The European Central Bank has published proposals to make euro area banks and the financial infrastructure they use better able to support the economy, calling for fewer barriers to cross-border banking and simpler EU rules.
The proposals — endorsed by all euro area central banks — form the ECB Governing Council’s response to a European Commission consultation on the competitiveness of the EU banking sector, the ECB informed on Tuesday.
A key theme is that the euro area should work more like a single jurisdiction for banking, with capital and liquidity able to move more freely within the same banking group across borders.
The ECB said barriers still hold back cross-border banking integration and scale, adding that unnecessary complexity and fragmentation between countries are weighing on competitiveness.
Push for banking union and simpler rules
The Governing Council called for “synchronised progress” on the main parts of the banking union, including steps towards a European Deposit Insurance Scheme — a plan to protect bank deposits across the EU on the same basis — with a clear timetable, the ECB said.
Euro area central banks are “united” in calling for a “truly single banking market where capital and liquidity can move across borders and all deposits are protected equally”, ECB Vice-President Luis de Guindos stated.
Regulatory simplification should cut undue complexity without weakening banks’ ability to withstand shocks, the ECB said, adding that reforms after the global financial crisis improved resilience without restricting banks’ ability to finance the economy.
Capital requirements for euro area banks are broadly comparable to those in other jurisdictions and in line with international standards, and there is “no evidence” they have hampered banks’ efficiency or lending capacity.
The ECB said it wants changes to EU banking rules including shifting rules from directives to directly applicable regulations, merging the current five “macroprudential buffers” — extra capital cushions intended to protect the financial system — into two, increasing proportionality for small banks, and streamlining reporting.
