13 Jan 2021

On the 1st of January, Portugal took over the six-month Presidency of the Council of the European Union. The Portuguese Government will now chair the EU council’s meetings and be responsible for the progression of EU legislation until May 2021. Under the flagship moto ‘Time to Deliver a Fair, Green, Digital recovery’, the Portuguese Presidency’s programme places heavy emphasis on the economic recovery post-Covid as well as on the dual digital and green transitions which have now been placed at the heart of Europe’s recovery. Other priorities of the Presidency are developing the EU’s Social Pillar and the strengthening of Europe’s ‘strategic autonomy’.

In financial services, the Portuguese Presidency has a limited agenda, as key files - such as the AIFMD, ELTIF, and MiFID reviews - are currently in the hands of the European Commission and ESMA. However, we expect the Portuguese Presidency to play a pivotal role in several files that were either recently published or due in the next three to six months. These include:

  • Digital finance – The Presidency is expected to significantly advance the work on the Commission’s Digital Finance Package, and to set the Council’s negotiation mandate on the Retail Payment Strategy by March 2021
  • Sustainable finance – The Presidency will lay the groundwork for Council’s discussions on the Commission’s initiatives expected in the next six months, namely the NFRD review (Q1 2021), the Renewed Sustainable Finance Strategy (Q1 2021), the legislative proposal on EU Green Bond Standard (Q1 2021), and the legislative proposal on sustainable corporate governance (Q2 2022).
  • Anti-money laundering – As we expect the Commission to publish its new AML legislative proposal in Q1 2021, the Presidency is likely going to play a pivotal role in the new EU AML framework, and the creation of a new EU centralised AML authority.

We address each of these below and keep members informed as the Presidency’s priorities evolve over the coming months. If you have questions about this note, wish to speak with us on our engagement work in the EU, or have colleagues who would like to receive similar updates in the future, please email europe@theia.org.

Programme of Portugal’s Presidency

On 1 January 2021, Portugal took over the Presidency of the Council of the European Union for the fourth time. The Presidency rotates every six months and, to ensure coherency, three Presidencies are grouped together. Portugal shares the Trio-Presidency with Germany (2nd half of 2020) and Slovenia (2nd half of 2021). The primary focus of the Trio’s programme is the economic recovery in the aftermath of the COVID-19 pandemic. While the German Presidency has done much of the heavy lifting on the framework through which the recovery will be financed, it now falls on Portugal to ensure the smooth implementation of the recovery programmes, namely the Multiannual Financial Framework (MFF) and Next Generation EU.

In addition to securing the national recovery and resilience plans, the Portuguese Presidency focuses on building a "fairer, greener and more resilient" future. Portugal's 6-month programme puts forward the following priorities:

  1. Placing the Green and Digital transitions at the heart of Europe’s recovery - with a heavy emphasis on the Commission’s environmental and digital ambitions through specific commitments including the adoption of the first European Climate Law and of the EU Digital Services Package.
  2. Developing and implementing the European Pillar of Social Rights (EPSR) –with notably the approval of an action plan to implement the EPSR scheduled for May 2021.
  3. Strengthening the EU’s strategic autonomy – with the overarching goal of reducing the EU’s external dependency in all sectors, the Presidency will focus on developing a new European Industrial Strategy that promotes European value chains and focuses on strengthening SMEs and the sectors worst hit by the crisis.

Finally, the Portuguese Presidency will also have to support the implementation of the free trade agreement between the EU and the UK, framing their new relationship post-Brexit. Portugal committed to engaging in a ‘comprehensive, fair and balanced partnership that respects the interest of the Union and its Member States’.

Financial Services priorities

Overall, the Portuguese Presidency has a fairly limited agenda on financial services. While the next six months will see significant preparatory work to finalise proposals expected to be tabled in the second half of this year – such as the AIFMD, ELTIF and MiFID reviews, and the Retail Investment Strategy – this work will mainly be in the hands of the European Commission and ESMA rather than the Presidency. Ultimately, the negotiations of these key files for our industry will likely fall into the French Presidency (H1 2022) and the Czech Presidency (H2 2022). However, the Presidency will start the technical groundwork on the recent Commission’s publications on Digital Finance, as well as on other Commission’s publications scheduled for H1 2021:

  • Digital finance – This will be the primary focus for the Presidency as it is the only open legislation on which it can reach an agreement during its six-month tenure. Portugal intends to take forward negotiations on the Commission’s Digital Finance Package, published in September 2020, which includes: a Digital Finance Strategy, a legislative proposal on crypto-assets (MICA),  a legislative proposal on digital resilience (DORA) and a Retail Payment Strategy. The Presidency will aim at advancing the discussion on the Digital Finance Package as well as delivering the Council conclusions on the Retail Payment Strategy by March 2021.
  • Sustainable finance and corporate governance – As expected, sustainable finance also features at the top of the Presidency’s programme, with a very busy first half of the year. In fact, the Commission is expected to publish a number of legislative proposals in the next six months on which the Presidency will have to start the technical groundwork and prepare the discussions on the Council’s negotiating mandates: the NFRD review (Q1 2021), the Renewed Sustainable Finance Strategy (Q1 2021), the legislative proposal for an EU Green Bond Standard (Q1 2021), and the legislative proposal for Sustainable Corporate Governance (Q2 2021).
  • Anti-money laundering and anti-terrorist financing – Following the Commission’s Action Plan on Anti-money Laundering (AML) published in August 2020, we are now expecting a legislative proposal in Q1 2021 on which the Presidency will need to start Council discussions to prepare the Council’s conclusions due during the Slovenian Presidency (H2 2020). The key issues for the industry are expected to be: (1) the creation of a new EU-level supervisor; (2) the potential reviews of the rules of entities made subject to AML obligations; and (3) the strengthening of the international dimension of the AML framework.
  • Tax – As part of the wider discussion on new own resources for the EU budget in the context of the recovery, the Portuguese Presidency will continue the work on digital taxation, currently led at the OECD level. Should the OECD negotiations fail, the Commission is expected to publish a temporary digital services tax this year. The Presidency is also expected advance Council discussions on the Financial Transaction Tax (FTT), VAT for financial services and CBCR.
  • Diversity and inclusion – With an important focus on bolstering the ‘European social model’, the Presidency programme plans to follow up on the different European D&I initiatives published last year, namely the European Gender Equality Strategy, the European LGBTIQ Equality Strategy, and the European Anti-Racism Action Plan. These three workstreams are likely to impact how Member States will promote D&I in the workplace. More particularly, the Portugal Presidency has committed to speeding up the work on pay transparency and gender balance in company boardrooms.

Finally, the Portuguese Presidency will have to tackle the sensitive issue of appointing the new ESMA Chair end of March. While Portugal has its own candidate running, former Minister of Finance Maria Luis Albuquerque, she is currently considered a long shot by European diplomates, with only Portugal backing her. The Council is backing the Italian regulator Carmine di Noia and the European Parliament has expressed a preference for Verena Ross, the current ESMA executive director. Portugal will now have to decide how to move forward.