Banking Union Brainstorming

"La lettre B" l'essentiel de l'actualité économique et financière européenne décryptée

Banking Union Brainstorming

The European Commission held on 11th November an ’orientation debate’ about the next steps needed to complete the Banking Union, as part of the ongoing brainstorm on how to achieve a full and deep Economic and Monetary Union (EMU), and bringing forward a proposal for a European Deposit Insurance Scheme (EDIS).

The recent Five Presidents’ Report set out a number of steps to further strengthen the EMU. Prepared by the President of the European Commission, in close cooperation with the President of the Euro Summit, the President of the Eurogroup, the President of the European Central Bank and the President of the European Parliament, the Report reflects the personal deliberations and discussions of the five Presidents on the euro area, as countries that share a currency face specific common challenges, interests and responsibilities.

The European Deposit Insurance Scheme (EDIS) has been identified as a priority. EDIS would mark an important step forward to strengthen financial stability, by reducing the link between banks and sovereigns and enhancing confidence, according to the Commission, by protecting citizens’ deposits at European level, independent of their bank’s location in the union.

The Commission’s proposal, expected for 24th November, will be accompanied by a Communication which will set out other concrete measures to further reduce risks in the financial system.

Vice-President for the Euro and Social Dialogue, Valois Dombrovskis, said in this respect:

“Financial stability is a precondition for economic growth and convergence. We need to complete Banking Union as one of the pillars of a resilient and dynamic Economic and Monetary Union. Today’s discussion in the Commission demonstrates our commitment to propose first steps towards an EU Deposit Insurance Scheme already this year. In parallel, we will work on further reducing risks in the banking sector.”

Commissioner Jonathan Hill, responsible for Financial Stability, Financial Services and Capital Markets Union, added:

“Everyone agrees that there is unfinished business on the Banking Union. Alongside supervision and resolution, we need an effective system for deposit guarantees. By gradually developing that at the European level, we can reinforce the confidence that depositors have in their banks, and further weaken the link between banks and their sovereigns.”

Financial stability and citizens’ confidence are indispensable preconditions for economic growth; EDIS, as suggested by the Five Presidents’ Report, would thus consist of a reinsurance of national Deposit Guarantee Schemes (DGS) as a first step, moving towards a full European system of deposit guarantees in the longer term. While national DGS are already in place and provide for the protection of EUR 100.000 per person/per account per bank, they are not backed by a common European scheme.

The Commission believes that EDIS would help to reinforce depositor confidence in banks across the Banking Union, while the pressure on banks would be reduced and the loop between banks and Member States would be further weakened by helping to ensure that all national DGS would have sufficient funds available to weather periods of high stress.

The need for all Member States to fully implement the agreed rules of the Banking Union is a clear Commission priority.

The EDIS proposal will thus be accompanied by concrete ideas about how risks can be further reduced in the financial system in general and in the Banking Union, in particular.

Filippo Giuffrida Répaci

 

 

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