The countdown has begun: In just over five months, from June 6 to 9, 2024, a new European Parliament will be elected in the 27 member states. The two co-legislators of the EU, namely the national governments in the Council of Ministers and the members of the European Parliament in the EU Parliament, are now in a hurry to complete ongoing legislative procedures. Because it is by no means certain that the members of the European Parliament in the newly elected Parliament in the fall will continue those legislative procedures that could not be successfully concluded by the European elections.

At the European level, unlike in Germany, there is no principle of discontinuity. This means that unfinished legislative procedures after the European elections are not necessarily abandoned. But, on the other hand, it also does not mean that the new Parliament will definitely continue old legislative procedures. Rather, it depends on how far the negotiations on a specific legislative proposal have already progressed.

So far, it has been common practice to continue a dossier if the (old) Parliament has already adopted a common position. If not, the Conference of Presidents of the (new) Parliament decides whether to continue working on a legislative proposal or whether it ends up in the waste bin. The approaching European elections can be observed in the hectic activity with which efforts are made to advance legislative procedures as much as possible. This applies, for example, to the EU Retail Investment Strategy (RIS). It regulates, among other things, under what conditions manufacturers of financial products, such as fund providers, can provide incentives to financial advisers. The rapporteur – i.e., the lead member of the European Parliament – for this legislative initiative, Frenchwoman Stephanie Yon-Courtin, is keeping her colleagues busy. Yon-Courtin has scheduled five meetings and seven technical sessions until March. The goal is to lay the groundwork for an agreement in the Committee on Economic and Monetary Affairs by the end of March. Theoretically, confirmation could still take place in the last plenary session of the EU Parliament at the end of April.

However, it is too late for an agreement with the Council – the last legislative stage. In this legislative period, the adoption of the Retail Investor Strategy will not happen. Not only because the translation of legal texts alone would take too much time. But also because heated controversies are still foreseeable, especially over the partial prohibition of commissions, i.e., the prohibition of incentives from product manufacturers to advisers for so-called "execution-only transactions." The German financial industry is likely to be pleased with the delay because a commission ban would require significant adjustments to business models.

Yon-Courtin's motivation to at least negotiate a common position of the EU Parliament now is the hope that negotiators from the Parliament and the Council could enter into final negotiations – the trilogue – directly in the fall. Whether the French liberal will still be the rapporteur for the dossier at that time is uncertain. After all, forecasts are predicting significant losses for the liberals.

Hectic efforts to reach an agreement were also observed recently on a completely different dossier – the reform of the Stability and Growth Pact. In this instance, the second EU legislator, namely the Council of Ministers, was making efforts to accelerate the proceedings. German Finance Minister Christian Lindner made a detour to his French counterpart Bruno Le Maire just before Christmas to accelerate the process with a diplomatic visit. What the two managed to achieve: a few hours after the rendezvous in Paris, all EU finance ministers adopted a unified position of the Council for the final negotiations with the EU Parliament. This compromise of the Council includes, on the one hand, the introduction of "safety lines" that Germany insisted on – these are buffers to ensure that the 3% deficit threshold is not exceeded at the slightest economic downturn. On the other hand, the compromise contains safeguard clauses, which, for example, allow more time for the reduction of high debt levels – a wish of some highly indebted countries in Southern Europe. The trilogue will start in January.

Progress has also been made recently regarding the revision of the Regulation on European Market Infrastructure, in technical jargon: EMIR. On December 6, the Council agreed on a common line for the trilogue. EMIR includes provisions for over-the-counter derivatives (OTC derivatives), central counter parties (CCPs), and transaction registers. In the legislative pipeline of the EU are also still new requirements to combat money laundering and terrorist financing. The Council and the EU Parliament reached an agreement on individual parts of the anti-money laundering package just two weeks ago. There is consensus that the future EU authority (Anti-Money Laundering Authority, AMLA) should have direct and indirect supervisory powers over risky financial institutions and be able to impose fines.

Other parts, however, have not yet been finalized. In addition, the difficult question of which city will host AMLA still needs to be clarified. It is foreseeable that the anti-money laundering package can only be finally adopted after these negotiations – as well as the controversy over the location of AMLA – have been concluded. Whether this will succeed in spring is uncertain. Though many observers trust the Belgian EU Council Presidency to solve delicate issues. And the choice of the city where AMLA will be located is certainly one of these sensitive topics.

It might seem that many procedures are open in the EU at the moment and nothing is coming to an end. This would be a misconception. Especially in recent weeks and days, the co-legislators of the EU have been able to conclude some trilogues. From the perspective of financial market participants, four dossiers were particularly relevant: first, the agreement on stricter capital requirements for banks (implementation and completion of Basel III), second, the European rules for instant payments, third, the revision of the supervisory framework for insurers (Solvency II), and finally, the EU Supply Chain Act.

At the end of June, the EU Parliament and the Council agreed on stricter capital requirements. Banks operating in the EU must prepare for gradually holding more capital and meeting additional requirements from early 2025. The centerpiece of the negotiated banking package over several years is to limit the use of internal models by a threshold ("output floor").

Another example of concluded negotiations is the topic of instant payments. Four weeks ago, negotiators from the Council and the EU Parliament reached a preliminary agreement on the proposal for instant payments. It is intended to strengthen the availability of instant payment options in euros for consumers and businesses in the EU to be less dependent on Alipay, Apple Pay & Co.

Finally, recent deliberations on one of the most intricate legislative agendas of the EU yielded concrete results. At the end of a nearly three-year review process, the EU Parliament and the Council provisionally agreed on the substantive revision of the Solvency II framework directive on insurance supervision. According to the EU Commission, the most important result is the release of capital for long-term investments that insurers had to hold in the form of provisions: for this purpose, the capitalization rate, which determines the level of reserves, is to be reduced.

Under vehement protest from the business community, the EU Parliament and EU governments recently succeeded in adopting a Supply Chain Due Diligence Directive (CSDDD). Companies with 500 employees and €150 million in annual turnover will now have to ensure that business partners throughout their entire supply chains respect human rights and the environment. CSDDD is not quite finished yet: After reaching an agreement in the trilogue, technical issues still need to be clarified. This is supposed to happen by March.