20 February 2014

Commissioner Barnier: From crisis responses to defining a new ambition for Europe

Translated from the French

Our first major task is to finish stabilising the European financial sector. In the last four years, my team and I have proposed 28 texts which cover the entire regulation framework enviseaged by the G20 states. But for all these texts actually to help put finance at the service of the real economy, their proper application is not enough. We need to add three conditions.

1. First, we must ensure that these rules apply effectively to all players, regardless of their size. Our rules on transparency, supervision, capital and resolution should be sufficient for most European banks to avoid another financial crisis. However, these rules may not be sufficient for the largest banks, those that are indeed "too big too fail". On 29 January I proposed structural reforms for the 30 largest European banks, which are designed to prohibit the most risky and speculative activities to give the supervisor the authority to request that espcially risky activities might have to be split from the main activities of the bank. I know that this proposal goes further than some national reforms and may raise concerns. But we have taken into account the impact on these banks in great detail. 
2. We must be very attentive and responsive to new risks that have not been addressed in our regulatory measures. These new risks are not theoretical, as shown by the case of index manipulation, and can have a very real impact on the rate paid by millions of borrowers - this fact justified a quick response from us.
3. Finally, we must ensure that the texts of equivalent measure to ours are adopted by key partners and ensure that our respective new rules work together. That is why the agreement we reached last week with the CFTC is good news. It leads us to recognise the equivalent effect of our rules on OTC derivatives.

The second major project we need to complete is the consolidation of the euro area. Angela Merkel is right to say that the euro is much more than a currency. It is the very heart of European integration which almost exploded under the effect of an external shock - the transmission of the financial crisis that originated in the United States - but also our own imbalances in public finances and competitiveness.

We must continue to respect the lessons learned from this crisis and put the economic, financial and fiscal union on a sound basis, as without it the monetary union cannot be viable in the long term. Amongst other things, we have already started our largest joint project probably since the euro itself: the Banking Union, which should allow us to overcome the fragmentation of financial markets and protect taxpayers and citizens better from risks taken by banks. This requires us to be able to detect these risks by mean of a Single Supervisory Mechanism (SSM) in the enlarged euro area - a role that the European Central Bank will assume for about 130 systemically important institutions from 1 November 2014.

But Banking Union also requires us to be able to deal with the situation efficiently should these risks materialise. That is the objective of a Single Resolution Mechanism, which should include a Single Resolution Board and a Single Resolution Fund. The basic text on which the Council reached a general agreement in December is now being discussed with the European Parliament which has expressed strong opposition to some details and is going back to the Commission proposal in some respects. We continue to adopt a constructive approach and to make every effort to reach an agreement on an effective resolution process before the end of the legislature.

The two major projects that I have just described - financial sector stabilisation and consolidation of the eurozone - are essential so that we can learn the lessons from the financial crisis and sovereign debt.We must assess the overall coherence and economic effects, with a particular highlight any unwanted effect on growth. This is the objective of the economic review of our financial regulation agenda on which we are working, which we should be introducing in April.

Whatever the outcome of this exercise, it is clear that these stabilisation measures are not as such sufficient to restore growth in Europe… the time has come to take bold measures to boost the competitiveness and growth of the European Union.

(...)

To return to my starting point, I would say we are in the middle of our journey. We have preserved what is essential - our financial system, the internal market and the euro - but we did it with our backs against the wall, being forced to respond to successive crises, not always able to offer a global vision and to reconnect citizens to the European project.

Today, the bulk of the economic and financial crisis is probably behind us, but the social and political crisis is still there. The time has come to define this new vision for Europe, going further in the integration of the euro area, renewing the property settlement of the internal market, investing in our future together, giving us the means to also be a player on which the international scene can rely.

All this will require a less bureaucratic and more political Europe. A Europe also where citizens, states and national parliaments have more ways to make their voices heard and influence public decisions. These are the real challenges of the years to come!

Full speech (in French)

© European Commission