@techreport{Mack, type = {Working Paper}, author = {Mack, Sebastian}, title = {How Does Differentiated Integration Work in the EU Financial Sector? Spotlight on Banking Union}, url = {http://nbn-resolving.de/urn:nbn:de:kobv:b1570-opus4-36847}, pages = {23}, abstract = {Five years after the entry into force of the Banking Union, this Policy Paper assesses its effectiveness as a form of differentiated integration. This case study presents the legal and organisational dimensions of the Banking Union and describes its accountability mechanisms and procedures. At the heart is the question of whether the creation of the Banking Union has been effective in promoting integration among its members while avoiding distortions in the Single Market. To this end, also the impact of the Banking Union on the political unity in the European Union is analysed. This Policy Paper finds that the Banking Union has enhanced European integration in the financial sector without jeopardising the functioning of the internal market. Although the Banking Union is still incomplete, the benefits of participation create centripetal forces that are attractive also to non-euro countries.}, language = {en} } @techreport{Mack, type = {Working Paper}, author = {Mack, Sebastian}, title = {Prepare for the worst - How to make Europe's bank crisis management framework fit for purpose}, url = {http://nbn-resolving.de/urn:nbn:de:kobv:b1570-opus4-36982}, pages = {22}, abstract = {Amid a severe health, social and economic crisis, banks again take centre stage on the political agenda. This policy paper explains why decisionmakers are worried about a looming banking crisis, sets out the existing European bank crisis management framework and makes proposals for addressing its shortcomings in readiness for a possibly systemic banking crisis. Instead of taking the supposedly easy way out and bailing out banks again, now is the right time to prepare for the worst in Europe's bank crisis management framework.}, language = {en} } @techreport{Mack2021, type = {Working Paper}, author = {Mack, Sebastian}, title = {Beyond transparency: Getting serious about greening Europe's financial system}, doi = {10.48462/opus4-3733}, url = {http://nbn-resolving.de/urn:nbn:de:kobv:b1570-opus4-37334}, pages = {7}, year = {2021}, abstract = {The financial sector must divest from unsustainable business. This is imperative to achieve a climate-neutral economy and to safeguard financial stability. The European sustainable finance regulatory agenda of 2018 launched important initiatives that increase transparency on climate risks. Now it is time to move to the second stage and incorporate climate risks in the risk models and capital requirements of banks, pensions funds and insurance firms. This will reduce their exposure to potential losses from climate risks and at the same time render sustainable investment alternatives more attractive.}, language = {en} } @techreport{GuttenbergMack, type = {Working Paper}, author = {Guttenberg, Lucas and Mack, Sebastian}, title = {Building EU green bonds that deserve their name}, url = {http://nbn-resolving.de/urn:nbn:de:kobv:b1570-opus4-36885}, pages = {4}, abstract = {The EU should seize the day: It should issue parts of the Recovery Instrument debt as green bonds and thereby boost that burgeoning market. But it is important to manage expectations: Issuing green bonds alone will not ‚green' recovery spending. This will depend on the criteria for climate-friendly spending in the legal texts governing the Recovery Instrument - and these so far lack teeth. So, there is a substantial risk that EU green bonds will set the wrong precedent now if backed by weak criteria. This would pre-empt future legislative work on the final EU green bond standard. If the criteria for climatefriendly spending are not strengthened, the Commission should scale back its ambition and should only issue green bonds for measures that fully match the criteria set out in the EU Taxonomy Regulation.}, language = {en} } @techreport{Mack, type = {Working Paper}, author = {Mack, Sebastian}, title = {EU banks' vulnerabilities - Capital conservation key to withstanding Corona crisis}, url = {http://nbn-resolving.de/urn:nbn:de:kobv:b1570-opus4-35234}, pages = {10}, abstract = {COVID-19 will hit financial institutions with a substantial time lag, but the coming storm will be fierce. The EU banking sector is entering the troubled waters of the Corona crisis with four major vulnerabilities: (1) Market and (2) funding liquidity risks have been mitigated by bold policy measures at EU and national level. (3) Concentration risk in banks' sovereign exposures could be addressed by a European recovery fund. The immense economic fallout will further depress banks' already weak (4) levels of profitability. Losses will erode banks' capital base, putting their viability at severe risk. Monetary, fiscal and prudential emergency measures are keeping the real economy afloat but fail to enhance banks' resilience. To withstand the crisis, EU policymakers should require banks to suspend all discretionary distributions and preserve capital instead.