Could the EU sideline Britain in its defence loan scheme?
The Security and Defence Partnership which the government agreed with the European Union this week has had more spin applied to it than a thousand cricket balls. The central argument in its favour, apart from vacuous reiki-like attempts to change the 'mood' of relations with the EU, was that it would allow the UK defence sector to engage with the Security Action for Europe (SAFE) loan instrument providing €150 billion (£127 billion) for defence procurement over the next five years. It does not do that.
You would be hard pressed to realise that the partnership has not succeeded in what many saw as its central purpose. Weasel words came in a pack, and some commentators were openly untruthful, but the 'ambitious' deal says only that 'possibilities for establishing an administrative arrangement between the UK and the European Defence Agency (EDA) will… be explored'. The most positive official statement of the whole summit was a single sentence in the 'Common
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Finextra
2 hours ago
- Finextra
How do we regulate a future not yet written?
0 This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community. This is an excerpt from The Future of European Fintech 2025: A Money20/20 Special Edition. According to the European Fintech Association, the fintech industry has attracted the largest share of all VC funding over the last five years, worth around $85 billion. This showcases the strong potential of fintech in Europe, and how the sector will be a driver for economic growth – with the industry expecting to grow more than fivefold over 2021 figures (5.5x) and be worth $190 billion by 2030. As fintech increasingly enters the social and economic fabric of Europe, the question of governance is no longer one of compliance with rules. In 2025, new rules such as PSD3, MiCA, DORA, and MiFID II are beginning to converge. Even though their real impact will be a five- to 10 year play, actually rewriting the way fintech is imagined, deployed, and depended upon will happen in real-time. As Vibhor Narang, executive director, structured solutions cash management, transaction banking, Europe, Standard Chartered, observes, 'the evolving regulatory landscape in Europe is not merely reshaping fintech. It's redefining the very foundations of financial innovation and collaboration.' Regulation will be more innovation driver than compliance tool Looking forward to beyond 2025, regulation will be less of a brake and more of an active driver of innovation. The convergence of PSD3, MiCA, DORA, and MiFID II shows a Europe which is open, transparent, and bestows data rights that are not just regulated but architected to foster competitive environments. In Julija Fescenko, head of marketing and communication, Magnetiq Bank's view, 'these combined forces will drive standardisation and foster more innovation-friendly environments, provided implementation does not stifle agility.' The industry should expect regulators stepping in to design digital infrastructure, particularly in relation to open finance. PSD3's extension into safe data portability will broaden, enabling consumers to seamlessly coordinate financial experiences between providers in the future, just like APIs do with software. Narang goes on: 'PSD3's extension into open finance […] is connecting previously siloed financial products into cohesive customer journeys. This could influence the rise of modular finance: hyper-personalised financial 17 services constructed dynamically through regulated data-sharing protocols.' Operational resilience will become a competitive differentiator By 2030, operational resilience will not be a regulatory checkbox under DORA but a market expectation. Financial institutions that can assure service continuity and cybersecurity against volatility will be more trusted. Johnnie Martin, senior associate, Augmentum Fintech, believes that 'the need for the robust back-up systems required by DORA was brough into sharp relief.' He adds: 'Fintechs are uniquely placed to deliver solutions to many of the problems that these regulations are trying to solve.' The fintech sector can expect fintech firms to create resilience-as-a-service offerings, including third-party monitoring products, stress tests managed by software, and disaster recovery solutions made in modules. With the entire fintech value chain now in the spotlight, resilience will no longer be each company's concern but a collective responsibility across the ecosystem. MiCA will unleash a tokenised finance boom MiCA's launch in 2025 is only the start. Within the next ten years, it will standardise digital asset adoption throughout Europe, opening doors to mass tokenisation of traditional assets, programmable payments, and the emergence of regulated stablecoins. This view is shared by Narang, who clarified that 'MiCA's unified framework […] is creating unprecedented opportunities for regulated innovation in digital assets.' In the future, controlled digital wallets that can deal with fiat and tokenised assets may be incorporated into mainstream banks. MiCA will prompt traditional institutions to enter Web3 finance, especially as corporate treasuries search for programmable yield-generating products. Regulation will, however, have to catch up with innovation in DeFi, which MiCA addresses only marginally at present. This suggests the introduction of MiCA II, a second, more advanced regulatory layer that addresses staking, algorithmic stablecoins, and cross-border DeFi protocols. Europe is at a fintech leadership fork While Europe once led the world in open banking, that leadership is now in question. Ahmed Badr, chief operating officer, GoCardless, explores how 'Europe led the world in open banking innovation a decade ago, but is now at risk of falling behind as other countries leapfrog ahead.' The next few years will tell whether the continent doubles down on competitive, consumer-driven innovation, or allows red tape to stifle momentum. Badr calls for 'greater ambition and support for innovators,' and that need is likely to intensify as global players, especially in Asia and the Middle East, move aggressively on embedded finance and real-time cross-border infrastructure. AI governance will define institutional trust The most uncertain, and urgent, regulatory horizon is artificial intelligence. By 2030, AI will be embedded into every tier of financial services, from real-time lending decisions to autonomous risk scoring and investor advice. But trust in this future hinges on one factor: ethical regulation. Tom Moore, head of financial services at Moore Kingston Smith, mentions that 'the risks of bias, misinformation, or system failure are very real. These will only grow as generative AI is used more and more for personalised financial advice.' Leading institutions are already preparing for this shift. Wendy Redshaw, chief digital information officer, NatWest Group, outlines a framework based on explainability, fairness, and human oversight: 'We ensure AI systems are subject to human oversight […] that their decisions can be explained, and that they are free from unfair bias.' Standard Chartered has also formalised this approach with its Responsible Artificial Intelligence Framework, embedding 'governance, continuous oversight, and robust data privacy into every deployment. Leadership will be defined by those who not only harness the power of AI, but also set the benchmark for ethical stewardship,' says Narang. By the end of the decade, we predict a harmonised European AI regulation for financial services, likely inspired by the EU AI Act but more tailored to the risk profile of finance. This will require firms to perform continuous AI audits, maintain decision traceability, and prove non-discrimination by design. Governance will become real-time and inclusive As data quantities grow and digital services get spread across third-party platforms, strict regulation will become less suitable. Europe's governance model will be required to change towards real-time supervision that combines regtech solutions, AI-driven anomaly detection, and adaptive policy updates. This implies a future where regulators and businesses collaborate continuously and in the long term, rather than sporadically through compliance tests. Fescenko continues to say that 'fintech companies must take the initiative in self-regulation. This involves conducting regular AI audits and implementing strong governance structures.' Ultimately, regulatory agility will become as critical as business agility. Toward a new regulatory future Europe's regulation of fintech is changing from a rulebook-based approach to a co-created, principle-based approach. The successful institutions will be those that redefine compliance a constraining idea rather than as a strategic background for expansion and growth. Redshaw says 'we are focused on aligning innovation with regulation. Our priority remains on supporting customers with the best, safest and most compliant digital experiences.' Looking ahead, regulation will no longer chase innovation, it will partner with it. The governance of tomorrow will demand new capabilities: regulatory forecasting, ethical design thinking, real-time oversight, and cross-sector collaboration. As Narang aptly concludes: 'The institutions that will thrive […] will be those that view regulatory compliance not as a burden, but as a strategic enabler that builds trust, enhances service delivery, and accelerates responsible innovation.' Europe now has the opportunity to set the gold standard for fintech regulation in the digital age, not by slowing change, but by governing it wisely.
The Guardian
3 hours ago
- The Guardian
Between ‘rollover UK' and ‘retaliatory China': will EU hardball secure trade deal with US?
