some of the new tasks in the enforcement of the new rules require sophisticated competencies, too.
Most prominently, the DSA contains wide-ranging rules on algorithmic transparency and accountability for online platforms, and important data access obligations for the very large ones. In order to assist the enforcement of these new DSA rules DG CONNECT and the Joint Research Centre will establish a high-profile European Centre for Algorithmic Transparency.
This new Centre will attract world-class scientific talent in data science and algorithms that will complement and assist the enforcement teams.
The new DG CONNECT teams dedicated to the DSA/DMA implementation, together with DG Competition, the Commission Legal Service and the JRC, and in cooperation with enforcement authorities in Member States, will make a powerful new digital regulator that has technology baked into its DNA from the start.
There will be a before and an after to the DSA and DMA.
Many thought that regulation would take years, would be impossible, too complicated, the lobbying too strong…
Today’s vote shows that, when we work together, much can be done in the general interest of Europeans.
We are ready.
Compliments of the European Commission.
The post Sneak peek: how the EU Commission will enforce the DSA & DMA – Blog of Commissioner Thierry Breton first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

‘Countries have made substantial progress toward implementing capital markets regulatory reform, but important gaps remain and new challenges have raised the bar.’
Capital markets are like engines that help power the global economy: they perform best with regular tune-ups. In this spirit, the major regulatory overhaul following the global financial crisis was aimed at shoring up key segments, from over-the-counter derivatives to investment funds and market infrastructure, closing fault lines revealed by the crisis.
But now, even after historic enhancements in recent years, countries still need to keep pushing to lower risks and strengthen the tools to manage future crises, and ultimately to reduce fluctuations tied to economic cycles.
So, to better gauge progress on reforms to market regulation and what further gains are needed, our latest research surveys IMF financial sector assessment programs in several countries over the past seven years.

‘Financial-sector assessments are still uncovering shortcomings despite progress since the global financial crisis.’

These regular reviews tracked risks, vulnerabilities, and arrangements for market oversight and crisis management, with a focus on safety nets to manage any potential failures of major firms.
They also looked at the resilience of central counterparties, the entities that function as buyer to every seller and seller to every buyer to guarantee performance of open contracts, which have grown in prominence under derivatives-clearing reforms. The reviews also examined the vulnerability of asset managers like money market funds and bond funds, and whether trading venues beyond traditional exchanges are adequately regulated.
Making progress
One main reason we see a need for greater reform even after the significant progress seen in recent years is that it has been accompanied by rapid growth of financial services firms that don’t have banking licenses or take deposits, such as insurers, mutual funds, and exchanges.
Nonbank financial intermediation, as it’s known, has grown to represent almost half of the assets of the global financial system, thereby playing a much bigger role in the global economy . Regulators must better ensure that its vulnerabilities and business models don’t amplify future shocks to markets and financial stability. Applied to the asset management sector, a key priority is to broaden the range of liquidity management tools that are available to investment funds managers.
Another priority for regulators is to reinforce financial safety nets and crisis-management arrangements, while a third is to strengthen early warning capabilities, for example, through enhanced stress-testing tools and capacities.
Emerging issues
Issues like these are challenging on their own, but securities regulators can’t limit themselves to just implementing the capital markets reform agenda that followed the global financial crisis. Rather, their priorities must also evolve and broaden in-step with the financial systems they safeguard.
That’s especially true in capital markets, where cyber resilience, fintech, and climate change are key emerging issues. Trading venues are a focus for cybersecurity, as both supervisors and market participants aim to boost their technological and operational resilience to minimize potential market disruptions. And fintech’s promise also involves risks stemming from crypto assets and decentralized finance.
Regulators also must be vigilant amid the shift away from benchmarks like the London Interbank Offered Rate to new references for interest rate swaps and other key financial contracts. Finally, the impact of climate change will need to be appropriately reflected in financial statements, valuations, and issuer disclosures on which investors depend.
Appropriate perimeter
A key priority highlighted by this wide-ranging, future work program is ensuring the adequacy of the financial regulation perimeter so that it covers all the relevant actors, activities, and instruments.
Our financial-sector assessments are still uncovering important shortcomings despite all of progress that has been made since the global financial crisis began a decade and a half ago.
Some countries, for example, appear to have regulatory gaps for asset management firms. Also, policymakers need to consider more explicitly which derivatives to regulate as part of efforts to manage risks from commodity, climate, emissions, and other carbon-related instruments.
This array of challenges raises concern given the insufficient resources for supervisors even in some of the world’s largest and most sophisticated markets—a finding IMF financial sector assessments confirm. Post-crisis reforms implied a significant expansion of the regulatory perimeter and raised expectations of supervision needed to assess and mitigate risk, but securities regulators rarely saw a commensurate increase in resources.
Emerging challenges like new market technology and a broadening of the regulatory perimeter make it important for regulators to have a wider range of specialist expertise and to ensure that their supervisory techniques and technology keep pace. Strained resources in some jurisdictions are compounded by a lack of operational independence for authorities, which limits their ability to effectively supervise and respond to risks.
Therefore, we must keep prioritizing our push to make further progress on these key aspects of the institutional and regulatory framework underpinning capital markets.
Authors:

Tobias Adrian
Jay Surti

Compliments of the IMF.
The post IMF | Capital Markets Regulation Is Stronger, but Some Gaps Still Must be Closed first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.