}, language = {en} } @techreport{Mack, type = {Working Paper}, author = {Mack, Sebastian}, title = {Turning green into gold - How to make the European green bond standard fit for purpose}, url = {http://nbn-resolving.de/urn:nbn:de:kobv:b1570-opus4-42935}, pages = {8}, abstract = {Green bonds can play an important role when it comes to financing a more sustainable European economy. However, lack of transparency in today's market for them prevents green bonds from achieving their full potential. The European Commission's proposal for a European green bond standard (EuGBS) does little to fight greenwashing and foster investor confidence. To establish the EuGBS as the new gold standard, the European Parliament and EU Council should improve it in three respects. They should (i) strengthen its environmental credentials, (ii) regulate the entire green bond market and not just the EuGBS niche, and (iii) ensure the enforceability of investor rights. That way, a credible EU public standard can become the new benchmark on financial markets and make a positive impact on the environment.}, language = {en} } @techreport{Mack, type = {Working Paper}, author = {Mack, Sebastian}, title = {The final piece of the Basel III jigsaw fits - Banks and unrated corporates can handle the output floor}, url = {http://nbn-resolving.de/urn:nbn:de:kobv:b1570-opus4-42510}, pages = {8}, abstract = {The European Commission has proposed implementing the outstanding elements of the international banking reforms agreed in the wake of the global financial crisis. The final Basel III rules are designed to curb any underestimating of risks by banks when using internal models. The introduction of the output floor as lower bound for determining banks' capital requirements will foster fair competition between banks using internal models and those that do not. The output floor will predominantly affect loans to large unrated corporates. Sebastian Mack assumes that the resulting capital increase will be digestible for the banks with only limited effects on the real economy. Requiring all EU corporates to seek an external credit rating would not reduce the impact of the output floor as only a fraction of these firms demonstrates high creditworthiness. However, increasing the rating coverage of EU corporates would provide banks with additional information on borrowers and thus improve their risk management capabilities. In the absence of any public European rating agency, national central banks should follow the example of the Banque de France and establish public rating registers for large EU corporates.}, language = {en} } @techreport{MackGuttenberg, type = {Working Paper}, author = {Mack, Sebastian and Guttenberg, Lucas}, title = {After the German election: What's next in EU economic governance?}, url = {http://nbn-resolving.de/urn:nbn:de:kobv:b1570-opus4-42434}, pages = {6}, abstract = {The new German government will face a number of unresolved issues of varying urgency when it comes to EU economic governance. In the case of the fiscal rules, there is an urgent need for a decision on how to proceed after 2022. In the medium term, the future of EU finances and economic policy coordination is open; both have undergone drastic changes as a result of the Recovery Instrument. Last but not least, the new German government must decide whether and how to break the deadlock in negotiations on completing the banking union and breathe new life into the capital markets union.}, language = {en} } @techreport{Mack, type = {Working Paper}, author = {Mack, Sebastian}, title = {Never waste a good crisis: European banking regulation in the pandemic}, url = {http://nbn-resolving.de/urn:nbn:de:kobv:b1570-opus4-42474}, pages = {8}, abstract = {The regulatory framework for banks introduced in the aftermath of the global financial crisis was designed to provide financial stability in good and bad times. Given an external shock, capital buffers are meant to cushion losses and prevent banks from pro-cyclical deleveraging. However, insufficient accumulation of easily releasable buffers ahead of the pandemic, combined with banks' unwillingness to use the available ones, made European decision-makers tweak hard banking law during the pandemic. In his policy brief, Sebastian Mack shows that microprudential, monetary and fiscal policy measures together averted a credit crunch. But Europe should revise its macroprudential framework so that it is fully functional in the next crisis.