Speech by Commissioner McGuinness at Eurofi conference

Eurofi

Good afternoon.

The title of my talk is to finish what we started, and I think that's really important.

Because it's extraordinary to think that we are during the final year of the mandate of this European Commission.

I came in frankly a year late, so I have to do five years' work in three effectively, or three and a half.

But when I talk now about what we've done and our mission for the rest of this term, I am really writing my own school report – but I've had it checked, so others know and agree with what I'm about to say.

It's also important to recall that this Commission mandate has been challenging to say the very least of it.

It's an overused word but the truth is it's been a very, very difficult time globally.

Whether it was post-Brexit, pandemic and the horrible war in Ukraine.

So it's been a busy and very eventful mandate.

And yesterday I'm sure you were listening to the President of the Commission Ursula von der Leyen in her State of the Union speech.

So despite all of the extra things we had to deal with as a Commission, we've actually delivered over 90 percent of the political guidelines presented in 2019.

I'm going to say that in FISMA, so my colleagues, my services, we've delivered 99.9%, so that's not bad as a track record.

It's also worth recalling the President's words when she said, “Together, we have shown that when Europe is bold, it gets things done.”

And it's True that when Europe is under pressure, it gets things done.

We go beyond ourselves and we go beyond what we think we are actually capable of.

So my goal when it comes to financial services is to reach agreement on hopefully most of the proposals before the end of the mandate.

And really now we're waiting and working with the co-legislators – the Parliament and the Council.

As a Commission we are ready and are helping in that process and have reached agreement on a number of our files.

The ambition of our proposals should not be watered down.

We say that all the time, and we do mean it.

Because we think that our proposals are needed – for financial stability, for market integrity and for the competitiveness of the economy.

We are going through very uncertain times, and we do need the financial system to play its part in these challenging times.

I was listening in to the conversation about technology and the great transformation, and what might come is quite extraordinary – what we're already dealing with.

Also the climate crisis requires everyone to join in this transition to a low-carbon economy.

And that's more urgent now because of the invasion of Ukraine by Russia.

Because Russia ' s aggression, this war, has delivered a shock to the global economy, particularly when it comes to energy and food markets.

We can better respond to the challenges we face with a competitive and resilient European financial system.

So in my speech today, I want to take you through:

• The proposals we ' ll make in the coming weeks,
• Recent proposals across my area of responsibility,
• And some of the issues we're beginning to think about for the next Commission's mandate. Because you have to keep that process going.

Yesterday President von der Leyen put a strong emphasis on European competitiveness.

Every new piece of legislation will have a competitiveness check conducted by an independent board.

And next month, the Commission will make the first legislative proposals on reducing reporting obligations at the European level by 25 percent.

In financial services, we're contributing to the goal of competitiveness and simplifying reporting requirements.

And I know that's something that is asked of frequently and we will be delivering on that.

For instance, we will be proposing a review of the Benchmark Regulation.

We've extended the non-application of the third-country chapter of the current regulation for two years.

But this isn't a viable solution for the long term.

We need to reform the rules for third-country benchmarks for good.

We will reduce the number of third-country benchmarks that are included.

And we want to make sure EU and non-EU operators are competing on a level playing field.

So we will also reduce the number of EU administrators required to get a license.

By looking at where we can reduce reporting burdens, we can make the EU more competitive.

And it's a good complement to our work on the Capital Markets Union.

And here I'm glad to say that we are making good progress but we do need to keep the momentum going.

I'm happy to say we have now reached political agreement on all the initiatives in the November 2021 CMU package.

In July we reached agreement on the final part – the Alternative Investment Fund Managers Directive.

But the legislative work isn't over yet.

There are still structural barriers standing in the way of the single market for capital.

And this year is 30 years of the European single market, so we really do need to make sure that that world comes to the world of capital.

This Commission faced into those barriers head-on and proposed reforms on insolvency and withholding tax.

And now we need to see agreement on these proposals.

