Europe's banking union at 10: unfinished yet transformative
I actually have a printed copy of the book. It was so riveting, I printed it because I needed to underline things.
Well done on the book.
It's a great record of things we didn't know or things we might have known, but there are different twists to it.
So it's a very important historical record of events.
But I think more than that, it points to the future.
So I have read all 160 pages.
And there are insights there which I wish I had had at the start of my mandate!
But look, it's better late than never.
I think what the book does is very clearly set out why the Banking Union represented such a major step change.
Because before Banking Union, Member States were reluctant to move banking supervision away from the national level.
And then came 2007 and the great financial crisis, which demonstrated the failure of banking regulation and supervision.
With very real impacts on people ' s lives as many lost savings and homes and indeed jobs.
And just on that point, it strikes me – I've said this on a few public events – that we really need Banking Union relate to citizens in the way that when there's a crisis it's very real when banking has its problems, that people have problems.
And I think we've failed to do that during the campaigns for the European Parliament.
I've just come from Parliament speaking to colleagues. This topic was not on the agenda, and yet it's absolutely pivotal, as is Capital Markets Union.
That's my pitch over.
So to go back to the problems it caused, the financial crisis, for people, also for businesses – bankruptcy, losses, etcetera.
And then we saw how the bank-sovereign nexus exacerbated the problem in 2011 and 2012.
But – as we often do in a crisis – the EU acted very decisively.
The twists and turns, and they're intriguing, they're well covered in this book, and I do encourage you to read it, not just summary and conclusions, but all of it.
So, to sum up, we moved, in your words, Nicolas, from banking nationalism to Banking Union.
And we set up an ambitious system to ensure the stability and integration of the EU ' s banking system.
The Banking Union exists to avoid history repeating itself.
And the aim of Banking Union: to ensure financial stability so that banks can provide funding to the economy, as well as protecting depositors ' and taxpayers ' money.
A well-functioning Banking Union should also underpin a single market for banking.
And here's my second grief if you like – why do we eep talking about cross-border in a single market?
Because I think language matters and I think we have embedded the words ‘cross-border'.
I scratch them out of all my speeches, as my colleagues at the end of the room will testify.
Because I think it impacts in a negative way our thinking about a single market for capital.
If we look to what strong banks can deliver, if they're operating across multiple Member States, delivering better banking services, more affordable financing to Europe an citizens and companies.
And I got one Facebook question in the last two days, saying, when will we have free banking across Europe that will have more competition?
So I live in hope that eventually citizens will push this agenda further, as we discuss it here.
I also think that in the last few years in particular, Banking Union was joined by the Capital Markets Union – so the two projects complement each other.
The Capital Markets Union could be facilitated by a more integrated market for banking services.
And the CMU needs strong banks that operate across Member States to provide key capital market services, like listing, trading, and investment.
So what have we achieved on Banking Union?
The Single Supervisory Mechanism, set up in 2013.
The next year, the Single Resolution Mechanism followed.
Both have proven their worth and on their own terms, but as you note, Nicolas, in demonstrating that the EU can introduce radical reforms when required.
And I think it's something we need to discuss, why does it take something radical for us to actually take action, which can be done in a much easier way in times of peace?
If I look again to the Single Supervisory Mechanism, it helped the banking system navigate many challenges.
Like Covid-19, like the consequences of Russia ' s illegal invasion of Ukraine, and indeed subsequent increase in energy prices and inflation.
And again most recently the banking crisis in spring last year, which hit banks in the US and Switzerland, but not in the EU. But you never know how these things can have an impact.
I think clear communication by the SSM, the SRB and the EBA, all their clarity calmed the markets.
The Single Resolution Mechanism provided a way to handle banking crises, and I think in a way that was unthinkable 15 years ago.
It effectively managed two significant bank failures: Banco Popular in 2017 and Sberbank in 2022.
So we have made progress on the single rulebook, which underpins the Banking Union.
Including the Basel III standards. As you know we will apply these new standards from January 1st of 2025 – but we do that also looking at level playing field issues.
And I recently mentioned that we have taken the decision when it comes to the Fundamental Review of the Trading Book, FRTB, to postpone implementation of this element of the Basel package until 1st January 2026.