In Brussels' corridors of power, quiet optimism is growing that the EU's hardball strategy to secure a US trade deal is working. While Britain quickly moved to try to cushion the impact of Donald Trump's tariffs with a deal agreed last month – and US-Chinese relations are a tit-for-tat situation – the EU has taken a different stance. 'We are positioning ourselves between 'rollover UK' and 'retaliatory China',' said a Brussels source. The stakes are not just the £706bn in transatlantic trade between the EU and US but the fallout from what diplomats and businesses say is a dangerous assault on the global rules-based system that governs western democracy. 'The only thing that appeals to Trump is power. Amid all the nausea and uncertainty here, there is a significant chance the EU will go the whole way and not do a deal,' said a diplomat in the Belgian capital. 'If the EU doesn't stand up to Trump or demand the rigours of rules, the question will be: what is left of the international rules based system?' the source added, noting the risk to employment rights, free speech, social welfare and public care. The EU's steadfast strategy is high-risk, and has weeks to play out before the 90-day pause in Trump's threat to impose 20% tariffs on all EU imports ends in July. He has already slapped a 10% tariff on all exports, with more on autos and steel, which this week went to 50%. 'If in the end, if we are the only ones on the pitch, people will start to say we should have been more like the Chinese,' said one EU official, with demands for retaliation expected to arise 'very quickly from member states'. The biggest pothole in what threatens to be a bumpy road ahead may be a Nato summit on 24 June when Trump, who has shown visceral antipathy towards the EU, may find fault in what he considers freeloading allies. Right now, EU member states are united in their resolve not to capitulate in the face of his demands, which include the removal of non-tariff barriers such as food standards. 'What the US is doing has brought us together, and there's a sense of urgency of that cooperation within the 27 that is quite important,' says one diplomat. There is even a growing acceptance that US tariffs of more than 10% are a long-term reality. 'Ideally less than 10%, so it doesn't look like we have rolled over,' says one Brussels official. Before Trump took office for the second time the average tariff on US imports in the EU was about 2.5%. The EU's chief negotiator, Maroš Šefčovič, said on multiple occasions this week that he was 'optimistic' a deal would be done, but back at base, trade war preparations continue. 'We are keeping the gun on the shelf. We don't want to use it, but we want them to know it is there,' said one diplomat. Šefčovič said on Friday he had held another call with the US secretary of commerce, Howard Lutnick. 'Our time and effort fully invested, as delivering forward-looking solutions remains a top EU priority. Staying in permanent contact,' he wrote on X. Meanwhile, twin talks took place this week in Paris at the Organisation for Economic Co-operation and Development and in Washington with a team of EU officials led by Tomas Baert, trade adviser to the European Commission president, Ursula von der Leyen. Those talks helped 'clean the slate, clear the table', Šefčovič told a conference organised by the European Policy Centre, a thinktank, on Thursday in Brussels. He added that he had also discussed the continued threat of sectoral tariffs on pharmaceuticals and semiconductors with the US trade representative Jamieson Greer in Paris. Šefčovič said his message was that the US and the EU had mutual interests in re-industrialisation on both sides of the Atlantic, and in minimising China's unstoppable rise in key sectors such as electric vehicles and steel. 'Any obstacle in the middle of the Atlantic would simply make them less competitive and more vulnerable. This is the diplomatic, political but also very technical discussions we are having,' he said. Up to now negotiations have been somewhat hampered by the parallel universe occupied by the US president, and White House and EU officials. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion Last month, Trump, out of the blue, threatened and then unthreatened to slap a 50% tariff on all EU imports, claiming Brussels was dragging its feet 'to put it mildly'. 'This came as a surprise to Maroš, because he had been in talks since February,' said one source. 'But because this is an imperial court, it is the emperor who will decide when talks are happening.' The volatility in the transatlantic relationship on European business is unprecedented. 'I have been here 10 years and I have never seen this level of nervousness, not during the pandemic, not after the invasion of Ukraine,' said a director at one trade group representing dozens of multinationals in Brussels, who declined to be named. Luisa Santos, the deputy director general at Confederation of Business Europe, which represents 42 national business federations, said trade would, like water, find its course but investment could prove the collateral damage. 'The whole basis of trade is WTO [World Trade Organization] rules,' she said. 'We agreed on the rules and they were accepted the consequences. Now the rule is the power game: 'I will impose what I think is best for me, and the bigger players with more power determine the rules and that is a huge change.' Santos added: 'I think the biggest shock in Europe is that we were supposed to be the traditional allies. But now we are basically put on the same basket as China.' Kyle Martin, the vice-president of European affairs at the General Aviation Manufacturers Association, whose members include Boeing and Airbus, said tariffs would end a 45-year-old US-EU agreement that aviation construction, which relies on a global supply chain, was duty-free. A Boeing 787 gets its front fuselage from Italy, its wings from Japan and doors from France, with assembly at home in Seattle, he pointed out. 'I don't see this having a positive [outcome] for either Boeing or Airbus or any other manufacturer. Everyone will be impacted because everyone's got an interconnected supply chain.' But while negotiations with the US continue, new EU agreements with India, Thailand, the Philippines, Indonesia, South Africa and Australia are also on the cards. Ultimately it is the profound shift in the world order that is bothering many in Brussels. The US was behaving 'like a very unevolved state', said one EU source, like a developing country that relied on customs duties for national revenue in the absence of income tax, corporate tax and VAT. 'Maybe this is what Trump wants, a smaller, leaner weaker state where everybody has to pay for themselves,' they said.
