On the occasion of AFME’s inaugural Supervision & Integration conference which took place in Frankfurt on 23 May 2019, and in response to keynote speeches by Luis de Guindos, ECB Vice-President, and Dr Jörg Kukies, State Secretary of the German Ministry of Finance, Michael Cole-Fontayn, Chairman of AFME, said:
“The European banking market continues to suffer from fragmentation across national lines. While the system is safer and more resolvable than 10 years ago, Banking Union is not yet delivering its expected integration benefits and it is negatively affecting cross-border banking services and cross-border M&A, which remain limited in the euro area.”
“A continued lack of trust by Member States in each others’ facilitation of risk sharing also lies at the root of this. This is resulting in barriers to the free flow of capital and liquidity across the EU, preventing the diversification of risk and, perversely, running the risk of introducing systemic fragilities.”
“We need to unlock the full benefits of Banking Union. In order to do so, we must move forward with implementing the roadmap for a system-wide European Deposit Insurance Scheme (EDIS). This also requires the huge progress already achieved - through stronger prudential requirements and more effective supervision and resolution – to be acknowledged.”
“More also needs to be done to deepen capital markets in the EU by continuing to implement the Capital Markets Union (CMU) project. Capital markets are an important source of private risk sharing across borders, which contribute to smoothing economic shocks and reduce the need for public risk sharing. By focusing on building more integrated banking and capital markets in the EU, this will create a financing market, which will, in turn, power EU investment, innovation and growth in the longer term.”
In a new short paper, AFME makes further recommendations on how to achieve a truly integrated European financial market, or Financing Union. The paper is available online here.