16 September 2013

Commissioner Barnier: We are on track

Translated from the French

"At the beginning of my term, we set ambitious targets on how to address the lessons learnt from the financial crisis. Three-and-a-half years later, we are on track. However, there is still some way to go.

I have just returned from the informal ECOFIN meeting at Vilnius. The findings of Ministers and Governors were encouraging and show that our efforts of the last three years are paying off: the European Union is gradually emerging from the economic stagnation and recession which marked the last few quarters. Volatility and tensions on the financial markets are less pronounced and, in any case, no longer result in concerns about the strength and stability of the euro.

However, many factors still put this improvement at risk, both internal and external. We have to keep vigilant and be ready to act. The conclusions of the ECOFIN meeting in this regard were very clear: we must continue our economic strategy that is based on the following three pillars:

• further structural reforms to restore competitiveness and dynamism
• clean-up of our public finances, taking into account market conditions and the specific situation of each country
• strengthening the soundness of the financial sector which must play its role in providing businesses and households with the means to invest and consume.

The situation of the European banking sector is improving; the level of capitalisation and leverage of European banks is now comparable to those of the United States and well above the minimum regulatory capital level of 11 per cent. Much remains to be done but we can hope that the financial sector which was an instrumental factor in the crisis can now become an instrument of growth. To achieve this, we must fully implement our reform agenda:

I. Starting with the absolute priority: Banking Union

The Banking Union is probably our biggest joint project since the creation of the euro. It is firstly based on a single rulebook that we have substantially strengthened with the CRD IV that was passed last spring. This text allows both strengthening the stability of banks and fighting against the fragmentation of the Single Market - which is one of the obstacles to the return of strong growth across the Union.

Our Banking Union project is one of the strongest responses we can give to this risk of fragmentation, which, in turn, also has other causes which we will tackle: tax variation and no common framework for governance of business or corporate law are among them.

Finally, it is essential to complete our work on the so-called "BRRD", the Banking Recovery and Resolution Directive. As I said last Thursday during the plenary debate of the European Parliament, our priority now is to implement the single resolution mechanism (SRM) for ailing banks, based on precise and predictable rules.

Among the issues concerning this mechanism is its legal basis. As you know, the Commission has proposed to base it on Article 114 of the Treaty, as we did for the BRRD. This legal basis can be applied when a proposal is fiscally neutral. The legal services of the European Commission, the European Parliament and the Council felt that this was the case.

II. We must also finalise the initiatives on the agenda of the ECON Committee

I hope that the Member States will implement without delay the Regulation on Market Abuse, an important text for the moralisation of the financial sector. Several other projects must be completed by the end of the year as well:

• MiFID, which has already been discussed by the trialogue in a constructive atmosphere and that should help to preserve the level of ambition of this proposal;
• Omnibus II, for which an agreement this autumn is on track;
• the Regulation on Central Securities Depositories (CSD);
• and finally, the "consumer" side of our work with PRIPS, Insurance intermediation, UCITS V and the proposal for a directive to provide access to all Europeans to a basic payment account.

Let me conclude by emphasising that the Single Market must play a leading role in refocusing our economy towards our productive capital rather than financial capital. Moreover and most importantly, the European citizens, particularly the poorest among them, continue to suffer daily from the consequences of the economic and social crisis. Therefore our time should be one of vigilance and action to ensure that these reforms are bearing fruit and that the financial sector, on these new foundations, can again cater to the needs and projects of citizens and businesses.

This is the economic condition for a return to growth. And this is also the polical response to the rise of populism."

Full speech (in French)

See also: Michel Barnier, the great regulator Five years after the collapse of Lehman Brothers, the man who has been on the front line of financial regulation in Europe is assessing his performance. Now that his mandate is drawing to a close, Michel Barnier has set his sights on another role in the Commission. (Portrait by Les Echos)

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