A focus on key impacts for financial services firms and
The European Commission announced in the 2021 EU State of the
Union speech a number of key priorities. The following are those
that are likely to directly affect financial services:
- Introduction of an EU Cyber-Resilience Act to sit alongside and
support additional efforts on network security (NIS2) and digital
operational resilience (DORA).
- Stepping up delivery on the implementation of the Capital
market Union Action Plan including the Initiative on harmonizing
certain aspects of substantive law on insolvency proceedings.
- Reinvigorate initiative on instant payments in the EU
- Launch of a legislative proposal to facilitate small and medium
sized enterprises access to capital.
- Advancing two legislative proposals firstly on the
implementation of the OECD global agreement on re-allocation of
taxing rights and secondly on the implementation of the OECD global
agreement on minimum effective taxation.
- Finalizing the political agreement by 2023 on the EU’s
reformed Stability and Growth Pact.
While the above will likely during the fourth quarter of 2021 be
detailed by further and wider-reaching workstreams that are set to
be published by each of the European Commission, the European
Supervisory Authorities (EBA, ESMA and EIOPA) as well as the
European Central Bank, in addition to national competent
authorities across the EU-27, the 2021 speech sets a clear path as
to the EU’s planning for beyond the pandemic. While the 2021
speech is comparably more focused than European Commission Ursula
von der Leyen’s 2020 inaugural speech, it points to a very busy
2022 for financial services firms and those authorities supervising
EU Commission charts the path ahead for planning beyond the
Amongst EU institutions September is usually the time for
setting the agenda for the year ahead. Key announcements on future
policies, legislative initiatives and structural reforms take
center stage ahead of the publication of more detailed work
programmes. On 15 September 2021, European Commission President
Ursula von der Leyen delivered her second EU State of the Union
address1. This is the tenth time2 such an
address has been delivered by a European Commission President.
The 2021 speech offers an opportunity to reflect on the European
Commission’s achievements3 over the past year.
Notably this includes highlighting the successes of the
unprecedented NextGenerationEU recovery plan as well as
national-led recovery plans4, the Commission’s debut
on the capital markets as well as improving momentum in
vaccination. By August 2021 70% of the EU adult population were
reported as fully vaccinated. All of these developments underpin
the welcome outlook that the Commission expects that 19 out of 27
Member States’ economies are expected to return to pre-pandemic
However, the 2021 speech more importantly allows the Commission
to chart the course for the year ahead, and in this year, for
planning beyond the pandemic. The speech is the platform to deliver
its proposals for the big picture on aims and goals with technical
details to follow. Inaugural State of the Union speeches of
European Commission Presidents tend to be more about setting the
scene for the entire term, whereas those that follow tend to
reflect on achievements, refine previous but also introduce new
concrete reforms while equally sticking to longer-term projects in
various stages of successful delivery.
Unsurprisingly, the Commission in the 2021 speech highlights
that the success of the EU’s Single Market, which shortly
celebrates its 30th anniversary, is core to the EU’s progress
and prosperity over the next five to ten years. Consequently, the
Commission is pushing to expand and deepen the Single Market and
the Commission’s various efforts on the Banking Union and
Capital Markets Union serve as catalysts to achieve that aim -
certainly for financial services. Then there are those aims that
are broader, such as the Commission pressing to develop a Digital
Single Market, which aims to benefit a breadth of sectors.
One speech, many accompanying publications
As in previous years and very much accompanying the speech, the
European Commission President also sends a Letter of Intent to the
President of the European Parliament and the incumbent holding the
rotating Presidency of the Council. The Letter of Intent sets out
proposed commitments, and details which actions the Commission
intends to take both by legislative means and through other
initiatives during the coming year.
The communicated aims and goals of the European Commission will
likely be of interest to financial services firms and market
participants. They also serve as a primer ahead of the
comprehensive publications of respective 2022 work programmes later
in 2021 by the European Commission as well as the respective
European Supervisory Authorities (EBA, ESMA and EIOPA) and the ECB
– please stay tuned for our coverage and analysis on these.
While the speech also provides the opportunity for the technical
and political debate, notably amongst Members of the European
Parliament5, the following sections present an overview
of the salient points of interest to financial markets as announced
in the 2021 speech6 as well as in the 2022 high-level
priorities and the more detailed policy announcements published in
the “Letter of Intent”7.
