On Monday 20 November, the President of the European Central Bank (ECB), Mario Draghi, called for Banking Union in the Eurozone to be completed through the creation of a European Deposit Insurance System (EDIS) and defended the recent tweaking of the accommodative monetary policy.
We need a “fully-fledged” EDIS system, Draghi told the final monetary dialogue of the year with the members of the European Parliament.
Esther de Lange (S&D, Netherlands), who is responsible for steering the discussions in Parliament on this dossier, asked him how any progress can possibly be made when certain countries are refusing to tackle non-performing loans (NPL) head-on. She was referring to Italy's opposition to the addendum to the guidelines of the ECB, as the single banking supervisor, concerning the provisioning of non-performing loans (see EUROPE 11901).
Roberto Gualtieri (S&D, Italy) immediately took the floor to stress the importance of respecting institutional competencies and point out that the ECB has no regulatory powers.
Draghi made the case for moving forward “in parallel” on reducing financial risks, such as NPL, and sharing risks by creating the EDIS system. This is what the member states committed to do in a specific roadmap adopted in June 2016 (see EUROPE 11575), but the dossier is at deadlock at Council due to the opposition of the northern countries, such as Germany and Finland, which do not wish to see their banking sectors paying for the mistakes of the past in other member states.
Draghi approves of the Commission's recent proposal aiming to relaunch discussions on EDIS by moving forward in two stages (see EUROPE 11881). The Commission's plan is that EDIS would only provide extra liquidity to the national regimes up to 2021. In a second phase of three years, it would progressively cover any losses that materialise, intervening at a level of 30% in the first year.
We have to bear in mind the ultimate objective, but to create EDIS, we can move forward “in quantifiable and analysable stages, with measurable targets”, said the former governor of the Bank of Italy. And, to complete Banking Union, we must also go further in harmonising the national resolution regimes, for instance in terms of the hierarchy of creditors to be called upon in the event of bank resolution.
On NPL, Draghi said that reducing the stock of non-performing loans requires a joint effort by, on the one hand, banks and supervisors and, on the other, national governments, to create a regulatory environment that will allow banks to sell these loans. “We have to deal with the legacy problems of the past, not just new problems”, he added.
At the end of the session, Pervenche Berès (S&D, France) called for the EDIS dossier to be taken off ice to “return confidence” to the banking sector and unblock other related dossiers. She criticised a number of “sneaky” comments attempting to put risk reduction ahead of risk sharing.
QE. Draghi also welcomed the fact that the changes to the 'quantitative easing' (QE) operation had had no impact on the financial markets, although the monthly pace of the purchase of mainly public securities will fall from €60 to €30 billion (see EUROPE 11892).
He told Bernd Lucke (ECR, Germany), who accused the ECB of indirectly financing the member states, that the monetary institute scrupulously respects its mandate and that the stock of public securities purchased on the secondary markets was less than 20% of the total. (Original version in French by Mathieu Bion)