Telegraph
3 hours ago
- Telegraph
Spain could block Gibraltar's removal from EU money laundering list
Spanish conservatives are seeking to stop Gibraltar being removed from an EU list of jurisdictions with lax money laundering and terror financing controls. The centre-Right People's Party (PP) believes keeping the British Overseas Territory on the list is vital to maintaining pressure in negotiations over its future. The populist Vox party will also join an attempt to block Gibraltar's removal because of the party's long-standing support for Spain's sovereignty claim over the Rock, which was ceded by the Spanish king to Britain in 1713. A Vox source told The Telegraph: 'We will, of course, maintain the same position we have consistently held on Gibraltar in every vote. In our view, Gibraltar is a territory unlawfully colonised by the United Kingdom and does not meet the necessary conditions. 'Therefore, we firmly reject any proposal to remove it from the list of territories concerning capital movements.' Inclusion on the EU's 'grey list' comes as a reputational blow and introduces red tape that makes it less appealing to do business with. Gibraltar is on the list with countries including Afghanistan, Burkina Faso, Iran, North Korea and Yemen. The European Commission has proposed removing the Rock, but requires a majority vote in the European Parliament to confirm the decision. Eurocrats failed in a previous attempt to tweak the list, with conservative and socialist politicians forming an unlikely alliance to quash the move. Earlier this year, Right-wing MEPs voted against the changes because of Gibraltar's proposed removal, while their Left-wing counterparts opposed it because of a recommendation to remove the United Arab Emirates. The People's Party urged the Spanish government to intervene to prevent Gibraltar being removed from the EU list in January. It said that the Rock 'continues to be a territory that is too lax with respect to its commitments to combat money laundering and terrorist financing'. The PP also argued that under no circumstances should Gibraltar be removed before a deal was struck between Brussels and the UK on the post-Brexit relationship with the Rock. Its politicians are the second-largest national delegation in the centre-Right European People's Party (EPP) and hold powerful influence over the direction of its voting strategies. 'Sufficiently comprehensive' efforts Commission officials believe that the Spanish opposition could be overcome with a recommendation to add Russia to the list of countries. They have previously said Gibraltar's efforts to counter illicit finance and money laundering are 'sufficiently comprehensive' in order to be removed from the list. The Rock was originally included on the grey list because of concerns over regulations for its gambling industry. It was added in 2023, as negotiations between the UK, Spain and the EU were carried out over the territory's post-Brexit future. The talks have repeatedly stalled over sensitive sovereignty issues, including Madrid's wish for Spanish border police to operate security checks at Gibraltar's airport and seaport. There is strong support for Ukraine among the EU parliament's EPP, and vetoing the changes to the list because of the British overseas territory could become controversial amongst its politicians from other states. 'There is huge support for putting Russia on the list,' Markus Ferber, of the EPP, told the Financial Times. The commission's final list of recommendations is expected to be published next week, after a planned announcement was put on hold at the last minute this week. Moscow was originally listed in 2000 but taken off two years later after fulfilling a number of criteria set to reassure the EU.
