12 July 2012

Commissioner Barnier: Towards a European financial union and a more solid European banking sector

Less than two weeks ago, the EU Member States agreed on a "Compact for growth and jobs". It includes in particular €120 billion of new joint investments. As was underlined recently at the G20 summit, fiscal discipline and austerity measures – as necessary as they are - need to be accompanied by radical measures to support growth. Eurozone countries also agreed to step up the European Stability Mechanism, our new European intervention fund. The ESM will be entitled to buy sovereign bonds, provided that the countries concerned fulfil their commitments as regards fiscal consolidation and structural reforms.

Between October 2008 and October 2011, European countries have given €4.5 trillion in public support and guarantees to their banks. This is clearly not acceptable.  We want to break this link between States and their banks. With the future banking union, the situation will be different.  There will be one European Supervisor to deal with ailing banks and financial crises. How are we going to build this Banking Union?

It is sometimes claimed that the EU is regulating to the detriment of certain actors, in particular the City of London. I can assure you that this is incorrect. We have seen in recent years that the reckless and immoral behaviour of a few institutions has created enormous damage for the financial sector itself and society as a whole.

We now have three pan-European supervisory authorities for banks, insurance and securities markets. They have been operational since January 2011. And in October last year, European leaders decided on a major capitalisation exercise for the 27 biggest European  banks. The capital shortfall when the exercise started was estimated at €76 billion.  However, on the 30th of June this year, the banks in question had raised €94.4 billion!  And substantial parts of this capital were raised directly on the capital markets, with the need for a public backstop only in a very limited number of cases.

Let me now revert to the Banking Union and its main building blocks: I have mentioned supervision and capital rules. In early June, we proposed EU rules for bank recovery and resolution. To make sure that supervisory authorities have all the tools they need to deal with bank failures. Without taxpayers' money.

Let me conclude by saying that there are two final conditions for this banking, economic and fiscal union to become reality. First, building on the current momentum. Second, stepping up the democratic support and control of the EU. We need an integrated Financial Union with enhanced democratic control. We need more democracy at the bottom. And we need to provide responses to the many citizens in Europe today, who feel disconnected from their politicians. Citizens who as a consequence increasingly vote for populist parties, on the left and on the right.

Full speech

© European Commission