Today, the EU Commission published its communication on completing the Banking Union. The Commission hopes that this will break the deadlock on its proposal for a European Deposit Insurance Scheme (EDIS) in the European Parliament and the Council. It thereby maintains the long-term objective of full mutualisation of risks within a European deposit guarantee scheme. However, it was proposed that the necessary intermediate steps of reinsurance and co-insurance are made dependent on an asset quality review of the European banks. The Commission intends to take the decision on the passing of this check itself. In addition, Member States are required to provide the Single Resolution Fund (SRF) with a fiscal backstop as quickly as possible. The Commission communication is accompanied by a report on the review of the Single Supervisory Mechanism (SSM).
MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group commented:
“The Commission is pouring old wine in new bottles. To stick to the full mutualisation of deposit guarantee schemes, the Commission jeopardises the objective of ensuring that deposits throughout Europe are protected at the same level. This is only possible through a European reinsurance. If the EU Commission is allowed to decide whether the conditions for the transition from reinsurance to co-insurance have been met, one lets the fox guard the henhouse. In its recent decisions on state aid to Italian banks, the Commission has repeatedly flouted the existing liability rules and allowed good tax money to be thrown behind bad money.
The Europeanisation of deposit protection is in principle the right way. A breakthrough in the deadlocked negotiations with the Council and Parliament can only be achieved if the Commission makes concrete proposals as to how the risks in the European banking system will be reduced. In mitigating risks, the Commission fails to take substantive measures. The Commission’s Action Plan does not include a requirement for banks to hold equity for European sovereigns, a stricter leverage ratio for high-risk large institutions or a limit for underestimating risks by internal bank models. This means that the unholy banks-sovereign nexus will persist for the time being.
In practice, the banking union has overburdened small banks with bureaucracy and regulatory requirements, without fostering financial stability. The EU Commission is silent on this. We will put forward strong proposals to reduce the bureaucracy of banking regulation.
In light of the high level of non-performing loans in the balance sheets of European banks, it is not enough for the Commission to clarify a legal situation that is already generally acknowledged: Bank supervisors have the right to demand higher provisions from institutions for existing bad loans. Only for 2018, the Commission announces to possibly put forward a legislative proposal to impose minimum capital requirements for new non-performing loans. Europe must no longer turn a blind eye to the risks of non-performing loans in bank balance sheets.“
Commission Communication on completing the Banking Union of 11 October 2017:
Commission Report on the Single Supervisory Mechanism of 11 October 2017:
Initial Commission proposal to establish a European Deposit Insurance Scheme (EDIS) of 24 November 2015:
Council conclusions on Action plan to tackle non-performing loans in Europe of 11 July 2017:
Report of the Financial Services Committee (FSC) Subgroup on Non-Performing Loans: