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EBA’s evolutionary approach towards technological neutrality.

A long standing interest in applying innovative technologies in the financial sector which included distributing ledger technology (DLT) and asset- tokenization technologies, and the European Banking Authority ( EBA ) was one of the first regulatory authorities ever to comment publicly on the phenomena. Let’s explore more about the EBA’s approach has evolved in taking actions to account for technological neutrality and applying its principles has bought about the changes in the use of the technologies.

The EBA’s  aims are as follows-

  1. to not inadvertently prefer or prevent the adoption of a specific technology;
  2. to neither prefer nor prejudice a specific business model or service provider, and
  3. to maintain inter-temporal neutrality, which means, in practice, continuous monitoring of developments and, if needed, to adjust regulatory and supervisory approaches to ensure they are “tech-ready” to enable opportunities to be realized.  

These at all times , EBA works to make sure that the regulatory objectives like consumer protection, prudential robustness and financial stability will continue to be completely met. This commitment of technological neutrality can be seen in the work done by the EBA and its evolving approach to the crypto assets. When ecash was conceived by David Chaum, the development of the decentralized bitcoin began in 2008 which caught the public’s imagination which led to increase in consumer interest. And the lineage of the crypto assets dates back to that time. As illustrated by the price of bitcoin, which went from 10,000 bitcoins for two pizzas in its first commercial use in 2010 (around $30 at the time) to first passing the $1,000 mark, albeit briefly, in November 2013.

This led the EBA to issue a public warning on December 13, 2013,[iii] to emphasize to consumers the risks of what we described at that time as virtual currencies, pointing out their value volatility and absence of consumer-protection measures due to their unregulated status. The emphasis on the manifold risks, concluded that EBA’s warning to consumers remained valid; financial institutions should be discouraged from buying, selling or holding virtual currencies; and recommending the appropriate extension of the AML/CFT (anti-money laundering/combating the financing of terrorism) regime to mitigate risks of financial crime.

The use of DLT and crypto-assets within the European Union (EU) financial sector was fast evolving. Financial institutions and technology companies, recognizing the potential for the streamlining of transaction processes and other efficiency gains, were starting to experiment meaningfully by 2018. Rapid evolutions in the application of DLT and crypto-assets in the EU financial sector led the EBA to publish a report in January 2019 with advice for the European Commission on the subject. The report identified the changes in the application of the technologies as meriting further consideration in light of the increasing use within the financial sector. EBA recommended that the European Commission carry out a detailed analysis of the costs and benefits of adapting the regulatory regime both to address emerging risks. It also highlighted that if DLT and crypto assets were becoming a part of the fabric with which the financial sector was woven and it deserved consideration for the challenges posed by a range of differing national approaches and the converse benefits of scalability across the EU single market and to the need for consistency in regulatory approaches to provide certainty about rights and obligations and address risks effectively. Therefore proving a cautious but adaptive approach is possible and can keep pace with the increasing importance of the underlying technology and varying forms of tokenisation to financial services.

Borsa Italiana, CME Group, Deutsche Börse, London Stock Exchange, NASDAQ, SIX Digital Exchange), payment and settlement infrastructures (such as Fnality International) and banks (for example, BBVA-Banco Bilbao Vizcaya Argentaria, BNP Paribas, Commerzbank AG, ING Group and JPMorgan Chase) all these banks also started continuing to experiment in technological neutrality. And the Dialogue between industry, supervisors and regulators will help ensure that the regulatory framework remains fit for purpose, technology neutral and future-proof.

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Banking

Goldman banker hired by the Citi bank

Citigroup has hired Luisa Leyenaar-Huntingford from Goldman Sachs. This new hire is to co-head its global infrastructure franchise. Because, it seeks to win more business from cash-rich investment firms focusing on infrastructure deals. Leyenaar-Huntingford will be based in London. Responsibility will be shared with Todd Guenther in New York.

