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The weak lending in the euro area is partly due to a still very subdued demand for loans. This is not unusual in a period of weak economic growth. But if economic growth is gaining momentum again, we should be well prepared for the supply side. In order to have sufficient funds available for investment, I identify a need for action on three levels:
1. Europe's banking sector needs to be thoroughly cleaned up.
Banks should be able to provide the real economy with enough credit for investment. Obstacles are firstly the increasing number of non-performing loans in some Euro countries; secondly the lack of confidence in the banking sector, which drives up their funding costs; and thirdly the continuing uncertainty as to whether the negative feedback loop between sovereign debt and distressed banks can be interrupted while we still do not have a uniform European framework for the restructuring and resolution of banks.
An effective resolution mechanism will help to eliminate fragmentation in the single market which are due to the fact that some Member States are more likely to be able to support ailing banks with taxpayers' money than others. The planned resolution mechanism should ensure a clear liability order. Only a common, supranationally organised mechanism can ensure that this order does not only exist on paper.
2. The capital market access for enterprises must be improved.
Europe's economy is financed to 80 per cent by the banking sector, which is why we need to ensure that we make it healthy and sustainable. In order not to let possible financing bottlenecks on the corporate side arise, we should also think about alternatives to bank intermediation. In some countries, especially larger companies refinance themselves already increasingly directly on the capital market. But here too, Europe's financial markets remain highly fragmented. This has distorting locational disadvantages. A better harmonisation of securities regulation in the Member States is urgently needed.
Furthermore, we need a unified legal framework for crisis management. This includes, for example, a single resolution framework for non-banks (in accordance with the bank recovery and resolution directive (BRRD)). We should also have comprehensive resolution schemes in place for Central Securities Depositories (CSDs) in order to create a level the playing field for banks and non-banks.
In addition, it is time that we rethink the supervision of securities markets and instruments. The daily supervision lies presently in national hands. The Single Supervisory Mechanism (SSM) will mitigate these barriers to integration indirectly, as many of the banks that fall within the scope of the SSM are key participants in the securities markets.
3. Small and medium-sized enterprises should get support.
Financing constraints for SMEs must not impede economic recovery. Therefore, support for SMEs is necessary, by either direct or indirect measures: the case of indirect measures, I think primarily of reviving the securitisation market in Europe. The euro Member States have launched on national level various indirect and direct support measures for SMEs. Examples include government guarantees for bank loans, but also direct lending programmes. As necessary and welcome these national measures are, in a single market we also need common solutions. The High Level Expert Group on financing growth therefore proposes that the European Commission, in cooperation with the private sector should create a consolidated database on the credit risk of SMEs.
Full speech (in German)