The Commission´s Letter of Intent points of interest for
The Letter of Intent contained a number of proposed initiatives,
which are grouped into six thematic areas8 that stem
from the EU’s 2019-2024 Priorities9. Three out of
the six thematic areas and their respective workstreams are likely
to be of interest to financial services firms and market
|EU thematic area||Workstream – relevant parts in
|Potential considerations for
financial services firms and market participants
|A Europe fit for the digital
1. European Cyber Resilience Act
2. European Chips Act
3. Roadmap on security and defense technologies
4. Legislative proposal on building an space-based global secure
5. Review of competition policy – “fit for new
6. Proposal for a Council Recommendation on improving the
7. Legislative proposal on a Single Market Emergency Instrument
8. Legislative proposal on multimodal digital mobility
|An economy that works for
9. Legislative proposal on the protection of workers from the
10. Legislative proposal to facilitate small and medium sized
11. Initiative on instant payments in the EU
12. Implementation of the Capital market Union Action Plan
13. Legislative proposal on the implementation of the OECD
14. Legislative proposal on the implementation of the OECD
The contents of the Letter of Intent also cement the European
Commission’s high-level priorities for 2022 which were also
commented upon in the 2021 speech.
High Level priorities of the European Commission for 2022
The European Commission in 2022 plans to build upon the
following overarching themes and relevant priorities thereunder.
Specifically, the European Commission will:
- Continue the vaccination efforts in Europe and speeding up
vaccinations globally, as well as strengthening the EU’s future
Notably, the 2021 speech focused on a need to smooth what are
“worrisome divergences in vaccination rates in our
Union”. Equally, the 2021 speech commits the EU to building,
as announced in 2020, a “European Health Union”, with EUR
50 billion in funding by 2027, albeit with little details on
funding plans, and to speed up the set up and operation of a new
Health Emergency preparedness and Response Authority (HERA) by
early 2022. In the short term the European Commission is creating a
new biodefence preparedness plan called the HERA Incubator,
bringing together biotech companies, manufacturers, regulators and
public authorities to identify and combat future pandemics.
- Work on closing the climate finance gap, together with the
EU’s global partners.
The EU has pledged to commit an additional EUR 4 billion to
climate finance until 2027 and expects the USA and other partners
“step up too”. A number of key meetings at the global
level, including COP26 will likely yield further announcements on
- Lead the digital transformation that will create jobs and
drive competitiveness, while ensuring technical excellence and
security of supply across the EU.
In addition to the European Cyber Resilience Act, which aims to
complement existing efforts such as the second Network Information
Security Directive (NIS2) and the Digital Operational Resilience
Act (DORA), the European Chips Act is novel rulemaking for the EU.
The European Chips Act aims to create a “European chip
ecosystem” that focuses on improving supply chains and
reducing shortage of semiconductors as well as overreliance on
non-EU chip production. Concurrently, the EU plans to implement a
new accompanying investment framework. Such an investment framework
may provide a number of welcome opportunities for those seeking
inasmuch as those providing funding.
- Ensure fairer working conditions and better healthcare while
creating more opportunities for Europe’s youth to benefit from
the European social market economy.
The EU plans to introduce a number of targeted programs to
coordinate national efforts and create common platforms
strengthening work in this area in the previous years. This also
includes the EU introducing a new Erasmus-style placement
programme, ALMA, to help young Europeans who are neither in
employment or education find temporary work experience in another
- The EU also approved changes and to
improve the attractiveness of its Blue Card scheme for foreign
professionals, which grants the right to live and work in the EU.
The Blue Card, inspired by the US Green Card was established in
2009 and is available in 25 of the 27 EU Member
States13. It aims to provide a competitive advantage for
employers in the EU in the global race for talent. The changes mean
that those holding a permit need to secure a contract in the EU for
a minimum of six months as opposed to 12 months previously. The
rules allowing a bearer of an EU Blue Card to move from one EU
Member State to another after 12 months of work have been eased. So
too are the provisions for them to be joined by family members, who
would also have the right to work.
- Step up the EU’s cooperation on security and defence
while deepening the EU’s partnerships with its closest
As in more recent years and calls for the EU to push for greater
strategic autonomy, the EU dusted off historic plans and presented
afresh a reinvigorated European Defense Union. Focus will be
directed on better information sharing and greater situational
awareness, greater interoperability through common platforms
(including waiving VAT when buying European developed and produce
defense equipment) as well as ultimately collective decision-making
amongst Member States. Further efforts will be pressed ahead with a
new European Cyber Defense Policy. Under the French Presidency of
the Council, commencing 1 January 2022, the European Commission
will convene a European Defense Summit. An EU-NATO declaration is
also anticipated by the end of 2021.