}, language = {en} } @techreport{Mack, type = {Working Paper}, author = {Mack, Sebastian}, title = {Don't change horses in midstream - How to make NGEU bonds the euro area's safe asset}, url = {http://nbn-resolving.de/urn:nbn:de:kobv:b1570-opus4-42361}, pages = {19}, abstract = {The bonds financing the European Union's recovery remain short of being the much-hoped-for safe asset of EU monetary union (EMU). However, with the right reforms they could well turn out to be just that. To earn safe asset status, the volume of EU debt should increase, EU borrowing made permanent, and the ECB treat supranational EU bonds in a more favourable manner. The flaws associated with failing to be a eurozone-only instrument are offset by remarkable fiscal and democratic benefits. So, if the NextGenerationEU (NGEU) pilot project - limited in time and tailored specifically to fighting the coronavirus pandemic - turns out to be to everybody's benefit, then member states should seize the opportunity and extend it before debt is repaid as of 2028.}, language = {en} } @techreport{Mack, type = {Working Paper}, author = {Mack, Sebastian}, title = {Big tech: Closing the blind spot in Europe's financial market rules}, url = {http://nbn-resolving.de/urn:nbn:de:kobv:b1570-opus4-42377}, pages = {3}, abstract = {The technology giants Google, Apple, Facebook, Amazon and Microsoft are on the rise, recently also in the financial services business. This poses new challenges not only for competition regulators and consumer protection agencies, but also for financial market supervisors. The European financial market rules have a blind spot with regard to big tech and this endangers financial market stability. To prevent technology giants from flying under the radar of financial supervision, Sebastian Mack argues in this policy position for making group supervision of financial conglomerates fit for the digital age.}, language = {en} } @techreport{Mack, type = {Working Paper}, author = {Mack, Sebastian}, title = {Beyond Wirecard - All of Europe needs independent financial supervisors}, pages = {11}, abstract = {Financial supervisory authorities in the EU are not sufficiently independent of political and economic influence. As the financial scandal surrounding Wirecard shows, this entails the risks of conflicts of interest that undermine the integrity of the European financial system and harm the goal of an integrated banking and capital markets union. That is why in his Policy Brief, Sebastian Mack proposes European-wide requirements for the independence, accountability and transparency of national financial regulators. Ten years after the establishment of the European System of Financial Supervision, it is high time to regulate the governance of national supervisory authorities across Europe and thereby strengthen financial supervision throughout the EU.}, language = {en} } @techreport{Mack, type = {Working Paper}, author = {Mack, Sebastian}, title = {Don't throw it under the Omnibus: The EU needs to make sustainability reporting more effective}, pages = {14}, abstract = {The Sustainability Omnibus marks the first in a series of European Commission initiatives aimed at simplifying EU regulation and significantly cutting red tape for businesses. Given inconsistencies, overlaps, and complexities in the existing framework, streamlining sustainable finance rules can enhance their effectiveness in supporting a transparent and sustainable economy. However, the sweeping changes proposed by the Commission are unlikely to ease administrative burdens meaningfully. Instead, they risk hampering green investment and weakening measures to manage climate-related risks. To ensure that a streamlined set of rules delivers real added value for European competitiveness, climate action and financial stability, this Policy Brief calls on EU co-legislators to make targeted adjustments that preserve the integrity of the sustainable finance framework and tighten enforcement.}, language = {en} } @techreport{Mack, type = {Working Paper}, author = {Mack, Sebastian}, title = {Out of the Dark - An EU Asset Register to Combat Illicit Financial Flows}, url = {http://nbn-resolving.de/urn:nbn:de:kobv:b1570-opus4-45237}, pages = {8}, abstract = {The challenges of enforcing sanctions against Russian oligarchs have brought the problem of financial secrecy to the fore. Governments in the EU lack the information necessary to identify, locate and freeze the assets of Vladimir Putin's entourage. What is missing is an EU-wide asset register that would not only shed light on the wealth of sanctioned individuals, but also help in Europe's fight against financial crime. This policy brief outlines the steps needed to build an interconnected EU asset register based on existing data collection requirements. Such a register could be practically implemented in the context of the ongoing overhaul of the EU anti-money laundering legislation.}, language = {en} } @techreport{Mack, type = {Working Paper}, author = {Mack, Sebastian}, title = {Give us the tools and we'll finish the job: How Europe can fix the broken audit market}, url = {http://nbn-resolving.de/urn:nbn:de:kobv:b1570-opus4-45330}, pages = {19}, abstract = {The European audit market has been broken for far too long. After glaring audit failures in the recent past, the legislation is once more under review. Fixing the persistent shortcomings will require serious reforms in three areas. To increase competition and rein in the dominant position of the Big Four, joint audits including at least one challenger firm should become mandatory. Auditors should be prohibited from providing their audit clients with consulting services to eliminate conflicts of interest. And the European Securities and Markets Authority (ESMA) should directly supervise the biggest audit firms to ensure effective oversight. With bold and binding tools, European decision-makers can finish the job and finally turn the EU audit market around.