And I can say right now that we will publish that delegated act in July so that we are in good time and consistent with our decision-making.
But I also will add that we would expect and hope that our counterparts in the US and elsewhere will implement Basel fully and faithfully. I think it's important with international agreements that we do that.
Let me go back then to the subject at hand, and see – so what's left to be done, and we've heard already some of that.
We do not have a complete Banking Union.
We are missing EDIS, the European Deposit Insurance Scheme.
We're also missing other elements, like a facility for liquidity in resolution.
The large liquidity facilities that the US and Swiss authorities quickly put in place in the midst of the banking crisis there last year showed again how important having something similar would be for the European Union and the Banking Union.
In its statement on the future of the Banking Union in June of 2022, the Eurogroup agreed to strengthen the common framework for bank crisis management and deposit insurance, the CMDI.
The European Parliament made similar calls in its 2022 and 2023 reports on Banking Union.
So of course during this mandate, we started by reviewing the CMDI framework.
It has worked well in practice, but it doesn't provide appropriate solutions for small and mid-sized banks that are too big to be liquidated. So there are gaps.
To resolve these banks, authorities need the right tools to fund the transfer of a failing bank to a healthy bank that's willing to acquire it – while at the same time safeguarding financial stability and avoiding contagion by exempting depositors from having to bear losses where necessary.
Now without such funding, Member States resort to using different national tools outside the harmonised resolution framework, including state aid.
And this of course creates an unlevel playing field.
And it means that taxpayers, instead of the banking industry, are on the hook for bank failures.
The core of the Commission's CMDI proposal is, first, to ensure that banks build up sufficient internal capacity to absorb losses.
And, second, to facilitate – with the appropriate safeguards – using Deposit Guarantee Scheme money to close any funding gap for access to the resolution fund.
In the Parliament, the rapporteurs managed to reach agreement on the very final day of the legislature, which was welcome.
The Council, as you know, recently adopted its negotiating mandate.
So we should be able to start trilogue negotiations once the new Parliament is ready.
So let me take a look at how things are at this stage of the process.
The Parliament's position would make the framework more predictable and effective than it is today.
However, in contrast, the Council's negotiating position is – frankly – very disappointing.
It does not deliver on the objectives of the reform proposed by the Commission.
I would even say that it does not even deliver on the Eurogroup's own objectives as agreed in its statement.
The Eurogroup asked for resolution to apply to more banks.
But the Council position is less ambitious than the Commission on this point.
The Council amendments taken alone could lead to the resolution of more banks.
But in parallel the Council does not make it easier to access resolution funding.
We counted 19 new safeguards, on top of the ones in our proposal, that restrict access to funding.
And that makes it harder for resolution authorities to know whether the resolution framework could be applied successfully.
And this uncertainty would not incentivise them to plan for resolution for many more banks.
Instead, they will likely prefer to continue to use national tools.
In addition, many of the new restrictions are only for Banking Union Member States.
For example, caps on the maximum contribution of their Deposit Guarantee Schemes to resolution financing.
In contrast, Member States that aren't part of the Banking Union could use their Deposit Guarantee Schemes in resolution in a much more flexible way.
So that will widen the gap between Member States in and outside the Banking Union.
And it will reduce the attractiveness of the Banking Union.
So another issue – incentives to use national solutions other than resolution are maintained or indeed as I would see it even strengthened.
Our proposal introduced additional conditions for using tools outside resolution, so that tools are chosen based on economic merit, not how easy it is to access funding from outside the failing bank.
Almost all of these conditions have been removed in the Council compromise.
And this makes national solutions more attractive than the harmonised resolution framework.
The Council even goes in the direction of renationalising some aspects of Banking Union.
For example, the SRB plenary session, made up of national resolution authorities, would have a larger say at the expense of its executive board, made up of independent European board members.
And that would weaken our single resolution authority which today is strong and independent.
So overall, I believe the Council amendments would not increase financial stability, would not level the playing field, would not improve depositor protection, and would not reduce the use of taxpayers ' money.
On the contrary, they make the framework even more complex than it is today.
