Changes from report parliamentary committee draft to plenary report

Change 9

Changed1. Welcomes the renewed debate on the need to restoreboost EU productivity and competitiveness, inter alia through better integrated capital markets,markets boostedand bya resource-efficient economy, as outlined in the Draghi and Letta reports;

Change 10

Removed3. Notes the challenges stemming from more integrated financial markets, including the trade-off between efficient risk sharing and diversification, on the one hand, and contagion, spillover and amplification risks, on the other hand;

Added3. Emphasises the CMU’s goal to mobilise private capital more effectively to close the EU’s investment gap and the role it can play as a shock absorber; stresses that the CMU agenda should also contribute to correcting structural imbalances in the EU’s financial system; regrets the persistence of a tax-induced debt-equity bias;

Removed4. Stresses the importance of maintaining access to capital while preserving financial stability;

Added4. Recognises that the completion of the Banking Union must be a strategic priority in the deepening of the Economic and Monetary Union;

Added5. Notes the challenges stemming from more integrated financial markets in the absence of more coherent supervision, including the trade-off between efficient risk sharing and diversification, on the one hand, and contagion, spillover and amplification risks, on the other;

Added6. Recognises the trade-off with regard to cross-border banking consolidation between geographic diversification, cross-border financial services, economies of scale, and a potential weakening of the bank-sovereign nexus, on the one hand, and the ‘too big to fail’ problem, the potential weakening of smaller financial centres and links to small and medium-sized enterprises (SMEs) and local economies on the other;

Change 11

Changed5.9. WelcomesHighlights the ECB’s effortsprimary toobjective maintainof maintaining price stability and the key role of the ESRBESRB, European supervisory authorities and central banks in contributing to financial stability in the Union;

Change 12

Removed6. Notes the Union’s exposure to external shocks via strong interlinkages with foreign financial markets and entities, and pressures from rising trade tensions amid geopolitical uncertainty;

Added10. Recalls that the Eurosystem has been built on the principle of monetary dominance; calls for the preservation of the ECB’s independence as a factor supporting financial stability;

Removed7. Emphasises the risks of high sovereign debt and deficits, particularly through the sovereign-bank nexus;

Added11. Underlines that certain central bank market interventions come with the risk of market distortions that might affect financial stability;

Removed8. Stresses that structural reforms could elevate the international role of the euro and bolster financial and monetary stability;

Added12. Notes the Union’s exposure to external shocks via strong interlinkages with foreign financial markets and entities, reliance of the EU financial sector on non-EU service providers and pressures from rising trade tensions amid geopolitical uncertainty;

Change 13

Changed11.20. Emphasises the need forto fullensure the implementation of the Basel III framework to enhance the resilience and global competitiveness of EU banks; notes the continued lack of clarity concerning implementation of the Basel III standards in some major non-EU-country jurisdictions and the need for the Union’s banking system to remain competitive in an international context; emphasises the importance of maintaining the integrity of the Basel framework, underlining that financial stability itself can be seen as a competitive advantage;

Change 14

Changed12.21. Highlights the importance of keeping a sound macroprudential framework while ensuring simplification, legal clarification and burden reduction, particularly for bankssmaller withentities; ahighlights viewthat there is room for simplification and harmonisation in the design and application of macroprudential buffers; calls on the Commission and supervisory authorities to simplification,systematically legalapply clarificationthe principles of proportionality, cost-efficiency and burdendigital reduction;simplification where possible and without jeopardising financial stability;

Change 15

Removed13. Notes increased vulnerabilities in commercial real estate markets, compounded by rising rates and NBFI exposures;

Added22. Stresses that simplification of the post-2008 financial crisis reforms should be considered if there are clear and substantiated benefits to the real economy and if there are no risks to financial stability; takes note of the debate on the securitisation package;

Removed14. Calls for an assessment of financial institutions’ exposure to geopolitical risks, including indirect effects of sanctions and economic fragmentation;

Added23. Takes note of the ECB analysis on persistent vulnerabilities in commercial real estate markets, compounded by rising interest rates and NBFI exposures, which deserve close monitoring; calls, in this context, for the ESRB to closely monitor the role of NBFIs active in real estate markets and issue relevant recommendations; recognises, in addition, the high levels of household indebtedness;