}, language = {en} } @techreport{Mack, type = {Working Paper}, author = {Mack, Sebastian}, title = {The EU must not procrastinate on urgent audit market reforms}, abstract = {After the Wirecard accounting scandal, the EU Commission promised to reform the rules for auditors. Now it must finally present them: The problems are clear and there are plenty of proposed solutions.}, language = {en} } @techreport{Mack, type = {Working Paper}, author = {Mack, Sebastian}, title = {Get your priorities right - Europe must not underestimate the role of banks for the green transition}, pages = {13}, abstract = {EU policymakers and the financial sector have placed high hopes in forging a green capital markets union. However, the idea that capital markets could swiftly close the green investment gap ignores underlying financing structures. In Europe, the areas with the biggest funding needs rely on bank loans rather than financial markets and the recent banking turmoil is unlikely to change this. The reliance on banks will not abate any time soon as EU governments are dragging their heels on completing the capital markets union despite repeated promises. Since banks will largely finance the European green deal, the EU should step up its efforts to green the banking system and systematically make climate risks a core element of banking supervision, prudential regulation, and monetary policy.}, language = {en} } @techreport{MackFindeisen, type = {Working Paper}, author = {Mack, Sebastian and Findeisen, Francesco}, title = {Do more with more - How the EU can improve funding for the European Green Deal}, pages = {9}, abstract = {Funding remains the Achilles heel of the EU Green Deal. Europe needs to spend an additional €350 billion on climate action every year until the end of this decade. The bulk of sustainable investment is expected to come from the private sector and the InvestEU programme has been established to leverage private investment through the European Investment Bank (EIB) Group and other public financial institutions. However, overly ambitious target volumes backed by only limited public financial support, and the resultant high levels of leverage, prevent InvestEU from delivering its full potential for achieving the green transition. To plug the green investment gap, InvestEU needs to reduce its leverage, increase its transparency on intermediated operations and be complemented by fresh public spending at EU level to finance transformative investments that fall outside the scope of what public de-risking of private investments can achieve.}, language = {en} } @techreport{Mack, type = {Working Paper}, author = {Mack, Sebastian}, title = {Show greenwashing the red card. How Europe can make sustainable finance work}, pages = {16}, abstract = {What Europe needs is not a regulatory pause, but better legislation. In record time, the EU has rolled out a comprehensive disclosure regime for sustainable finance. But the nascent regulatory framework is challenging to implement, remains vulnerable to abuse by those seeking to game the system and fails to provide meaningful guidance to investors. Despite detailed legislation, financial market participants differ significantly in their expectations of sustainable investment products and face the risk of greenwashing, where issuers - intentionally or unintentionally - make misleading sustainability claims. To enable private investment to finance Europe's transition to net zero, this policy brief proposes short-term measures to combat greenwashing plus reforms that should be adopted once the next European Commission has assumed office. For the EU to uphold its status as a global benchmark for sustainable finance, lawmakers and regulators must urgently improve the rules in place and ensure that they are applied consistently across member states.}, language = {en} } @techreport{LindnerMack, type = {Working Paper}, author = {Lindner, Johannes and Mack, Sebastian}, title = {Europe must improve the quality of its regulation}, pages = {3}, abstract = {The EU is discussing better regulation. The issue is urgent. Nothing less than the competitiveness of European companies and the acceptance of the EU are at stake. But beware - neither symbolic politics nor broad deregulation will help. Instead: here are four concrete measures that could substantially improve the quality of EU regulation.