October 30, 2017

During the keynote speech at the Inter-parliamentary Conference on Stability, Economic Coordination, and Governance in the EU, the EC Vice President Valdis Dombrovskis highlighted that "completing the Banking Union and the Capital Markets Union are the most immediate priorities for future reform."

As per the EC Vice President, "we should strive to agree quickly on the remaining proposals such as the risk-reduction package of last November and the European Deposit Insurance Scheme (EDIS)." A recent EC communication on completing the Banking Union suggests a possible re-modulation of the EDIS proposal. The proposal entails introducing EDIS more gradually, with two instead of its original three phases. The first reinsurance phase of EDIS would concentrate on all liquidity support to national guarantee schemes, while the second phase would maintain the ambitions that EDIS would cover losses. Eventually we would move to 100% European system, making the move toward second stage conditional of the asset quality review.

Mr. Dombrovskis also highlighted that EC is following, with interest, the ongoing ESRB work on Sovereign Bond-Backed Securities (SBBSs). If the technical work on this is successful, the development of such securities could facilitate the diversification of banks' sovereign portfolios, thus further weakening the bank-sovereign nexus and boosting private sector risk-sharing. Being market-driven, SBBS would not require mutualization or a change in the regulatory treatment of sovereign bonds. In conclusion, he stated that "a well-functioning and well-integrated EMU [Economic and Monetary Union] can be much more than the sum of its parts."


Related Link: Speech

Keywords: Europe, EU, Banking, Securities, Banking Union, Capital Markets Union, EDIS, SBBS, EC

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