Jörg Kukies in conversation: Berlin pushes financial market union

State Secretary for Finance aims at a common EU policy on digital finance strategy by the end of the year

The Federal Government is moving ahead with the digital financial market union. During its EU Council Presidency, it hopes to achieve a political consensus among member states on the EU Commission’s digital finance strategy by the end of the year. This could mean that legislation could already start in Brussels.


“The regulation of stablecoins, the demarcation between tech companies and financial service providers and the financial industry’s access to clouds are the most important issues for our EU Presidency in the area of digitisation and financial markets.” In an interview with the Börsen-Zeitung, State Secretary for Finance Jörg Kukies outlined the working plan for the digital financial market union, which the Federal Government intends to implement during its EU Presidency by the end of the year. EU finance ministers already discussed the plan at an informal meeting in Berlin.

Berlin aims to unite the Member States on a common political line by December.

“Our aim is to achieve as clear a vision as possible of the strategic priorities for a digital financial market union during our Presidency based on the EU Commission’s proposal in Ecofin,” says Kukies.

If the group successfully reaches common conclusions, the legislative process can start. Berlin’s points belong to the EU Commission’s not yet published digital finance strategy.

Nevertheless, the Federal Ministry of Finance’s timetable is ambitious if the Commission is to present the digital finance strategy, as expected, in October. There is little time for negotiations between now and December. “In the negotiations, we will try to reach a Council position on all capital market issues during our Presidency,” said the State Secretary, describing the further process. “We are very hopeful about the Capital Market Union. Proposals have already been made,” he said. “With regard to the digital financial market union, we are waiting for the Commission’s announced legislative proposals in addition to the two strategies for payments.”

Resolving fragmentation

The EU Commission had set out a broad field for the strategy in the summer when it called for consultation. The aim is to eliminate the fragmentation of the single market for digital financial services and to support the data-driven financial sector. It is about a new regulatory framework for financial services in the digital age. It should manage risk appropriately while being innovation-friendly and technology-neutral. It also aims to enable consumers and businesses to take advantage of the single digital financial market. Finally, the Commission wants to promote a well-regulated, data-driven financial sector and improve the operational stability of digital systems in the EU financial system.

The Wirecard case in Germany shed light on a long recognised but unsolved problem of financial supervision, which is the control of companies that offer services in the financial sector but are not considered financial services providers. Kukies sees a need for EU regulation there. The term “financial holding company” is defined in the Capital Requirements Directive CRR. “We must clearly shift the demarcation between tech companies and financial companies towards a stronger inclusion of services in financial market regulation,” Kukies explains. The issue of “data cloud” is also a question of demarcation. The data company Google recently acquired banks as customers nationwide and offered its cloud services. If financial services providers transfer transactions to the area of pure service providers, questions arise about the scope of financial supervision.

Strict consumer protection

In the case of cryptocurrencies, such as Facebook’s proposed Libra, the German government, together with four other EU countries, is pushing for strict specifications.

“We want clear supervision of cryptocurrencies,” says Kukies. “With our national laws on crypto-custody and the crypto-securities register in the Electronic Securities Act, we are enabling innovation, but within a clear legal framework, thus creating legal certainty.”

Five EU states, including Germany, declared in Berlin that clear Euro-denomination, the explicit regulation of consumer rights and a legally guaranteed right to collateral are central. If the step into the digital future is to succeed, the new financial instruments must also be safe for investors. “We also want to create acceptance among our citizens,” Kukies says, underlining the further plans. “We, therefore, want to set high standards.”

 

Source: Börsen-Zeitung, 15 September 2020, Angela Wefers, © All rights reserved.

Image: Gerd Altmann/Pixabay