According to data from Bloomberg Economics, EU’s GDP is at risk of falling to just 40 per cent of the US’ in the bloc’s first five decades unless substantial investment is taken. Now in a new legislative term, EU’s policymakers are under pressure to “bridge the EU’s competitiveness gap and attract new financing to revitalise the European economy” – this is the prediction in a recently published regional analysis by Bloomberg Professional Services, which takes a look at “the most pressing economic priorities” that will likely guide the decision making of EU policymakers for the next five years.
Transparency, efficiency, risk management, and digitalisation are some of the main challenges plaguing the EU’s economic development today. To tackle these issues, the report highlights several relevant policies that would already be familiar to those in post-trade, including the revised Markets in Financial Instruments Regulation and Directive (MiFIR/MiFID), Digital Operational Resilience Act (DORA), and Basel III framework.
Nothing to hide
The implementation of the revised MiFIR and MiFID will be “crucial” to improving market transparency and efficiency over the next few years, states the article. Of note are the revamps in transparency regimes, especially for over-the-counter (OTC) markets, and the development of a pan-European consolidated tape (CT) “providing a single source of market data”.
Going digital
“AI-driven analytics and automation enhance decision making, risk management, and customer engagement. Yet, these advancements also bring regulatory complexities,” writes the report. “Regulation should foster innovation while providing clarity and protection for consumers”. Policies such as DORA will put in place “new requirements for risk management, incident reporting, and third-party outsourcing”.
Balancing act
Achieving financial stability for the region is about “developing safeguards against a wide range of financial stability risks, while ensuring the European banking sector remains globally competitive”. It’s a delicate balance that is most recently evident in the decision to “delay the Basel III requirements for market risk until January 2026, while pressing ahead with the rest of the Basel III regime from 2025”.
To conclude, the report emphasises the importance of new investment to EU’s competitiveness objective. A new approach to achieving fully functioning capital markets would be essential to this purpose.
