September 18, 2018

Danièle Nouy of ECB spoke at the ACPR Conference and emphasized that moving toward a single jurisdiction will help address the challenges being faced by the European banks and banking systems. She reiterated that the Banking Union and the Single Supervisory Mechanism (SSM) must progress further to become a single jurisdiction and outlined how a single jurisdiction can help manage the existing challenges. Finally, she listed actions that could facilitate improvements in the way things are being done.

Ms. Nouy discussed that the Banking Union requires harmonization of options and national discretions; cross-border cooperation, including cross-border waivers for solvency, liquidity, and large exposures; and solidarity, as embodied by a European deposit insurance scheme, or EDIS. With respect to the current low profitability of banks, she suggested that a larger market, in which banks are able to consolidate across borders, would help to get the banking sector back in shape. It would also put European banks in a better position to serve large European companies and to compete successfully with other global financial actors. She added that this European consolidation will not necessarily result in certain banks becoming too big to fail because they might be too big to fail for a single country, but not for the entire euro area.

Another challenge that Banking Union can help meet is Brexit. "Banking Union makes it much easier to welcome safe and efficient banks that want to relocate—not only banks from the United Kingdom, but also from other countries, as in the case of Nordea, which is moving from Sweden to Finland. And this is not just true for single banks; it is also true for entire banking systems, such as that of Bulgaria, that might join the SSM through close cooperation." She added that the SSM needs to be an agile supervisory authority that cooperates perfectly with the other European institutions and is respected by its global peers. To this end, the following are the things that can be done better:

  • Improvements in decision makingreal delegation of powers, embedded in the SSM framework, would be a huge help
  • Further simplify processesnot least to avoid duplication of work between the national supervisors and ECB
  • Awareness that, in the euro area, bank supervisors now have a European mandate, regardless of whether they work in Paris, Frankfurt, Brussels, or Madrid
  • Fostering the exchange of information and experiences between the national supervisors and ECB

 

Related Link: Speech

Keywords: Europe, EU, Banking, SSM, Single EU Jurisdiction, EDIS, Banking Union, ECB

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