Capital Markets Union: EU reaches agreement on reviving securitisation market

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Late on Tuesday, the European Parliament, the Council and the Commission agreed on a package that sets out criteria for simple, transparent and standardised securitisation (STS). The deal is one of the cornerstones of the Capital Markets Union (CMU), the Juncker Commission’s pivotal project to build a single market for capital in the EU. The swift implementation of the securitisation package could unlock up to EUR 150 billion of additional funding to the real economy.

Securitisation can allow diversification of funding sources and a broader distribution of risk by allowing banks to transfer the risk of some exposures to other institutions or long-term investors, such as insurance companies and asset managers. This allows banks to free the capital they set aside to cover for risks of those exposures, allowing them to generate new lending to households and SMEs. STS securitisations will also provide new investment opportunities for institutional investors such as pension funds and insurance companies.

Valdis Dombrovskis, Vice-President responsible for Financial Stability, Financial Services and Capital Markets Union, said: “This agreement marks another big step towards the creation of a Capital Markets Union. It will help build a sound and safe securitisation market in the EU, bringing real benefits to investment, jobs and growth. It will free up bank lending so that more financing can go towards supporting our companies and households.”

The new regulatory framework agreed by co-legislators sets out a risk-sensitive, transparent and prudential treatment of securitisation. At the same time, the package also ensures an appropriate capital treatment of securitisation instruments in general.

Next Steps

Today’s political agreement will be followed by further technical talks to finalise the text. The Permanent Representatives Committee (COREPER) of the Council of Ministers is expected to endorse the agreement ahead of the European Parliament’s plenary vote.

Background

In September 2015 the European Commission proposed new rules on securitisation as part of the Capital Markets Union (CMU) action plan (IP/15/5731). The Commission proposed a regulatory framework for securitisation which is simple, transparent and standardised and subject to adequate supervisory control. According to the Commission’s estimates at the time, if EU securitisation issuance was built up again to the pre-crisis average, it would generate up to EUR 150bn in additional funding for the economy.

Securitisation is the process where a financial instrument is created, typically by a lender such as a bank, by pooling assets (for example car-loans or SME-loans) for investors to purchase. This facilitates access to a greater range of investors, thereby increasing liquidity and freeing up capital from the banks for new lending.

The new EU legal framework provides a clear set of rules to ensure that STS benefits the real economy. It bears no relation to the securitisation of subprime mortgages created in the US that contributed to the financial crisis. The European Commission does not intend to go back to the days of opaque and complex subprime instruments. Instead, the new rules clearly differentiate between simple and more transparent securitisation products and other products which do not satisfy such criteria. This will restore an important funding channel for the EU economy without endangering financial stability.

More information: https://ec.europa.eu/info/business-economy-euro/banking-and-finance/financial-markets/securities-markets/securitisation_en

MEMO: http://europa.eu/rapid/press-release_MEMO-15-5733_en.htm

Do not stand silent while Syrian parties use starvation, fear as ‘methods of war,’ urges UN aid chief

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30 May 2017 – Though there are significantly fewer reports of violence in some parts of Syria, the consequences of the conflict continue to devastate lives, the top United Nations relief official said today, calling for ending attacks and obstacles that prevent humanitarian workers from reaching the hundreds of thousands of civilians still trapped in the war-torn country.

“We must not lose sight of the fact that – all over Syria – millions of people, in locations inside and outside the four de-escalation areas, continue to suffer because they lack the most basic elements to sustain their lives,” said Stephen O’Brien, the UN Emergency Relief Coordinator, briefing the Security Council.

“We must not stand silent while violence flares up elsewhere in the country and parties continue to use starvation, fear tactics and the denial of food, water, medical supplies, and other forms of aid as methods of war,” he stated.

The war in Syria, now into its seventh year, has extracted the worst toll on the country’s children. Tens of thousands have been killed and many have been forcibly detained, tortured, subjected to sexual violence, forcibly recruited and in some cases executed.

Just last week, 30 children and women were injured in an attack by Islamic State of Iraq and the Levant (ISIL/Da’esh) on besieged neighbourhoods in Deir ez-Zor as they were lining up to collect water.

Furthermore, in recent weeks, more than a hundred civilians, many of them women and children, have fallen victim to escalating counter-ISIL airstrikes, particularly in the north-eastern governorates of Al-Raqqa and Deir ez-Zor.

According to estimates, nearly seven million children are living in poverty and some 1.75 million are out of schools with another 1.35 million at the risk of dropping out. Almost one in three schools have been damaged, destroyed, or otherwise made inaccessible.

“And even if the schools were intact, many would be unable to open, with almost one quarter of the country’s teaching personnel no longer at their posts,” said Mr. O’Brien.

