26 June 2024

Commissioner McGuinness at Bruegel event, 'Europe's banking union at 10: unfinished yet transformative'

..we really need Banking Union relate to citizens in the way that when there's a crisis it's very real when banking has its problems, that people have problems.. This topic was not on the agenda, and yet it's absolutely pivotal, as is Capital Markets Union.

And there are insights there which I wish I had had at the start of my mandate!

But look, it's better late than never.

I think what the book does is very clearly set out why the Banking Union represented such a major step change.

Because before Banking Union, Member States were reluctant to move banking supervision away from the national level.

And then came 2007 and the great financial crisis, which demonstrated the failure of banking regulation and supervision.

With very real impacts on people's lives as many lost savings and homes and indeed jobs.

And just on that point, it strikes me – I've said this on a few public events – that we really need Banking Union relate to citizens in the way that when there's a crisis it's very real when banking has its problems, that people have problems.

And I think we've failed to do that during the campaigns for the European Parliament.

I've just come from Parliament speaking to colleagues. This topic was not on the agenda, and yet it's absolutely pivotal, as is Capital Markets Union.

That's my pitch over.

So to go back to the problems it caused, the financial crisis, for people, also for businesses – bankruptcy, losses, etcetera.

And then we saw how the bank-sovereign nexus exacerbated the problem in 2011 and 2012.

But – as we often do in a crisis – the EU acted very decisively.

The twists and turns, and they're intriguing, they're well covered in this book, and I do encourage you to read it, not just summary and conclusions, but all of it.

So, to sum up, we moved, in your words, Nicolas, from banking nationalism to Banking Union.

And we set up an ambitious system to ensure the stability and integration of the EU's banking system.

The Banking Union exists to avoid history repeating itself.

And the aim of Banking Union: to ensure financial stability so that banks can provide funding to the economy, as well as protecting depositors' and taxpayers' money.

A well-functioning Banking Union should also underpin a single market for banking.

And here's my second grief if you like – why do we keep talking about cross-border in a single market?

Because I think language matters and I think we have embedded the words ‘cross-border'.

I scratch them out of all my speeches, as my colleagues at the end of the room will testify.

Because I think it impacts in a negative way our thinking about a single market for capital.

If we look to what strong banks can deliver, if they're operating across multiple Member States, delivering better banking services, more affordable financing to European citizens and companies.

And I got one Facebook question in the last two days, saying, when will we have free banking across Europe that will have more competition?

So I live in hope that eventually citizens will push this agenda further, as we discuss it here.

I also think that in the last few years in particular, Banking Union was joined by the Capital Markets Union – so the two projects complement each other.

The Capital Markets Union could be facilitated by a more integrated market for banking services.

And the CMU needs strong banks that operate across Member States to provide key capital market services, like listing, trading, and investment.

So what have we achieved on Banking Union?

The Single Supervisory Mechanism, set up in 2013.

The next year, the Single Resolution Mechanism followed.

Both have proven their worth and on their own terms, but as you note, Nicolas, in demonstrating that the EU can introduce radical reforms when required.

And I think it's something we need to discuss, why does it take something radical for us to actually take action, which can be done in a much easier way in times of peace?

If I look again to the Single Supervisory Mechanism, it helped the banking system navigate many challenges.

Like Covid-19, like the consequences of Russia's illegal invasion of Ukraine, and indeed subsequent increase in energy prices and inflation.

And again most recently the banking crisis in spring last year, which hit banks in the US and Switzerland, but not in the EU. But you never know how these things can have an impact.

I think clear communication by the SSM, the SRB and the EBA, all their clarity calmed the markets.

The Single Resolution Mechanism provided a way to handle banking crises, and I think in a way that was unthinkable 15 years ago.

It effectively managed two significant bank failures: Banco Popular in 2017 and Sberbank in 2022.

So we have made progress on the single rulebook, which underpins the Banking Union.

Including the Basel III standards. As you know we will apply these new standards from January 1^st of 2025 – but  we do that also looking at level playing field issues.

And I recently mentioned that we have taken the decision when it comes to the Fundamental Review of the Trading Book, FRTB, to postpone implementation of this element of the Basel package until 1^st January 2026.

And I can say right now that we will publish that delegated act in July so that we are in good time and consistent with our decision-making....

 more at Commission

© European Commission