Further risk reduction and risk sharing can pave the way for the third pillar of the Banking Union
The European Economic and Social Committee (EESC) calls for concrete implementation without delay and with a clear and specific timetable of the measures proposed by the European Commission to complete Banking Union and deepen the Economic and Monetary Union (EMU).
In the light of populist threats, increasing nationalism, new financial technology and economic recovery, the completion of the Banking Union is vital for the EMU as it will enhance the financial stability and territorial integrity of the EU and also prevent market fragmentation and disintegration in future financial crises. The EESC therefore welcomes the proposals of the European Commission.
We support the new approach for a more phased implementation of the third pillar of the Banking Union, the European Deposit Insurance Scheme. It might give a new impetus to the so far unsuccessful negotiations, said Daniel Mareels (Employers, BE), co-rapporteur for the EESC opinion recently adopted on the subject.
We urge the Commission not to lose momentum in implementing the Banking Union.
The EESC backs the measures to reinforce and consolidate the first two pillars - the Single Supervisory Mechanism and the Single Resolution Mechanism - of the Banking Union, as their consolidation constitutes a precondition for the realisation of the third pillar, the European Deposit Insurance Scheme (EDIS), a pan-European deposit guarantee system. The Committee believes that further efforts in reducing and sharing risks in the financial sector can pave the way for the realisation of the third pillar and strongly recommends continuing strenuous efforts in these fields in parallel.
Non-performing loans (NPLs) for instance constitute a high risk for the financial sector and therefore for the objectives of the Banking Union. The EESC notes and especially welcomes the fact that on 13 March 2018 the Commission presented a new package of measures to accelerate the reduction of NPLs.
Remaining stocks of non-performing loans and their possible build-up in the future must be addressed with priority. It is important to follow the principle of proportionality and to take the specificities of all players into account. We also call for immediate operability of the European Monetary Fund, as a backstop to the Single Resolution Fund, said rapporteur Carlos Trias Pintó (Various Interests, ES).
With regard to implementation of the new EDIS proposal, the EESC recommends giving full attention to the national deposit guarantee schemes (DGSs) during the first, re-insurance phase, when they are still responsible for covering losses. The Committee believes that the mechanism for implementing the progressive increase in loss coverage by EDIS as well as a number of other points require more clarity and guidance from the European Commission in order to ensure the decisiveness of the proposals.
With a view to progressing to the co-insurance phase, the EESC proposes:
- addressing legacy issues and moral hazard and further harmonising national DGSs;
- ensuring the application of the previously agreed measures by the national DGSs;
- taking a more concrete and formal decision to enter the second phase on the basis of the broadest possible consensus.
Banks can play a role in the fight against climate change, and in the application of the SDGs. The EESC therefore emphasises the need to implement the Banking Union and apply the Single Rulebook hand-in-hand with the establishment of a fair, more sustainable, transparent and accountable financial industry that creates, through its various players, a favorable environment for sustainable investment and growth, and contributes to financial and digital inclusion.
In the Committee's view, all financial players should focus reliably and on an equal footing on the financing of the real economy, and the Banking Union should address financial innovations. The participation of non-euro Member States in the Banking Union should be encouraged and the Banking Union should contribute to increasing European and international cooperation and strengthening the global financial architecture.