The pair will work closely with industry teams covering healthcare, industrials, natural resources and clean energy transition (NRCET), technology and communications. Leyenaar-Huntingford helped in the establishment of the Goldman’s infrastructure franchise in her time at the Wall Street bank. They will team up with Citi’s Iberia co-head of banking, capital markets and advisory (BCMA) Jorge Ramos will continue to be a senior member of the global infrastructure franchise.

The infrastructure sector is poised for further growth, according to the memo. The memo was released by Citi’s global co-heads of the alternative assets group Anthony Diamandakis and John Eydenberg, and its EMEA head of BCMA Nacho Gutierrez-Orrantia. There was significant private investment demand across the globe to deal with environmental, energy, transportation, waste, communication, digital and other social needs.

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Banking

Banks make slow progress on UK gender pay

Major banks in Britain made a slight dent in their gender pay gaps. Several insurers went backwards. Companies in Britain with more than 250 employees have been required to publish the difference between the pay and bonuses of their male and female employees. They got a reprieve due to the pandemic, last year. The financial services sector has shown one of the largest genders pay gaps in Britain. The lack of women in senior jobs is the main reason.

Pay gap data from 21 major financial institutions showed a narrowing in their average mean gender pay gap. This is just 0.4 percentage points. Banks alone had a pay gap which narrowed by one percentage point. Ann Francke, chief executive of the Chartered Management Institute said that the UK’s financial services industry has often been singled out. It really does have to get its house in order. Goldman Sachs had the widest gender pay gap in the year to April 2020. Goldman posted a gender pay gap of 51.8%. The bank told the staffs that narrowing the gap further was a critical priority. A spokesperson for banking lobby group UK Finance said, that there is clearly more still to be done.

FTSE 100 insurers Prudential, Legal & General and M&G reported a widening in their pay gaps. Prudential’s UK gender pay gap widened to 45.2%. M&G also reported a widening in its pay gap in the most recent year to 30.5%. The M&G spokesperson said that they are determined to narrow their gender pay gap and will do this by achieving better representation of women in all roles at all levels of our organization. Legal & General’s mean gender pay gap widened to 30.8%.

The insurer said that the legal & general is tackling the underlying causes of its pay gap. This is by creating a more diverse workforce and a more inclusive culture through sustained, long-term action. Admiral had a gender pay gap last year of 12.8%. The 21 firms surveyed were Barclays, HSBC, Lloyds, NatWest, Standard Chartered, Bank of America Merrill Lynch, Goldman Sachs International, JPMorgan, Morgan Stanley, UBS, Credit Suisse, Deutsche Bank, PGMS (a Phoenix unit), abrdn, Schroder Investment Management, St James’s Place, Legal & General, Prudential, Admiral Group, Aviva and M&G.

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BOJ to lower inflation target-Japan’s finance minister

Japan’s outgoing finance minister, Taro Aso, said that he had proposed lowering the central bank’s 2% inflation target. This is when the prices took a hit from plunging oil prices. He was the finance minister for nearly nine years. The slump in oil price was among the main reasons the government could not officially declare an end to deflation. In his final news conference as finance minister, Aso said that he proposed to Governor Kuroda that, with oil prices falling this much, it would be hard to achieve 2% inflation. Hence, the target must be lowered at some point. He stated this by referring to Bank of Japan (BOJ) chief Haruhiko Kuroda.

Aso also said that the governor said he would do his best to achieve the target. This is stated by adding that policymakers must scrutinise at some point, why the BOJ’s inflation target of 2% has not been met. The remarks highlight how the government and lawmakers distanced themselves from the BOJ’s target years ago, despite central bank reassurances that achieving the target was possible by maintaining or increasing stimulus.

Aso was deeply involved in negotiations with the BOJ. After Kuroda took over as governor, he deployed a massive asset-buying program. This is for pulling Japan out of deflation. Aso supported the BOJ’s stimulus efforts. He is a member of the cabinet. And also, had raised many doubts that monetary policy alone can reflate the economy out of the doldrums. New Prime Minister Fumio Kishida is set to form a cabinet.

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