Top issues in financial services policy this fall

The German election, Eurogroup presidency and Brexit are all on the agenda.

ECB stimulus tapering: The European Central Bank is expected to head for the exit from crisis measures, more than five years after President Mario Draghi promised to do “whatever it takes” to save the eurozone from collapse. Since 2012, large-scale asset purchases and generous liquidity offers to banks have ballooned the ECB’s balance sheet to over €4 trillion. With the economic recovery finally taking off, Draghi in July said policymakers will discuss phasing out bond buying in the autumn. However, with inflation still undershooting the ECB’s just-below-2-percent target and worries about jumpy investors, any tapering of stimulus measures will likely be slow.

Germany’s election: German voters are not expected to topple Chancellor Angela Merkel but there’s a chance that her Finance Minister Wolfgang Schäuble will no longer steer Europe’s economic powerhouse next year. A neck-and-neck race with the Social Democrats could produce a repeat of the 2005 Merkel government, in which the junior partner laid claim to both the foreign and finance ministries. Speculation is also mounting that at 75, Schäuble may be eyeing retirement, although there’s no sign of him slowing down yet. If the man involved in European integration for the last 30 years departs from the government, it will mark the end of an era.

Eurogroup presidency: Brussels has been swamped with speculation over the successor for the Eurogroup president, who chairs informal talks every month with eurozone finance ministers. A Dutch caretaker, Finance Minister Jeroen Dijsselbloem, currently sits on the throne. But that could soon change as the Social Democrat stands to lose his seat in his national government once a new coalition is established. Few replacement candidates have emerged, as political horse-trading threatens to complicate the process. Nonetheless, Dijsselbloem’s successor will wield significant influence in eurozone policymaking, and it’s only a matter of time before capitals make their move.

Deepening integration: Eurozone finance ministers will begin discussing how far they are prepared to integrate economic and monetary policies, in response to a reflection paper that the European Commission put out in May. Plans floated include formalizing the Eurogroup and making its president accountable to the European Parliament. The EU’s executive arm would also like to merge the Eurogroup’s presidency with the role of the commissioner for economic and financial affairs. Combined, the post would become in effect that of an EU finance minister, who would head a eurozone treasury responsible for monitoring economic and fiscal policies.

U.K.-EU deal for financial services: In the U.K., a detailed industry proposal for a post-Brexit free-trade agreement for financial services should be published in September. The International Regulatory Strategy Group, an industry organization, is investigating a way for U.K. financial firms to continue accessing the EU single market outside the “equivalence framework,” which grants access on the basis that a firm is subject to similar rules. It has been peddling the idea to top regulators and lawmakers in Brussels and London, and will be publishing a more developed set of recommendations.

EMIR and euro-clearing: Feedback to a major change to EU regulation of third-country central counterparty clearing houses is due September 25. The consultation, which proposes amendments to the European Market Infrastructure Regulation (EMIR) and was published June 13, sets out a more intensive supervision process for euro-clearing outside the single market, and was written with Brexit and the U.K.-based clearing house LCH — which is also the largest clearer of euro-denominated swaps — in mind. It will be interesting to see if the consultation responses indicate any softening of stance within the EU.