Week in Review (22 Feb)

Greek government submits NPL plan

This week the Greek government finally submitted its plans for NPL securitisation to the European Commission. The Commission will now assess whether the proposals are compatible with State Aid rules.

Under the proposals Greek banks would securitise their NPLs independently through SPVs that would pay the Greek government for a credit guarantee on the senior tranche of the securitisation. The Greek government is hopeful that, with approval, Greek banks

can decrease the NPL overhang to below 10% by 2021.

EBA to investigate Danish and Estonian regulators over Danske

On 17 February the European Banking Authority opened a formal investigation into both the Danish and Estonian Financial Services Authorities, over their handling of the Danske bank scandal. News of the EBA investigation was followed by the Estonian Authority announcing that Danske Bank must close its Estonian operation by the end of 2019.

On 21 February Danske confirmed that it had received an inquiry from the U.S. Securities and Exchange Commission, which is carrying out its own investigation. This is in addition to an existing investigation by the US Department of Justice, and a number of European investigations. US investigations are seen as particularly threatening, given they carry the risk of Danske being cut of from Dollar financing. Even if Danske avoids this sanction – which would effectively kill the bank – it could still be facing total fines running into the billions of dollars.

EU prepares for US trade talks, as car tariff threat re-emerges

EU trade ministers are today meeting in Bucharest to consider two draft mandates for negotiations with the United States. Negotiations would build on the July 2018 joint statement issued by Presidents Trump and Juncker, which forestalled US car tariffs. That threat has begun to re-emerge ahead of the Bucharest ministerial meeting. On 17 February President Trump received a US Commerce Department report assessing the national security implications of European Automotive imports. The President has 90 days from the receipt of the report to decide whether to act on it. Tariffs could be set at 25%.

Aware of this threat, European Trade Commissioner Cecilia Malmstrom has said that she expects to be allowed to commence negotiations in March and that a trade agreement can be reached by the end of 2019. Whether such rapid progress is possible will, though, depend on EU Member States, with some – including France – prepared to delay negotiations until after the EU Parliament elections.