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Summary Of 2021 EU State Of The Union Policy Announcements – Financial Services

A focus on key impacts for financial services firms and

Quick Take

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
growth levels.

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
financial services

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
communication system

5. Review of competition policy – “fit for new

6. Proposal for a Council Recommendation on improving the
provision of digital skills

7. Legislative proposal on a Single Market Emergency Instrument

8. Legislative proposal on multimodal digital mobility

  • The European Cyber Resilience Act will sit alongside NIS2, DORA
    and the operations of the European Cyber-resilience Board. We
    expect this to be an area of ongoing focus as financial services
    firms look to assess financial services’ firms risk footprint
    as well as (over-) reliance on third-party IT and other outsourcing

  • Accompanying the European Chips Act, the EU intends to
    coordinate EU and national investment “along the value
    chain” that aims to create a state of the art European chip
    ecosystem, including production, with security of supply and
    possibility of developing new markets for ground-breaking European
    technology. It remains to be seen what opportunities this might

  • EU Commissioner for the Internal Market, Thierry Breton, has
    also pitched a dedicated European Semiconductor Fund – details of
    which are yet to materialize.

  • The proposal for a Council Recommendation on improving digital
    skills is part of the EU’s Digital Education Action Plan
    2021-202710 which currently, amongst other things
    focuses on improving digital literacy, but has been earmarked as an
    initiative upon which aims to improve financial literacy could be
    advanced. In such instances, this could mean greater pressures on
    financial services firms to engage in proactive financial literacy
    improvement efforts of their retail (and possibly SME)

  • The SMEI a structural solution, which is part of the EU’s
    revised Industrial Strategy11, and which aims to ensure
    the free movement of persons, goods and services in case of future
    crises. It should guarantee more transparency and solidarity and
    help address critical product shortages by speeding up product
    availability and reinforcing public procurement cooperation.

An economy that works for

9. Legislative proposal on the protection of workers from the
risks related to exposure to asbestos at work

10. Legislative proposal to facilitate small and medium sized
enterprises access to capital

11. Initiative on instant payments in the EU

12. Implementation of the Capital market Union Action Plan
including the Initiative on harmonizing certain aspects of
substantive law on insolvency proceedings

13. Legislative proposal on the implementation of the OECD
global agreement on re-allocation of taxing rights

14. Legislative proposal on the implementation of the OECD
global agreement on minimum effective taxation

  • The EU Commission’s plan on achieving a deal on minimum
    corporate taxation may be announced as early as October 2021.

  • A renewed push on promoting the following workstreams are
    expected to be explained in further detail in the European
    Commission’s workplan for DG-FISMA as well as those of the
    ECB-SSM and the European Supervisory Authorities:

    • SME funding channels beyond existing efforts with differing
      degrees of successful impact including prudential regulatory
      capital reforms or those wider efforts as part of the EU’s
      current SME Strategy for a sustainable and digital

    • Development pan-EU instant payments adoption; and

    • Harmonization of insolvency law – a longstanding issue with
      only recent tentative successes.

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
    pandemic preparedness.

    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
    EU policy.

  • 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
    Member State.

  • 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
    forced labor.

  • 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
    Growth Pact

    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
centralized fashion.

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.


1. A recording of the speech is available
here and a transcript here.

2. And first time that Brexit did not
merit a single mention and the UK itself only one.

3. A list of which is available in
English here and as transcribed in other EU official

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

6. Available in English here, the original multilingual version here and as transcribed in other EU official

7. Available in English here and as transcribed in other EU official

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.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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