And in some respects, they are a step backwards.
The Commission still believes it is important to improve our CMDI framework.
And we will actively participate in trilogues with Parliament and Council to ensure that the outcome is a real step forward.
And I think this is also important for the future of the Banking Union.
We started with the resolution framework because it was considered the easiest part to fix.
And to help unlock progress on the unfinished parts of the Banking Union, as agreed by the Eurogroup.
Unfortunately, the Council negotiating position suggests Member States are approaching this reform primarily from a national perspective.
And so failing to consider what is best for the Banking Union.
So banking nationalism has not disappeared – and indeed it may be reinventing itself.
So it's something we need to overcome and address if we want to make genuine progress on the Banking Union.
If I look at the European Deposit Insurance Scheme, the EDIS proposal, the Parliament's ECON committee adopted a report before the elections.
And this sets out a first phase for EDIS based on liquidity support between a common deposit insurance fund and national deposit guarantee schemes.
It also includes a commitment towards loss sharing in a second phase.
And the Parliament report is broadly in line with past ideas from the Commission on how to bring EDIS forward in phases.
Of course the new Parliament will decide how to move forward with this report.
And for now, the Commission reserves its position on it.
But I will say that after nine years of stalemate, it is good to see movement.
I note the Parliament's report also proposes to take sovereign bond holdings into account in Deposit Guarantee Scheme contributions of banks.
If I look to our 2017 Communication on the Banking Union, we indicated that facilitating the diversification of banks' sovereign portfolios and lessening the bank-sovereign nexus is important.
EDIS is also important because it could pave the way for additional market integration in the Banking Union.
And that will allow capital and liquidity to flow more freely among Europe ' s banks and allow the economy ' s competitive and market forces to operate in the single market.
Our big European banks are large compared with the GDP of the Member States they are established in, but they are not large compared to the size of the EU economy.
Whereas mergers could make banks more resilient to shocks due to greater asset diversification.
And they would allow European banks to have more efficient business models, pursue growth strategies and invest in digitalisation – and I'll add the what comes with that, cyber-security, which is always a topic that needs investment.
So these banks would be better equipped to compete with their non-European counterparts.
At the same time, market integration should always be combined with appropriate safeguards to protect financial stability in all Member States.
Larger and more diversified global banks would benefit the EU economy.
But of course small and medium banks continue to be essential for local economies, for competition, and so for depositors and consumers.
So I know I have been quite clear and indeed quite critical in my remarks.
But I want to finish on a more optimistic note, because at heart I'm an optimist. I live in hope.
I do remain optimistic that the European Union can overcome what are familiar challenges to people in this room.
That there are large benefits in the future but they rely on compromises that are not popular with everyone today.
And I'm optimistic because the EU did all of that, reach compromises, when it created the Banking Union.
Which was a huge step.
And I hope that it won ' t take another crisis for us to meet today ' s challenges.
And for us to show the political courage that the founders of the Banking Union showed.
But it ' s also True – as you remind us in the book – that what remains to be done is not nearly as imaginative as the leap of imagination that leaders took in 2012.
I hope we can be reminded of the significant benefits that do await us in the future.
Banking Union is important for financial stability and protecting depositors and taxpayers ' money.
But beyond that, it ' s also important in the current conversation we ' re having around Europe ' s resilience and competitiveness.
Strong banks can offer better financing conditions to our companies and can support the green and digital transitions.
Banking Union is also important from a geopolitical point of view.
A complete Banking Union would underpin the Economic and Monetary Union, and so it would strengthen the euro, both at home and abroad.
It would contribute to our open strategic autonomy agenda.
So it is the time now – for the next Commission, but above all the Member States and the Parliament – to stay ambitious.
To reach that little bit higher than we have seen to date to deliver the benefits which are needed more urgently today than ever.
Thank you.
| Zařazeno | út 25.06.2024 13:06:00 |
|---|---|
| Zdroj | Evropská komise en |
| Originál | ec.europa.eu/commission/presscorner/api/documents?reference=SPEECH/24/3467&language=en |
| lang | en |
| guid | /SPEECH/24/3467/ |
