16 January 2020

BIS: Margarita Delgado: The European Banking Union

Speech by Ms Margarita Delgado, Deputy Governor of the Bank of Spain, in which she delves into what the SSM has meant for supervisors and for the functioning of the European banking sector. Then she goes beyond the SSM and talks about the European Banking project.

Throughout its history, the EU has moved towards a greater level of economic and political integration that has provided clear social and economic benefits. Yet the pace of this movement has not been constant. 

Analysis of any of the main achievements of the Union, such as the creation of the single market or the euro, tells that it is often better to be pragmatic and adopt less ambitious solutions instead of persisting with an impasse because a perfect agreement cannot be achieved. 

The Banking Union is a major step in this direction and it has been pivotal in helping withstanding the euro crisis. That said, the absence of any European deposit guarantee scheme is a reminder that the process is unfinished. Further, specific regulatory and institutional elements must be added to obtain economic benefits resulting from an increase in crossborder banking activity, thereby achieving a true “Financial Union”. 

As the Five Presidents report indicates, “Economic and Monetary Union today is like a house that was built over decades but only partially finished. When the storm hit, its walls and roof had to be stabilised quickly. It is now high time to reinforce its foundations.” 

Margarita Delgado says: “This quote illustrates very clearly how the EU reform process often is. It is amid the storm that political pressure rises to undertake reforms that help avoid the house come crashing down; but we agree that the best time to carry out this type of work is when the sun is shining. 

“When assessing our capacity to face future financial crises, we should not forget that the institutional framework is not yet complete. Admittedly, the foundations are not fully and firmly in place, and we should avoid lapsing into complacency. We cannot forget that, as the memories of the crisis fade, the political pressure to undertake reforms also tends to wane.”

Full speech on BIS

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