Completing the Banking Union (communication) - Related Opinions
Informationsvermerk: Amendments to financial regulation to facilitate economic recovery post Covid-19
While acknowledging the progress made by the Commission in taking account of smaller and less complex banking institutions in its recent regulatory measures, the EESC believes it would be useful to further increase the proportionality of banking rules, without sacrificing the effectiveness of prudential rules.
The EESC endorses the recent decision to push back the date for implementing the Basel III accord, and feels that when the time comes, the new provision on capital requirements should be transposed in a way that caters properly for the diversity of banking business models in Europe.
The EESC welcomes these proposals on sovereign bond-backed securities (SBBSs), which fit into the broader context of completing the Banking Union and building a Capital Markets Union (CMU). Moreover, the proposals also have the potential to make a positive contribution to financial stability and resilience. The EESC has been strongly advocating a weakening of the link between banks and their home countries ("sovereigns") and therefore welcomes that SBBSs aim to contribute to this. The EESC considers that in conceptual terms, the idea of SBBSs is an attractive one and feels that the only way to find out whether banks will switch from bonds from their home countries to SBBSs for their investments and whether investors will be prepared to buy "junior" tranches in sufficient quantities to justify the creation of SBBSs, is to test this new financial instrument - the SBBS - on the market.
The EESC welcomes the Commission's package, a centrepiece in the EU offensive to address the persisting issue of NPLs and fundamental to progress towards the Banking Union. The EESC agrees with the application of statutory prudential backstops as a preventive measure to ensure that credit losses on future NPLs are sufficiently provisioned but warns against a "one size fits all" approach. The Committee recognises that the Commission gives an answer to many of the problems of fragmented NPLs secondary markets in the EU, however, the Committee is of the view that regulators must not encourage the sale of NLPs. The EESC welcomes that the right to a fair trial in a national court is ensured if it is necessary and if the application of the out-of-court procedure as proposed in the directive is restricted.
The introduction of further risk sharing is to be accompanied by further risk reduction in the Banking Union. Both the EDIS and the relevant risk reduction measures have to be dealt with in parallel and without delay and actually put into effect. An EDIS will have a positive impact on the situation of individual Member States and banks by being more able to cushion local shocks. This may discourage speculation against specific countries or banks, thus reducing the risk of bank runs. At the same time it will further weaken the link between the banks and their national sovereigns. It is imperative that the existing legislative framework of the Banking Union is fully implemented by all Member States. It is important that the Commission carry out a comprehensive in-depth impact study in order to further strengthen the legitimacy of the proposal.
The EESC welcomes the proposals to set up a Single Resolution Mechanism which, forms an important new building block in developing the banking union. The Committee equally welcomes the proposed Single Bank Resolution Fund and considers it important to ensure that the resolution fund has the financial resources it needs to fulfil its role properly.
The EESC welcomes this legislative proposal which ensures the effective resolution of failing financial institutions within the EU, and supports the introduction of harmonised rules regarding intra-group financial support. The Committee also stresses that the Central Banks, including the ECB, have to be involved in the assessment of the recovery and resolution plans, while remaining independent. Professional advice of consumer organisations, trade union representatives, etc., should also be sought. The Committee encourages a greater degree of certainty for the institutions by introducing explicit and more clearly defined rules. The opinion demands more clearly defined rules for the Special Manager (SM) as a highly intrusive early intervention measure, and points out the need for additional clarifications regarding both the bail-in tool and the Resolution Authorities (RAs).
The EESC welcomes a banking union to place the banking sector on a more sound footing and restore confidence in the euro as part of a longer-term vision for economic and fiscal integration. Shifting the supervision of banks to the European level is a key part of this process, which must subsequently be combined with other steps such as a common system for deposit protection, and integrated bank crisis management. A banking union would represent a step towards the euro zone and the EU as a whole embarking on a virtuous cycle overcoming its design flaws and enabling the single market to regain competitiveness.