17 December 2012

Michel Barnier: The European banking union, a precondition to financial stability and a historical step forward for European integration

The SSM is a great first step towards a proper Banking Union. But the Banking Union does not stop with the SSM.

1. First, the Banking Union will build on a single rulebook

The single rulebook will be applicable to all 27 Member States. It will include rules on key issues such as:

• Capital requirements: Our "CRD IV" proposal is crucial for financial stability. It is currently being discussed in the so called "trilogues" and we hope to reach an agreement very soon. And our banks are ready for it as demonstrated by stress tests conducted by the European Banking Authority. But our major partners should also follow. Starting with the US. As the two largest financial markets in the world, we both have a duty to set the example and show leadership. We need to ensure a coordinated approach for the implementation of these important rules.
• Deposit guarantee schemes are another important aspect of the single rulebook. We need to ensure that each Member State has a fully funded scheme in place.
• We also need rules on bank resolution: Our proposal for a common European resolution framework provides that shareholders and creditors should bear the cost of resolution before any external funding is granted. And that private sector solutions should be found instead of using taxpayers' money.
• Finally, the single rulebook could include rules on the structure of the banking sector. The Liikanen report has proposed solutions to separate deposit taking from more risky activities. Our reflection in this field is still on-going.

2. Secondly - the Banking Union will also need a single resolution authority

The SSM will help us prevent crises. But we also need to anticipate the cases where a crisis would nonetheless occur. We of course need to ensure that each Member State sets up national funds for resolution and deposit guarantees. But a fully-fledged banking union would require going even further and creating a single resolution authority. In case of cross-border failures, it would be more efficient than a network of national resolution authorities. This is in particular needed so that we can ensure speedy and credible reactions to addressing banking crises.

With last week's agreement, EU countries have fulfilled the commitment they made in June. The SSM now has to be discussed in the European Parliament. The rapporteurs Sven Giegold and Marianne Thyssen have already done a great job.

I am confident that the final agreement will be reached soon. This would be good news for financial stability, for public finances in the eurozone and for the world economy, which would get a boost from a return of full confidence in the eurozone.

I am also confident that, in five years' time, the SSM will be considered as the key step to putting our financial house in order. And a milestone in a new phase of European integration, which should lead us to a genuine financial, budgetary, economic and political union.

Full speech

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