Brussels (EFE).- The recent turmoil in entities in the United States and Switzerland have led the leaders of the European Union to give impetus to their plans to strengthen the regulation on bank failures, which keeps the creation of a European fund on hold deposit guarantee, despite the fact that the sector in the bloc is in good health.
“The eurozone banking sector is strong because we have applied the internationally agreed regulatory reforms after the global financial crisis to all of them. Recent events remind us how important it has been to continually improve these standards. Now we have to make progress in completing the banking union”, transferred the president of the Central Bank of Europe, Christine Lagarde, to the leaders, according to European sources.
The declaration approved by the leaders calls specifically for the implementation of the plan agreed in June 2022 to advance in the banking union, which called for strengthening the crisis management framework and the use of national deposit guarantee funds, but left the project to have a common Deposit Guarantee System (EDIS).
This system is the essential pillar pending to complete the European banking union created as a result of the last financial crisis, which already established a single supervisor for the large banks of the continent (integrated into the ECB) and a Resolution Board to orchestrate the liquidations of bankrupt entities.
However, the proposal has been stalled for almost a decade due to the refusal of some countries, led by Germany, to jointly respond to the risks of the banks of any member of the eurozone, despite the fact that Brussels has softened the proposal in two occasions to try to move it forward, suggesting progress in phases and conditioning it to reduce the risk of the entities.
In recent years, finance ministers have tried to negotiate EDIS in parallel along with risk mitigation measures, such as controlling bank exposure to sovereign debt, but the difficulties have always been such that the role of the Eurogroup was not so much approving the EDIS as “maintaining it with assisted breathing”, as repeated by a senior European official.
Finally, after verifying the blocking of these two initiatives, in 2022 the ministers agreed to advance only in those areas where there was consensus: a directive to improve the crisis management framework and reinforce national guarantee deposits.
This minimum plan is what the leaders now want to promote, despite the fact that countries like Spain have defended that the current context reinforces the importance of creating this European system of guarantees. Moncloa sources point out that Spain is “much more ambitious” and is committed to completing the EDIS, despite the fact that “there is no concern for Spanish and European banks.”
The president of the Eurogroup, Paschal Donohoe, already conveyed the general message of the meeting upon his arrival at the meeting when, in statements to the press, he stressed that the European banking system is solid thanks to the “political decisions” that were adopted as a result of the financial crisis of 2008, but asked “not to be complacent” and to continue strengthening community financial regulation.
The Irishman called not only to carry out the new proposals on the crisis management framework, which the European Commission must present “soon”, but also to implement agreements already agreed, such as the ratification of the European Stability Mechanism treaty that would allow him to provide from 2024 an additional line of 68,000 million euros to the Single Resolution Fund, which already has more than 66,000 million to help finance bank resolutions when there is no alternative.
The process has been blocked on its own for months by Italy, where ratification is politically very sensitive.
“We have learned the lessons from last time and I think we are more resilient now, for example compared to the US, but there are things we can do,” the Estonian Prime Minister summed up upon her arrival at the European Council meeting, Kaja Callas.
Belgian Prime Minister Alexander De Croo noted that European law is “very different” from that of the United States, but called for completing the pending aspects of both the banking union and the capital market union.
For his part, the Prime Minister of the Netherlands, Mark Rutte, coincided in highlighting the need to advance in banking regulation and defended the work in this regard since 2008 in the face of “criticism from companies and banks saying that they were probably too harsh”.
Lagarde (ECB) maintains before EU leaders that European banking is “strong”
The president of the European Central Bank (ECB), Christine Lagarde, informed the leaders of the European Union (EU) this Friday that the eurozone banking sector is “strong” and “resilient”, but urged them to progress to complete the banking union.
Lagarde participated in a summit of EU Heads of State and Government in Brussels in which the Twenty-seven addressed the recent turmoil in the financial markets following the bankruptcies of SVB and other entities in the United States and the bailout of the Swiss Crédit Suisse .
“The eurozone banking sector is strong because we have applied the internationally agreed regulatory reforms after the global financial crisis to all of them. Recent events remind us how important it has been to continuously improve these standards,” the ECB president told community leaders, according to European sources.
Lagarde specifically urged moving forward to complete the banking union – where the main missing element is the European Common Deposit Insurance Scheme (EDIS) – as well as working to create a “genuine” European capital markets union.
The ECB president insisted that European banks are “resilient because they have strong capital and liquidity positions”, thus reiterating the message that she has launched in different forums since the fall of the SVB and subsequent events.
The message comes precisely on a day in which European banks are suffering significant falls on the stock market, particularly German entities, with Deutsche Bank leaving more than 13% on the Frankfurt floor.
Sánchez sees the EU as better prepared and with “different recipes” in the face of the crisis
The President of the Spanish Government, Pedro Sánchez, assured this Friday that the European Union is “better prepared” and with “different recipes” for possible new crises and highlighted the “unity” that exists today in the face of the “division that was seen in the past financial crisis.
“Fortunately, Europe learned from the lessons learned from the financial crisis a decade ago. This helped us to be better prepared for the pandemic and now for the war in Ukraine, logically applying different recipes,” Sánchez said at a press conference after participating in the summit of EU heads of state and government in Brussels.
In it, the Twenty-seven addressed the recent turbulence in the financial markets, after the bankruptcies of several banks in the United States and the rescue of the Swiss Crédit Suisse, with the president of the European Central Bank, Christine Lagarde; and the president of the Eurogroup, Paschal Donohoe.
“Where there was division, today there is unity. Where there were cuts and lack of solidarity, today there is a solidarity response that serves to protect families, small and medium-sized companies and the industry of our continent”, added the President of the Government.
