The regulatory chronicle of Eric de Nexon - January 2019

Hello everyone.

Firstly, may I wish you all a very Happy New Year. May 2019 bring you much joy, health and success in your projects, both personal and professional. Unlike in previous years, I’m not going to give you a detailed list of all the past and upcoming initiatives, but instead refer to them through the four major trends of which they are a part.

The first trend is globally political in nature and is no doubt the one that comprises the most elements of uncertainty. It is associated with two major and structuring events that we are not in control of. The first of these two is Brexit. Three months before the deadline, we still do not know what form the UK’s withdrawal from the European Union will take, and even less what the nature of the future relations between the two parties will be. All we can currently hope for is that the emergency measures taken by the latter will prove sufficient should there be a Hard Brexit, to both get through the 29 March deadline but also to establish a framework that is conducive to the preparation of a calm and orderly divorce between the UK and the European Union. The second of the two will be the European elections. EU citizens will be asked to vote in a new European Parliament and then designate a new Commission. So what policies will be adopted in this new context? We do not yet know the answer.

The second major trend is that of the regulating of sustainable or ESG investment activities, a major area of concern for asset managers and institutional investors, but also for their partners. The Commission is targeting the adoption, between 2019 and 2022, of texts defining the ESG taxonomy, the latter being the cornerstone of sustainable models’ future labelling provisions. The question will also arise of the defining of reporting obligations, reference indices for measuring financial performance, but also the conditions for consulting investors about their priorities in terms of sustainable development.

The third major trend is that of the regulating of new practices based on new technologies. Most initiatives in this area are currently still domestic but, in 2018, the Commission initiated its action and is looking, within this framework, at fintechs in general, but also at blockchains and the tokenisation of the economy, at crowdfunding, at data management, of course, and at cybersecurity. It wants to better understand the new landscape in order to accompany its development by adapting the current regulatory framework in a balanced manner. This promises numerous debates and numerous initiatives in this domain in the coming years.

Lastly, I feel it is essential not to omit a fourth major trend, which is that of infrastructure projects undertaken by the European Central Bank. The latter wants to be a major player in the consolidation of post-market infrastructures in Europe, but also a catalyst for harmonisation in this domain. It all began, as you know, in 2006 with T2S, which is now the single settlement platform for 23 CSDs and 2 European currencies. This continued in 2018 with the launch of the new TIPS instant payment platform, and all this will continue over the coming years between 2019 and end-2022, maybe beyond that, with three new structuring projects whose impacts should not be underestimated in terms of investment costs and change steering. Firstly there’ll be the technical consolidation of the T2S and T2 platforms mainly aimed at overhauling T2, the Eurosystem’s RTGS. The second project is the implementation of ECMS, a single collateral management platform, mobilised within the framework of the Eurosystem’s monetary policy operations. Third project: the possible launch of EDDI, one European CSD devoted to debt issues, notably supranational, whose feasibility study has just been launched.

So, as you see, 4 major trends. Some details are not yet clear, but they will drive our thoughts and our activities in 2019, as well as in subsequent years. So a regulatory hiatus certainly isn’t looking imminent.

May I again wish you all a very Happy New Year.