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Enria focused on two issues:
Enria concludes that in the field of bank regulation all the initiatives approved by the G20 already in 2009 need to be promptly finalised, as many still remain work-in-progress. Uncertainty with respect to the details and timing of regulatory measures, as well-intentioned as they may be, alleviates the pressure for changes in banks’ business model and delays the adjustment process. In the EU, this provides a unique opportunity to truly move to a Single Rulebook, i.e. rules that really deliver consistent supervisory outcomes with respect to equivalent situations. The natural instinct to call for national discretions and preserve the advantages granted to this or that class of intermediaries should be resisted, as the use of the regulatory lever to protect the competitive position of national players has always adversely affected the resilience of the banking sector. The forthcoming implementation of the SSM makes the need to promote the objectives of the Single Market even more pressing.
On the financial supervisory side, we have to complete the work to restore confidence in banks’ balance sheets, through comprehensive asset quality reviews and analyses to better understand the differences in the computation of risk-weighted assets.
All these regulatory and policy initiatives need to be supplemented by an appropriate strategy of prompt and transparent dialogue with market participants to avoid misunderstandings leading to unwarranted fears or false expectations, which can corrode sustainable market confidence. Needed also, in my view, is a better effort across the bank regulatory community in the EU to ensure that all banks are abiding by and buying into the new rules and regulations and are changing their risk cultures to enable them to regain the confidence of society at large and to move again towards sustainable growth.
But in the end the key point is repairing the institutional framework for the Single Market. During the crisis, European decision-making has often been portrayed as a fight between Member States at the table of the Council, with winners and losers. Often a common position has been found only when there was no alternative, when national and European interests were aligned by the immediate risk of a catastrophe. A weak coordination of national policies is not enough in a crisis, when national interests may well be conflicting. We do need strong European institutions, able to take decisions in the interests of European citizens and subject to effective mechanisms of democratic accountability. Moreover, appropriate European resources have to be made available to support European public policies, as without clear common backstops no financial stability arrangements can be trusted. The Single Supervisory Mechanism is a major step forward. We now need to complete the Banking Union with strong institutions for crisis management and resolution. This is a very delicate point, as in response to a crisis the authorities must have the possibility to take difficult decisions, also overriding individual property rights for the pursuit of the general interest and deploying taxpayers’ money to prevent contagion. It is a delicate political point, which requires a deeper and stronger underpinning for the European Union.
An improvement in the market conditions, even a prolonged one, could always be reversed. We will be able to see the end of the crisis only when we will have fully restored the confidence of European citizens in the effective functioning of our European institutions.