The situation of those outside of the country, living as refugees, remains equally uncertain with many rendered “stateless”.

In his remarks, Mr. O’Brien, also the UN Under-Secretary-General for Humanitarian Affairs and the head of the UN Office for Coordination of Humanitarian Affairs (OCHA) recalled the memorandum, agreed to during the recent meetings in Astana, between the three guarantors – Iran, Russia and Turkey – on the creation of four de-escalation areas and that stipulates that fighting must significantly decrease and unhindered humanitarian access be enabled to these four areas.

He also stressed the need to ensure that all obstacles, including bureaucratic ones, are put to an end, once and for all, and the UN and its humanitarian partners can sustainably reach those who are trapped behind the current front lines.

He also underscored that in many other parts of Syria, humanitarian and protection space continues to shrink, primarily due to increasingly strict limitations by local authorities, non-State armed groups, as well as terrorist organizations.

Speaking particularly on the north-eastern parts of the country, Mr. O’Brien called on all with influence over the parties involved to act now, “further delays or restrictions will only result in the continued suffering and the death of civilians.”

“With some 100,000 people displaced due to fighting around Raqqa since April, access is needed now through every possible modality,” he said, calling on the Security Council “to take all necessary steps to see that the will to place humanitarian aid delivery in its rightful position – outside of any military or political calculations and totally impartially – is restored.”

UN atomic energy agency looks to boost ongoing contribution to sustainable development

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30 May 2017 – Nuclear science and technology are essential in helping countries address the twin challenges of ensuring reliable energy supplies while curbing greenhouse gas emissions, the head of the United Nations atomic agency told some 1200 participants at the opening of an international conference today in Vienna.

The Conference on the International Atomic Energy Agency (IAEA) Technical Cooperation Programme, which runs from 30 May to 1 June in the Austrian capital, will highlight the Agency’s role in providing development assistance, discuss future partnership opportunities and examine the way forward on the Sustainable Development Goals (SDGs).

After welcoming member States and other partners, IAEA Director General Yukiya Amano said: “Science and technology are critical for development. Transferring nuclear technology to developing countries is core IAEA business. Partnerships are an essential element of our work.”

“The technical cooperation programme has improved the health and prosperity of millions of people,” Mr. Amano said. “I have seen for myself in visits to developing countries all over the world that technical cooperation projects deliver huge benefits to individuals, families and entire communities.”

Partnerships key to sharing nuclear science and technology

In 2016 alone, the IAEA technical cooperation programme delivered support to 146 countries and territories, including 37 least developed countries.

Highlighting two key partnerships which help the IAEA to deliver assistance, he said: “Together with the UN Food and Agriculture Organization (FAO), the IAEA deploys nuclear techniques to help increase food production, manage pollution, reverse land degradation and restore soils. We work with the World Health Organization (WHO) to help improve the availability of radiotherapy and nuclear medicine.”

Nuclear technology contributing to development

Lifting people out of poverty to support sustainable development was also the central topic in the opening speech of the conference.

“Energy is indispensable for development,” he told the audience, stressing that “huge increases in energy supply will be required in the coming decades to support economic development and lift some 2.6 billion people out of energy poverty.”

He went on to say that many member States believe nuclear power can help them to address the twin challenges of ensuring reliable energy supplies, while curbing greenhouse gas emissions.

“Nuclear power is one of the lowest-carbon technologies available to generate electricity” Mr. Amano pointed out. “Nuclear power plants produce virtually no greenhouse gas emissions or air pollutants during their operation, and only very low emissions over their entire life cycle.”

The use of nuclear power can also help member States to alleviate concerns about volatile fuel prices and security of supply, he said.

He stated that some 30 countries are already using nuclear power and another 30 are considering building their first nuclear power plants, or have started doing so.

Sri Lanka: UN agency deploys rapid assessment teams to assist in wake of monsoon floods, landslides

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30 May 2017 – According to Sri Lanka’s Disaster Management Centre (DMC), the South Asian country is combatting floods and mudslides in the wake of Tropical Cyclone Mora, while the United Nations Migration Agency (IOM) today deployed three rapid assessment teams to the most affected districts, where some 177 people have died and 109 remain missing.

Secretary-General António Guterres said he was “deeply concerned by the devastating impact caused by Cyclone Mora on Sri Lanka and Bangladesh,” adding that the UN stood “ready to scale up its support to the government-led response efforts in both countries.”

Since heavy rains on Friday, most of the deaths were caused by landslides.

In a press statement, IOM maintained that while its teams travel to the four worst-hit districts of Ratnapura, Galle, Matara and Kalutara – in the south and centre of the country – the Government indicated that over 768 houses have been destroyed and 5,869 partially damaged while 80,409 people were temporarily displaced to 361 safe locations. More than half the displaced are located in Rathnapura district, where more rain is forecast today.

