20 April 2017

Valdis Dombrovskis, Vice-President of the European Commission Keynote speech "Transatlantic cooperation – key for jobs and economic growth"

[...] On Brexit, the European Union will act as one to preserve its interest. Our first priority will be to minimise the uncertainty caused by the United Kingdom's decision for our citizens, businesses and Member States. The EU stands ready to launch the negotiations quickly and make sure that the withdrawal process is orderly. Through negotiations, we need to build a new partnership, based on fair terms. In any case, the UK will remain the neighbour of the European Union. We have a strong mutual interest in close and fruitful cooperation.

The remaining 27 Member States are determined to stand together. By acting jointly we can address our challenges more effectively, be it in the fight against terrorism, strengthening security, dealing with the consequences of the migration crisis or strengthening the economic recovery of the bloc. [...]

Member States are following EU recommendations to reform insolvency proceedings and to accelerate the work of non-performing loans. The EU's single supervisor - the European Central Bank - is requiring banks to manage and address high levels of non-performing loans. NPLs are also increasingly being sold on secondary markets. The EU finance ministers have just made addressing non-performing loans their priority, and agreed to develop a common EU strategy.  

To further reduce risks in the financial sector, the European Commission proposed banking legislation to transpose internationally agreed standards into EU law. Similarly, to complete the Banking Union we have proposed the last major building block, a European Deposit Insurance Scheme.

Meanwhile, work continues at full speed to build a deeper and more integrated market for capital in the EU – the Capital Markets Union. The project was born as a response to what we saw during the crisis: bank financing became scarce, while alternative sources of financing were hardly available. Many firms were left with no funding at all, worsening the overall contraction of the EU economy. [...]

There is no doubt that financial rules need to be fine-tuned to make them more growth-friendly. In Europe, we have done an assessment of the overall impact of our rules on the economy – the so-called Call for Evidence. Where necessary, we also adjusted our rules. But we are not willing to lower prudential standards. And we count on the US to stand by the same principle.

This is key to our equivalence process. Our rules on equivalence - or as it is known in the US: deference - require us to monitor continuously the adequacy of a third country's rulebook and supervision to the EU standards.

Now, why do we consider international cooperation on financial services vital? I would like to give three examples.

The recent experience showed that it is impossible to properly manage a financial crisis without an effective regulatory framework for derivatives markets. As derivatives markets are global, they also require a global framework that no country – in isolation – can deliver. Since markets move to exploit the slightest arbitrage possibility – and do so extremely quickly - no single country on its own can put in place effective individual margining requirements or requirements for central clearing. That's why Europe stands by the new framework for derivatives markets agreed by the Financial Stability Board.

Another example I would like to mention today is bank capital charges. Today, US banks have probably as many operations in the EU as the EU banks over here. The Basel framework guarantees that all these banks can operate internationally, but are still regulated and supervised to the appropriate – jointly agreed – standard. The EU stands strongly by the agreed standards. Recently, we - as a first jurisdiction around the globe - proposed legislation to mitigate market risk and to review the trading book. And while we want to get the new standards right, we stand ready to negotiate with our international partners on how to finalise the Basel III framework.

A third example is bank crisis management. For banks to operate internationally, we need the tools to deal with international banks in case of a crisis. In the Financial Stability Board, we have put together a crisis management cooperation framework that can be used when a cross-border group gets in trouble. We have had a trilateral resolution exercise with the US and the UK authorities in DC last autumn. We want to maintain and improve this cooperation. To do so, both EU and US laws need crisis management tools, which are compatible with each other. So, we are following very closely discussions on a possible modification to the Title II of Dodd Frank on the orderly liquidation authority. We hope the need for effective cooperation will be taken into account in these discussions. [...]

Full speech

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