We also need agreement on the Listing Act, to make the listing of securities easier and less burdensome – particularly for smaller companies.

Companies that issue securities on public markets grow faster in terms of assets, sales, and employee numbers than companies that don ' t.

But the Commission ' s CMU indicators show that the number of IPOs in the EU is at an historic low.

One of the reasons – though not the only one – is regulatory barriers, and that's what we're tackling with the Listing Act.

Now we also need to keep the ambition high on clearing.

There will be no CMU without strong market infrastructures underpinning EU financial markets.

So we need a deal on the EMIR revision.

We also want citizens to experience the tangible benefits of CMU.

Being able to easily and safely invest their hard-earned money.

And that's what the Retail Investment Strategy is all about, and you've heard me speak on that topic.

And so we need to see progress on this Strategy too.

I'm hopeful that we can reach agreement on all these proposals before the next European election, and that's next June.

But even if we can achieve that and get things through, it's not the end of the journey on Capital Markets Union.

Because this is a long-term project.

And I do welcome the Eurogroup's work to look at what reforms we should focus on next.

And I think we can see here and right across Europe, at all levels, at the highest political levels, there is strong momentum to develop the CMU.

Banking Union is another long-term project where the Commission is keeping the momentum going.

The Eurogroup asked us to deliver a proposal on crisis management and deposit insurance.

And we delivered on that.

But, even with this latest reform, we still won't have a fully-fledged Banking Union.

I do hope the co-legislators will make progress on crisis management and deposit insurance.

And I hope this progress will spark renewed efforts to complete the Banking Union in the next mandate.

Today our banks are in a better place than they've been for a while.

The economic climate, with rising interest rates, is more positive for them.

Profitability is important for the banking sector's resilience.

We saw that in the recent stress tests: strong earnings help restore capital levels more quickly.

Higher profitability is also a major opportunity for investment.

During the last decade, lower profitability meant that EU banks could sometimes not invest as much as they would have liked to, particularly in digitalisation.

So now that the opportunity is here, I encourage banks to use these profits wisely, to be ambitious and to invest in the future.

As has been said already, this world is becoming ever more digital.

The Commission continues to keep up with the pace of change.

In June we launched new digital finance proposals.

First, the review of the Payment Services Directive:

It tackles payment fraud, and this is an issue which I fear is going to grow unless we tackle it collectively.

It will help banks and other financial companies compete on a level playing field.

And it will improve the enforcement of the rules.

Second, we adopted a new proposal on access to financial data.

This Financial Data Access proposal will let people decide to share a wider range of financial information.

Customers get greater control over how their financial data is used.

And they will get better access to services that are more tailored to their needs.

But of course the key we need informed customers to know when and what they're giving consent to.

I ' m sure many of you in the room here are thinking about how you will take advantage of this new proposal for new, innovative products.

Now we also adopted two proposals on the future of money: on a digital euro and on the legal tender of cash.

There are many good reasons to explore a digital euro.

It ' s important for Europe ' s competitiveness.

We ' re heavily reliant on companies outside the EU for card transactions and e-commerce payments.

And if we don ' t have our own solution, private stablecoins and foreign central bank digital currencies could fill the gap.

But, more importantly, the digital euro offers benefits for people:

• Digital payments anywhere in the euro area
• Offline payments with the same privacy as cash
• Digital payments without a bank account
• More choice alongside private digital payments

But I do say all the time that the digital euro is not something we need to rush.

It needs a calm, thorough, democratic debate, between institutions, Member States and citizens.

And this will – I hope – counter the conspiracy theories.

People are afraid of what they don ' t know.

So it ' s really important for all of us to talk clearly about what the digital euro is – and what it's not.

Now to sustainable finance.

The climate crisis is not new, but I think we all know it's more urgent.

In Europe, we saw wildfires in Greece, Italy, Spain, and Portugal, and terrible floods in Greece, Slovenia, and Austria.

