Overall financial integration in the Eurozone stagnated in 2016, the European Central Bank (ECB) said on Friday 19 May at the annual conference on financial integration and stability that it holds jointly with the European Commission. In order to remedy this, the two institutions recommend completing banking union and the Capital Markets Union (CMU).
At their meeting, the two European institutions presented their respective annual report on financial integration, both of which were published on the same day. Overall, the two reports show a positive trend towards the recovery of the European economy and the need to improve bank financing as well as the regulatory framework for supervision. The Commission’s report also notes that European banks are much more stable today than in the past.
Even so, the Vice-President of the ECB, Vítor Constâncio, reported that “overall financial integration in the euro area stalled last year”. He added that new indicators show that the sharing of risks between countries is still at a low level.
This mixed bag of results means that banking union must be completed and the Capital Markets Union (CMU) requires a more ambitious direction, the institutions stress.
“We need to take decisive steps towards financial integration within the EU by completing banking union and Capital Markets Union”, said the Commissioner for Financial Services, Valdis Dombrovkis. This view is also shared by the ECB Vice-President, who believes that the two projects should be seen as “mutually reinforcing initiatives that can bring the single market for financial services to the next level”.
Exploring ideas to deepen financial integration, Constâncio in particular stressed that the current examination of the directive on capital requirements (CRD IV) and of the directive on bank recovery and resolution (BRRD) should lead to tangible progress. He went on to say that the improvement and harmonisation of the insolvency rules could promote the integration and development of financial markets.
Addressing the conference, MEP Pervenche Berès (S&D, France) said that the mid-term examination of CMU (see EUROPE 11766) - to be presented by the Commission on 7 June - will be an important step. She expressed her hopes of progress on three dossiers: the ‘PRIIPS’ regulation on pre-contractual information on retail financial services, securitisation (see EUROPE 11790) and the ‘Juncker’ investment plan (see EUROPE 11789).
Finally, stressing that Brexit will be a challenge, but also an opportunity, Constâncio reiterated the need to relocate certain financial services based in London to the territory of the 27 member states. Acknowledging that the risks will certainly increase with the departure of the UK, the Vice-President said that the ECB stood ready to support a transition and reorganisation in this context. (Original version in French by Marion Fontana)