Sri Lanka’s National Building Research Organization also issued warnings of further landslides in a number of districts, including Kegalle and Ratnapura, where IOM provided shelter assistance to flood and landslide-affected communities last year.

In recent weeks, over half a million people in 15 districts of the country’s south and central regions have been affected by abnormally heavy monsoon rains.

The flooding is believed to be the worst since May 2003, when a similarly powerful monsoon from the southwest destroyed 10,000 homes and killed 250 people, according to IOM.

“When the rain has eased on Sunday and Monday, rescue workers used the break in the weather to deliver much-needed aid to the worst-hit areas. But many villages remain inundated and cut off from basic services,” said the UN’s migration agency.

Rescue operations led by the Sri Lankan military are continuing and the DMC has already identified an urgent need for drinking water and non-food relief items, including shelter.

Sri Lanka’s Health Ministry is also deploying mobile health units and will introduce vector control measures to combat expected outbreaks of mosquito-borne dengue fever, which often follows flooding. Displaced people living in emergency shelters are particularly vulnerable.

The Sri Lankan Government has appealed for international assistance and, according to media reports, three Indian naval ships carrying relief supplies arrived in Sri Lanka on Saturday and Sunday. China, the United States and Pakistan have also provided assistance.

Climate action ‘a necessity and an opportunity,’ says UN chief, urging world to rally behind Paris accord

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30 May 2017 – Highlighting the seriousness of the impact of climate change on the planet and its inhabitants, United Nations Secretary-General António Guterres today called for sustained action to meet the global challenge and to ensure a peaceful and sustainable future for all.

“The effects of climate change are dangerous and they are accelerating,” Secretary-General Guterres told a gathering of students, business leaders and academics at the New York University Stern School of Business.

“It is absolutely essential that the world implements the Paris Agreement [on climate change] – and that we fulfil that duty with increased ambition,” he underscored, recalling the ground breaking agreement that entered into force last November.

The Agreement calls on countries to combat climate change and to accelerate and intensify the actions and investments needed for a sustainable low carbon future, and to adapt to the increasing impacts of climate change.

It also aims to strengthen the ability of countries to deal with the impacts of climate change and calls for scaled up financial flows, a new technology framework and an enhanced capacity-building framework to support action by developing countries and the most vulnerable countries in line with their own national objectives.

Science ‘is beyond doubt’

Underlining that science behind climate change “is beyond doubt,” Mr. Guterres said:

“As the Intergovernmental Panel on Climate Change put it: ‘Human influence on the climate system is clear. The more we disrupt our climate, the more we risk severe, pervasive and irreversible impacts,’” he said, recalling that global temperatures have been rising, year after year, and that that last year was the hottest on record.

Furthermore, there are fears that the melt of sea ice and glaciers due to rising temperatures will have deep and far reaching impact: droughts and dry spells will last longer, while natural disasters like floods and hurricanes will be even more destructive.

Impacts of these catastrophic events, Mr. Guterres noted, would be felt in all corners of the world and in all sectors of the economy.

Informing of his intention to convene a dedicated climate summit in 2019 to reach the critical first review of implementation of the Paris Agreement, the UN chief called on all, including those who might hold divergent perspectives on climate change to engage with him on the way forward.

Green business is good business

He also pointed to the opportunities that climate action can provide, such as through the creation of jobs and increased economic growth. It is thus, not surprising, that many private corporations, including major oil and gas companies have adopted climate action.

“They know that green business is good business. It is not just the right thing to do, it is the smart thing to do,” he highlighted.

Five-point action plan

Laying out a five-point action plan to mobilize the world for climate action, the UN chief underscored that he will intensify political engagement with countries to increase efforts to limit temperature rise to well below 2 degree-Celsius and as close as possible to 1.5 degree-Celsius, the first point.

He also said that he would engage more with Governments and major actors, including the coal, oil and gas industries, to accelerate the global transition to sustainable energy, and committed stronger support by the entire UN development system to Governments as they strive to meet climate commitments and achieve the 2030 Agenda for Sustainable Development and the Sustainable Development Goals (SDGs), especially at the country level.

“That is where true change will be achieved,” he said.

The UN chief also said that he will work to with UN Member States mobilize national and international resources for adaptation, resilience, and the implementation of national climate action plans, and called for new and strengthened partnerships, including with the private sector and through North-South, South-South and triangular cooperation.

Further in his remarks, the Secretary-General cautioned that failure to act on combatting climate change would in turn harm the countries themselves for their inaction.

“Those who fail to bet on the green economy will be living in a grey future [but] those who embrace green technologies will set the gold standard for economic leadership in the twenty-first century.”