ECB and Eurozone central banks: we need a single market with the same deposit guarantees
"The decisive step to strengthen European competitiveness is a true single banking market in which capital and liquidity can move across borders"
Resilience, more freedom of cross-border movement of capital and liquidity, less fragmented markets, a single European deposit guarantee, harmonised insolvency rules and simplified prudential requirements adopted through regulations and not directives, less complexity and more European integration through the removal of national regulatory barriers, more efficiency, more scale but also maintaining proportionality to preserve the capillarity of credit channels. This is what the Eurosystem central banks and the ECB propose to increase the competitiveness of the European banking system.
The resilience of Europe's banks is solid and well established, it is the achievement after the Great Financial Crisis and it is a fundamental prerequisite for competitiveness, but it is not enough on its own. The Banking Union must be completed and the Capital, Investment and Savings Union must be realised with a definitive roadmap.
In response to the European Commission's public consultation on the competitiveness of the sector in Europe, the European Central Bank today published two documents in a booklet of some 70 pages explaining in great detail what needs to be done to make European banks more competitive not only to support the economy in the euro area and in Europe by providing credit to businesses and households, but also to face competition from American giants.
The Eurosystem and the ECB therefore propose to complete the banking union with two pillars: the single European deposit guarantee and a more harmonised resolution mechanism to better manage liquidity in the system. "Capital and liquidity should flow freely within banking groups operating on a cross-border scale, with due safeguards," the document states. Once the European banking system can count on a single deposit guarantee and a single resolution and liquidity distribution procedure, without the need to 'hold' liquidity within national borders to deal with domestic crises, the economy will benefit.
The ECB calls for the creation of a single European jurisdiction to regulate the functioning and resilience of the European banking system, to increase competitiveness, incentivise cross-border operations, and encourage growth in size and scale to invest in modernisation and new technologies.
