The European Commissioner for Financial Services, Mairead McGuinness, said that completing the Banking Union in the euro area was becoming “harder as time passes”, on Thursday 23 September, at a conference organised in Frankfurt by Freshfields Bruckhaus Deringer and the Institute for Law and Finance.
Acknowledging that the Covid-19 pandemic had set other policy priorities, Ms McGuinness noted that if a “more typical” financial crisis were to occur, the exceptional level of public budgetary support mobilised to tackle the health emergency cannot be taken for granted.
Hence the need for effective “industry-financed safety nets”, she said.
Completing the Banking Union means setting up the European Deposit Insurance Scheme (EDIS), the third pillar of the structure after the ‘supervision’ and ‘resolution’ pillars.
Ms McGuinness recalled that the technical work is focused, as an initial step, on the creation of a “hybrid model” through which EDIS would provide for “the coexistence of national deposit guarantee schemes with a common central fund” (see EUROPE 12736/16). This model, which would initially “provide liquidity to national deposit guarantee schemes in need“, will have to evolve over time into a “more ambitious” EDIS set up, involving “loss mutualisation“, she nevertheless stressed, even if a political consensus on the issue of mutualisation does not exist at this stage.
Without mutualised safety nets, however, the Commissioner considered that the level of trust required between home and host countries to allow banking groups to operate fully on a cross-border basis would not be achieved.
In June, the Eurogroup was unable to adopt a detailed work programme on the completion of the Banking Union, partly because of the upcoming German parliamentary elections (see EUROPE 12743/8). An agreement is hoped for by the end of 2021 to re-launch the momentum.
Cash. Ms McGuinness also stressed the importance of the EU having a “robust and credible” mechanism to provide sufficient liquidity in the event of a failed banking group resolution. She provided several avenues for further work: - develop consistent and proportionate solutions to manage the failure of any type of bank, regardless of its size and business model; - improve the predictability of the regulatory framework, including a public interest assessment; - further harmonise the conditions attached to sources of funding, e.g. State aid. (Original version in French by Mathieu Bion)