- Equally, the EU will together with the
US continue to cover common topics for cooperation ranging from
health security and sustainability, through the new Trade and
Technology Council. Furthermore, the EU will continue to press
efforts across those Western Balkan countries that are in various
stages of the EU accession process. The EU will equally press ahead
with investing in existing regional partnerships, including the
EU-Africa Summit and creating a market for green hydrogen linking
Africa and the EU as well as setting new partnership strategies,
including following the EU’s new Indo-Pacific strategy. These
partnerships aim to promote regional security and prosperity.
- Continue to defend European values and freedoms as well as
protecting the rule of law.
In addition to promoting partnerships above, the EU will apply a
values-based approach, offering transparency and good governance to
its partners, through a new “Global Gateway Partnership”
that drives investments and infrastructure improvements but with
conditions attached. While such initiative aims to compete with
those of other countries, the EU’s conditions include a
proposed ban on products entering the EU that have been made by
- Moreover, within the EU, the Commission
announced that from 2022 its Rule of Law reports will come with
specific recommendations issued to Member States.
- Finalizing the return to a reformed Sustainability and
In the 2021 speech, the Commission announced that in the coming
weeks it will relaunch the discussion on the Economic Governance
Review, aiming to build consensus on the way forward well in time
for the 2023 timelines with the EU’s Stability and Growth Pact
being reinstated by that time. While the Commission is reopening
the conversation on the Stability and Growth Pact (SGP), it is not
one without difficulty.
- The last time the SGP reform debate was
aired amongst national capitals differing views became drawn along
a familiar north-south divide. The fundamental issue remains on how
to balance a move to loosen the EU’s deficit rules and allow
for fiscal flexibility, against the risks looming in the form of
high public debt left over from the pandemic or even the European
Sovereign Debt Crisis. In the Eurozone-19 (soon to be 21) the
average debt is expected to reach 102% of GDP at the end of 2021,
with a number of larger economies expected to rise to 120%.
- A number of the priorities above, as
clarified in the speech are set out in further technical detail in
the Letter of Intent.
The EU’s 2021 State of the Union, marks the real start of
the EU’s policymaking cycle ahead of technical publications and
workplans being released before the end of the year. More
importantly, financial services firms and market participants may
equally want to take note of the push for further Europeanization
taking place across a number of areas already within the
Commission’s responsibilities as well as those new areas that
it is seeking to tackle, or at least coordinate in a more
Equally, even if the 2021 speech and accompanying documents may
indicate the beginning of the end of COVID-19 firefighting,
policymakers, financial services regulators and supervisors at the
EU and the Member State level are all largely back into normal
operating conditions. Many are looking to digest and apply the
lessons learned during lockdown, but equally looking to pick up, as
well as amend, those reform proposals that were paused by the
Then there are those financial services rulemaking and
institutional reforms that did not make it into the 2021 speech and
accompanying documents, but which are likely to be reflected in
forthcoming announcements. This includes everything from the
finalization of Basel IV reforms through to the exact future nature
of access to third-country CCP clearing still to be clarified, down
to improving the EU’s supervisory architecture, including the
location of the EU’s new Anti-Money Laundering Authority
(AMLA). Desks are likely to be full with a much busier regulatory
reform agenda than in previous years and with a more intrusive
level of supervisory scrutiny.
2. And first time that Brexit did not
merit a single mention and the UK itself only one.
4. On 15 September 25 of 27 Member States
had submitted their plans. Bulgaria and the Netherlands are yet to
submit theirs. Of those submitted an average of 30% of total
expenditure is to be directed towards social policy reforms. That
in itself is welcome by the European Commission following its
longstanding demands that national capital reform and invest in
their respective domestic labour markets, education and social
protection systems. The European Commission each year issues
so-called “Country Specific Recommendations” to each of
the 27 Member States and in 2019 and 2020 about 40% of these were
related to targeted improvements to employment, skills and social
5. President von der Leyen listened to 81
MEPs statements before having an ability to respond to points
8. 1) A European Green Deal; 2) A Europe
fit for the digital age; 3) An economy that works for people; 4) A
stronger Europe in the world; 5) Promoting the European way of
life; and 6) A new push for European democracy.
9. Available here.
10. Available here.
11. Available here.
12. Available here.
13. Denmark and Ireland have previously
opted out and have their own national schemes on highly-skilled
non-EEA workers. According to latest data from 2019, Germany is the
main user, issuing more than 75% of Blue Cards in the EU followed
by Poland and France.
Originally published September 2021.
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