18 June 2018

European Parliament: Country-specific recommendations in banking - June 2018

This briefing focuses on the banking recommendations addressed by the Council to individual Member States within the framework of the European Semester over the past years (2011-2018). It takes a rather broad approach and covers all recommendations targeting individual Member States’ banking sectors from a financial stability perspective or in respect of the financing of their economies and access to finance.

It takes stock of these banking relevant country-specific recommendations issued since 2011, looks in detail at the main topics addressed and gives an overview of the implementation by Member States as assessed by the Commission.

The following conclusions can be drawn:

• The level of implementation of the banking CSRs policy aspects, after a sharp decline in 2016, increased again in 2017 up to the level of 2014;
• Banking CSRs have been used to monitor the reduction of banks’ NPL and the pace at which Member States reform their insolvency framework;
• There is no obvious correlation between the size of the banking system and the level of implementation of the banking CSRs: small banking systems are not necessarily easier to reform than large ones. In general terms, structural and cyclical weaknesses are more difficult to address by Member States;
• Some banking CSRs have been discontinued, despite the implementation by the Member State not being assessed as satisfactory (in Denmark and Germany);
• The establishment of the Single Supervisory Mechanism and the Banking Union constitutes a turning-point which resulted in far fewer banking recommendations on structural weaknesses addressed to euro area Member States. Since the establishment of the Banking Union, national supervisors have been fully integrated into the Single Supervisory Mechanism and the ECB is now directly responsible for the supervision of the most significant banks in the euro area; one may argue that this institutional change has made the interpretation of some banking related CSRs more complex, as they remain addressed to individual countries while the responsibility of banking supervision has been transferred to the European level.

Full briefing

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