Europe has made significant progress in building a true Banking Union. Supervision is common, and a single mechanism has been established to resolve potential problems of institutions. However, there is still a long way to go. Without the establishment of a common deposit guarantee scheme (EDIS-European Deposit Insurance Scheme) that strengthens depositor confidence and stability, and decouples banking risk from sovereign risk, the Banking Union will not be complete.
Among European authorities, there are two opposing positions on EDIS. Some advocate for reducing the risks inherited from the past that persist on the balance sheets of some banks before advancing banking integration. For others, advancing does not mean mutualizing risk. Establishing a common guarantee for European depositors would increase the credibility of the Banking Union and would be a significant step toward the ultimate goal of creating a capital market without borders.
The creation of European supranational banks will be the litmus test to validate this currently incomplete Banking Union. Until now, mergers between institutions have largely focused on a national scale, to cut costs and improve efficiency. On an international scale, they would make sense to increase revenues by entering new markets or business lines and to diversify risks.
However, beyond the lack of an EDIS or the lack of harmonization in national regulation, underlying issues remain, such as the profitability potential in an exceptional scenario of expansive monetary policy and the enormous investment effort required by the financial innovation that clients demand. Added to this is the need to address the costs of strict regulation. The Banking Union is there. But to achieve it, all necessary steps must be taken.
José Luis Martínez Campuzano, spokesperson for the Spanish Banking Association
