Agustín Carstens, General Manager at the Bank for International Settlements, recently delivered a speech on the topic of inflation at the International Center for Monetary and Banking Studies Geneva on 5 April 2022. Being the BIS’s General Manager, it will not come as a surprise to you that I have decided to devote my presentation to the issue that is top of mind for policymakers around the world, namely the return of inflation. After more than a decade of struggling to bring inflation up to target, central banks now face the opposite problem. The shift in the inflationary environment has been remarkable. If you had asked me a year ago to lay out the key challenges for the global economy, I could have given you a long list, but high inflation would not have made the cut.  Continue reading…

Banks are increasingly exploring opportunities for using artificial intelligence and machine learning (AI/ML). AI/ML technology is expected to increase banks’ operational efficiency and also facilitate improvements in risk management. While significant opportunities are emerging from the increasing use of AI/ML in many areas of banking, there are also risks and challenges associated with these techniques. Banks are still in the process of developing best practices for risk management. Given the increasing adoption of this technology as well as the potential risks, the Committee is analysing banks’ use of AI/ML and potential implications for bank supervision. Continue reading…

Yannis Stournaras, Governor of the Bank of Greece, made a speech at the EUROFI High Level Seminar 2022, Paris on 28 February 2022. What we observe today is mostly supply-side inflation. In fact, the acceleration of inflation mainly reflects two interrelated supply-side shocks: One comes from the pandemic. Actually, we had a series of pandemic shocks, then we had an energy shock, and finally we have the invasion of Russia in Ukraine, which, regarding its economic implications, is also a supply-side shock. In the short term, its implications are stagflationary, but, in the medium term, the implications are deflationary, depending of course on the resolution of the uncertainty. We do not know much about the resolution of the Ukrainian crisis at this moment, so we have to be cautious. Continue reading…

On March 24th, Eurojust hosted a special meeting of EU Ministers of Justice, organised together with the French Presidency of the Council of the European Union, to discuss the role of the Agency in coordinating investigations into war crimes, crimes against humanity and other core international crimes allegedly committed in Ukraine. This coordination will be taken up in close cooperation with the International Criminal Court (ICC) in The Hague. Continue reading…

An international operation involving judicial and law enforcement authorities in seven countries has resulted in the takedown of one of Europe’s most active Albanian-speaking cocaine trafficking networks in Europe. On February 15th, Eurojust and Europol supported a series of actions carried out in Belgium and Spain, during which over 80 places were searched and 45 suspects arrested. These include a number of high-value targets, investigated in multiple high-profile cases in different jurisdictions. Continue reading…

by Lieve Lowet & Lorenz Van Roosbroeck

Early February, the Actuarial Association of Europe (AAE) hosted a webinar entitled Sustainability and Climate Change – what does it mean for risk management in Insurance and Pensions? The webinar centered around issues of sustainability and the climate crisis. Since the EU Commission officially endorsed ESG considerations in its 2017 sustainable finance package, reinforced by the priorities of the current Commission and the Green Deal in 2019, the discussions are proliferating — up until the point that it is nearly impossible to follow all developments. As such, clear and distinct frameworks which capture the essence of the challenges we face are needed. It is within this context that the aforementioned webinar sparked interest as one of the speakers introduced a concept and measurement tool from ‘down-under’. More specifically, Gregorio Gil de Rozas, Instituto de Actuarios Espanoles, introduced the specific case of The Australian Actuaries Intergenerational Equity Index or AAIEI. After some research, it appears that The Actuaries Institute — i.e. the professional body representing the actuarial profession in Australia — published a Green Paper under the same name as the presentation, entitled Mind the Gap — The Australian Actuaries Intergenerational Equity Index (AAIEI). Here, we bear emphasis on this topic of intergenerational equity for several reasons.
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Crypto-asset markets are fast evolving and could reach a point where they represent a threat to global financial stability due to their scale, structural vulnerabilities and increasing interconnectedness with the traditional financial system. This is the Financial Stability Board’s (FSB’s) updated assessment of risks to financial stability from crypto-assets, published on February 16th. The report examines developments and associated vulnerabilities relating to three segments of crypto-asset markets: unbacked crypto-assets (such as Bitcoin); stablecoins; and decentralised finance (DeFi) and crypto-asset trading platforms. It notes the close, complex and constantly evolving interrelationship between these three segments, which need to be considered holistically when assessing related financial stability risks. Continue reading…

The Governing Council of the European Central Bank (ECB) has decided to gradually phase out the package of pandemic collateral easing measures in place since April 2020. The Governing Council has taken into account in a forward-looking manner the impact of this gradual phasing out on the collateral availability of Eurosystem counterparties, in particular with regard to their ability to continue mobilising collateral until the maturity of the outstanding targeted longer-term refinancing operations (TLTRO III). Moreover, it has considered the risk impact of each of these measures. This gradual phasing out allows ample time for the Eurosystem’s counterparties to adapt, and is scheduled to take place in the following three steps.
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The Commission welcomes the swift political agreement reached yesterday between the European Parliament and EU Member States on the Digital Markets Act (DMA). The regulation, agreed in slightly more than a year after it was proposed, is among the first initiatives of its kind to comprehensively regulate the gatekeeper power of the largest digital companies. Commissioner for the Internal Market Thierry Breton (see photo) said: “This agreement seals the economic leg of our ambitious reorganisation of our digital space in the EU internal market. We will quickly work on designating gatekeepers based on objective criteria. Within 6 months of being designated, they will have to comply with their new obligations. Through effective enforcement, the new rules will bring increased contestability and fairer conditions for consumers and business users, which will allow for more innovation and choice in the market. We are serious about this common endeavour: no company in the world can turn a blind eye to the prospect of a fine of up to 20% of their global turnover if they repeatedly break the rules.”
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The Financial Conduct Authority (FCA) secures changes to potentially unfair and unclear terms in the contracts of Clearpay, Klarna, Laybuy and Openpay. The FCA was concerned there was a potential risk of harm to consumers as a result of the way some of the firm’s terms were drafted. The Woolard Review into change and innovation in the unsecured credit market found the use of Buy-Now Pay-Later (BNPL) products nearly quadrupled in 2020 to £2.7 billion. The Government plans to change the law to bring some of the current forms of unregulated buy-now-pay-later products into FCA regulation.  Continue reading…