So those images in recent days, particularly if you look to Libya, where sadly many thousands are feared dead and a rescue operation is underway.

These are real examples of extreme weather that are become more frequent and more serious, leading to the loss of lives and livelihoods, and if we don't address it, the consequences are horrendous.

And indeed it impacts those who least can deal with them, as we are seeing.

So we do need to address climate change. We need the financial system and companies to work with us in the transition to a sustainable future.

In June, we proposed a regulation on ESG ratings providers.

And here we want to introduce new rules for ESG rating markets, we want to avoid conflicts of interest, we want to improve transparency – while also fostering competition.

At the end of July we adopted the European Sustainability Reporting Standards, as envisaged in the Corporate Sustainability Reporting Directive.

We've adopted all the standards proposed by EFRAG.

Covering the full range of environmental, social, and governance issues, including climate change, biodiversity and human rights.

But we've made these standards more proportionate compared to the original drafts.

Here we aimed to strike a balance between limiting the reporting burden for companies and allowing them demonstrate their efforts in sustainability.

The standards also take into account developments at international level, by the International Sustainability Standards Board and the Global Reporting Initiative.

And I know many are happy to see that cooperation.

Companies that report to European standards should automatically meet the ISSB standards.

The focus now moves to implementation – indeed a topic of the previous conversation.

And here we want to support companies implementing this very first set of European sustainability reporting standards.

So this is a big moment, for the standards and indeed for companies that have to report.

Here I've asked EFRAG to focus on developing guidance on assessing materiality and reporting on value chains.

EFRAG expects to publish draft guidance for public consultation shortly.

And where appropriate, the Commission may decide to provide information on the legal interpretation of the European standards.

And I hope you hear that what we're trying to do is to make sure there is buy-in by companies and support for companies on their journey towards reporting.

So this may be the last year of the current Commission mandate, but it will be a busy one.

I do hope the co-legislators will reach agreement on our proposals.

Because they will make a real difference to the European financial system.

One example is the Anti-Money Laundering package, which we proposed in June 2021.

And the fight against money-laundering and terrorist financing is really essential for the integrity of EU financial markets.

I really would like to see agreement on this package as soon as possible – though the right deal is more important than a fast one.

We are also looking ahead now to the next five years, and considering what the next Commission will have to take on.

For example, non-bank financial intermediation is very prominent in the current conversation.

It will certainly be in focus in the next mandate.

Another topic we're reflecting on is T+1 settlement.

The US will shorten the settlement lifecycle to T+1 next year, and this will raise some questions for us here in the European Union.

But I know you are already asking those questions, and more importantly I'm hearing that you're answering those, and that's really important, that we work together on this.

We know the macroeconomic situation has changed a lot, which means risks to financial stability are evolving.

So this is something the Commission will be looking closely at – like how risks move from the banking sector to financial markets.

So let me finish with some words from President von der Leyen yesterday.

“In a world of uncertainty, Europe once again must answer the call of history.

“And that is what we must do together.”

I think we all know in this room that where there might be differences, we're very clear that acting together is the only way we can build a stronger system that is fit for the future,

I was very minded by the end of the conversation before I took to the stage here about certainty and uncertainty, on confidence and lack of confidence which Scott addressed very clearly.

And I think in all of these steps we know that we cannot say that the world will be any less uncertain in the next Commission mandate.

So I think we'd better be prepared for whatever comes our way and plan now to deal with it, rather than being overwhelmed.

I think we've had enough warning in the last few years about what can happen, whether that comes to climate change or geopolitical tensions.

But I am convinced of one thing, that we need a strong financial system that serves people and business and that can work when the economy is going through difficult times and finances small and large companies.

And like I said on many occasions, the financial system the backbone of everything that we do.

And in my words I always mentioned financial literacy – they don't always put it into the script but I never miss a moment to say that if we have better tuned-in citizens on the financial system, we would have a better Europe and we would have a better financial system that will serve everyone.

So I hope you agree with me on that.

Thank you.