Three years after Banking Union was put into place, various bodies involved in its functioning and the European legislators took stock of progress made and future work priorities, at the annual conference of the Single Resolution Board (SRB) in Brussels on Friday 29 September.
Improving the resolvability of European banks is a work in progress and “will not happen overnight”, said the SRB Chair, Elke König. Olivier Guersent, Director General for Financial Services at the European Commission, described Banking Union as a “trust-building exercise” and the reason the Commission has decided to move forward on the basis of the roadmap. He said that although the road decided upon is the right one, it will still take seven or eight years for Banking Union to be finalised.
The participants, who were invited to take position on the current state of Banking Union in the Eurozone, mostly recognised that the framework in place works, in particular stressing the success of the resolution of the Spanish bank Banco Popular (see EUROPE 11803). König and Guersent stressed that although the system is not perfect, the resolution mechanism has proved that it works.
The Chairman of the European Banking Authority, Andrea Enria, said that the rules are in place, but there are still differences between the member states. In particular, he expressed concern at the fact that in spite of favourable market conditions, the general state of health of European banks has not improved. Christian Stiefmüller of the organisation Finance Watch believes Banking Union has been prevented from keeping its promises by an overly flexible legal framework and the ongoing fragility of certain European banks.
Towards better resolvability of European banks. To improve the resolvability of European banks and guarantee financial stability, the participants identified a number of areas in which work needs to be done, such as: - bringing the prudential standard TLAC, the additional capital buffer agreed upon at G20 level for the 30 largest banks of systemic importance, into line with the MREL standard, with which all European banks must comply; - improving financing liquidity for banking resolution; - reducing the volume of non-performing loans on the balance sheets of European banks; - harmonising the national deposit guarantee frameworks, but also the insolvency frameworks.
König argued that cooperation will be necessary in all of these fields between the two pillars of Banking Union (the Single Resolution Mechanism and the Single Supervisory Mechanism), but also with the European legislators, the national authorities and banks.
SRB member Dominique Laboureix called for the banking risk reduction package, currently being examined by the European Parliament, to be finalised as a matter of urgency, along with the hierarchy of bank creditors, on which the Council reached a political agreement in June (see EUROPE 11810).
The main priority will be to create the missing pillar of Banking Union, the European Deposit Insurance System (EDIS), the participants said. The chair of the Supervisory Board of the Single Supervisory Mechanism, Danièle Nouy, said that it was impossible to say whether Banking Union has kept its promises, as it is not yet complete. The Commission is planning proposals to break the deadlock on this dossier, Guersent said. (Original version in French by Marion Fontana)