Added24. Urges the ECB to assess financial institutions’ exposure to geopolitical risks, including indirect effects of sanctions, tariffs and economic fragmentation as part of the regular Supervisory Review and Evaluation Process in the context of strategic autonomy;

Change 16

Removed16. Calls for a thorough review of regulatory gaps, including in less regulated areas such as family offices and supply chain finance companies;

Added26. Notes the diversity of NBFIs’ business models and their important financing role; highlights that for many sectors, there is already European sectoral regulation in place, such as for hedge funds (Alternative Investment Fund Managers Directive2), money market funds (Money Market Funds Regulation3), insurance undertakings (Solvency II), investment firms (Investment Firms Directive4 and Regulation5) or pension funds (Directive on institutions for occupational retirement provision6); notes that the current framework, however, focuses primarily on investor protection and market integrity rather than on reducing systemic risks7; calls for a thorough review of regulatory gaps regarding NBFIs, including in less regulated areas such as family offices and supply chain finance companies;

Change 17

Changed17.27. CallsTakes note of the Commission’s 2023 report on the functioning of money market funds and recent amendments to the Money Market Funds framework; calls on the Commission to come forward with a reform of the Money Market Funds RegulationRegulation8 in line with international standards, regulatory progress made in other jurisdictions and the recommendations of the ESRB and ESMA;

Change 18

Changed18.28. Highlights the fact that procyclical margin calls during crises such as COVID-19 and the 2022 energy turmoil drove significant liquidity stress; notes the importance of liquidity preparedness, and generally of leverage and capital buffers in this regard;

Change 19

Changed20.30. Stresses the need for resilient clearing infrastructure, robust collateral frameworks and coordinated supervision of central counterparties;counterparties (CCPs); notes the Commission’s decision to extend the equivalence regime for UK-based CCPs and notes continuing concerns regarding European dependence on non-EU CCPs;

Change 20

Changed21.31. Supports greater transparency and macroprudential oversight in margining practices, including stress testing and scenario analysis;analysis, drawing on the FSB's recent work on liquidity preparedness for margin and collateral calls;

Change 21

Removed23. Flags the potentially systemic relevance of developments in the markets for crypto-assets;

Added33. Takes note of the FSB’s analysis that for the time being, financial stability risks arising from crypto-asset markets appear limited9; flags, however, the potentially systemic relevance of developments in the markets for crypto-assets; notes the largely speculative nature of crypto-assets and their important role in illicit transactions; urges the Commission and the ESRB to closely follow evolutions in this field;

Removed24. Encourages investments in cyber-resilience to protect financial infrastructure against external threats;

Added34. Welcomes the fact that the European Union has put in place a prudential framework for crypto-assets (MiCAR); stresses the importance of timely and consistent implementation and calls on the Commission to monitor remaining regulatory gaps;

RemovedEnhancing supervisory coordination, data capabilities and crisis preparedness

Added35. Highlights the fast growth of the stablecoin market, which remains so far largely restricted to the crypto ecosystem; notes that the regulatory landscape with regard to stablecoins in major non-EU-country jurisdictions is rapidly changing; urges the Commission to assess whether there are potential channels of contagion, such as in the case of multi-issuance;

Change 22

Added43. Calls on the Commission to uphold a high level of ambition in implementing the FSB recommendations on leverage in the EU;

Change 23

Changed30.45. Calls for enhanced transparency, data sharinganalytics amongcapabilities and streamlined data-sharing mechanisms between national and EU authorities, includingwith respect of data protection safeguards, in order to support a more comprehensive risk monitoring framework and system-wide stress-testing capabilities;capabilities, including on cyber-resilience, energy outages and the collateral framework; notes that some national authorities have already communicated their intention to carry out stress tests on interconnections between the banking sector and the NBFI sector;

Change 24

Changed31.46. Calls for strengthened cooperation with international financial institutions, including the IMFIMF, the Basel Committee on Banking Supervision, the BIS and the FSB, to tackle cross-border stability risks;