Brussels, 27/04/2015 (Agence Europe) - The President of the Single Supervision Committee within the ECB, Danièle Nouy, argued in favour of the creation of “incentives” to expand banking union to non-eurozone countries, at a conference on financial integration and stability in Europe on Monday 27 April.
“With regard to the scope of the SSM, owing to the increasing amount of cross-border activity within the internal market, limiting the SSM to the supervision of euro area banks clearly leaves room for significant dangers of contagion effects. Therefore, it is important for the stability of the overall financial system that incentives are created for other member states to join the SSM, which would ultimately also have beneficial effects on financial integration”, Nouy said.
Currently, the 19 countries of the eurozone participate in the 'supervision' and 'resolution' planks of banking union, a process which transfers banking supervision and resolution responsibilities from the national to the European level. Since November 2014, the ECB has directly supervised more than 120 banks of systemic importance and from 2016, the new European banking resolution authority will be able to order the restructuring, or even dismantling, of a failing major financial institution making use of the Single Resolution Fund (SRF), which will have an envelope of €55 billion by the end of 2022.
Of the countries which are not part of the eurozone, the United Kingdom has stated that it will stay out of banking union, despite being home to Europe's largest financial market. Sweden appears lukewarm towards the idea.
Nouy also called for a credible safety net ('backstop') for the SRF fund. “The Single Resolution Fund is particularly important for the credibility of the banking union and its effect on financial integration. Appropriate steps need to be taken to enhance the borrowing capacity of the fund. In addition, a common public backstop should be developed and put in place before the end of the transitional period, which will further weaken the link between banks and sovereigns”. France wants the European stability mechanism to play the role of guarantor, Germany is opposed to this. The fund may also borrow from the markets, to make the most out of its €55 billion pot (see EUROPE 11284).
In its annual report on financial integration, which was published the same day, the ECB notes that financial integration in the eurozone has virtually returned to its pre-crisis sovereign debt level, thanks to the solidification of banking union and the favourable monetary policy. However, this improvement is less obvious on the share markets, the European institution notes. (Mathieu Bion)