}, language = {en} } @techreport{Mack, type = {Working Paper}, author = {Mack, Sebastian}, title = {Better green than sorry - Why the prudential framework for insurers should integrate systemic climate risks}, pages = {8}, abstract = {Climate change poses systemic risks to insurers and the broader financial system, yet the EU's prudential framework for insurers remains ill-equipped to deal with these. While recent regulatory revisions have introduced some climate-related requirements, these fall short of a systemic approach. This policy brief calls for integrating systemic climate risks across the full range of insurers' underwriting and investment activities and puts forward concrete actions to that end. The upcoming review of the EU's macro-prudential framework for non-bank financial intermediation (NBFI) opens an unmissable window of opportunity to align insurers' prudential policy with climate objectives and safeguard financial stability in an era of escalating climate risk.}, language = {en} } @techreport{Mack, type = {Working Paper}, author = {Mack, Sebastian}, title = {Handle with care - How Europe can reap the benefits of securitisation}, pages = {11}, abstract = {Provided it is sufficiently regulated, securitisation can help to fund the economy and share risks within the monetary union. Securitisation combines the advantages of banks in lending and of financial markets in financing. However, a lack of standardisation and legal harmonisation currently prevents the EU from reaping the benefits of this instrument. Weakening the prudential framework will not create a truly European market but may pose new risks to financial stability. Instead, this Policy Brief argues that to scale up securitisation, overcoming the fragmentation in national contract and insolvency laws in the longer term will be key. In the meantime, the European Commission should cut unnecessary red tape and establish an EU-wide standardised securitisation product tailored to an asset class that shows sustainable growth potential. Renovation loans are a promising option.}, language = {en} } @techreport{Mack, type = {Working Paper}, author = {Mack, Sebastian}, title = {Out of the shadow: A macro-prudential framework for NBFI in the EU}, pages = {13}, abstract = {Whereas market financing is becoming increasingly important, structural vulnerabilities in the shadow banking sector remain unaddressed. To ensure that capital markets are a source of economic prosperity rather than financial instability, the European Commission in its new term should strengthen the macro-prudential framework for non-bank financial intermediation (NBFI). As developing and integrating Europe's capital markets can help to provide innovative companies with risk capital, non-systemic NBFI entities should not be overburdened with micro-prudential regulation. However, the build-up of systemic risks in the NBFI sector must be addressed before they reach a dangerous level and central banks are forced to come to the rescue. This paper makes recommendations for tackling the structural vulnerabilities posed by NBFIs and their potentially dangerous ties with banks and the broader economy.}, language = {en} } @techreport{Mack, type = {Working Paper}, author = {Mack, Sebastian}, title = {Europe ventures forward: Getting the scaleup of cleantech right}, pages = {16}, abstract = {Public interventions that help European startups to scale up their businesses have so far focused mainly on establishing a functioning market for venture capital (VC) and making it attractive to private investors. However, VC funding in Europe remains a fraction of what is required, still relies heavily on the public purse and fails to channel resources into strategic green sectors. Changing this requires three measures. First, the EU should enable institutional investors to invest independently in VC. Second, the European Investment Fund should strengthen the sustainability impact of its support for VCs. And third, the European Investment Bank should expand its direct investments in cleantech scaleups that are too risky for private investors.}, language = {en} } @techreport{Mack, type = {Working Paper}, author = {Mack, Sebastian}, title = {Get your act together - The EU must push ahead with banking union to boost confidence in its banking system}, abstract = {EU banks have so far weathered the storm caused by the pandemic, the war in Ukraine and sharp interest rate hikes. However, the failure of Credit Suisse and three US tech banks underlines how quickly investor and creditor trust can erode, prompting regulators to intervene and governments to provide public support. While swift and decisive action in the US and Switzerland prevented a systemic bank crisis, the EU will struggle to preserve financial stability if things go badly wrong. To boost confidence in its banking system, it is therefore high time for the EU to push ahead with banking union. To get its act together, the EU should 1) improve banks' resilience by adopting strict prudential regulation instead of creating new vulnerabilities, 2) make the crisis management framework more credible to ensure that banks can fail without using taxpayers' money, and 3) put in place European backstops to bank resolution and deposit insurance to withstand a systemic crisis.}, language = {en} }