The regulatory changes introduced in the wake of the crisis have been essential to improving banking stability. Their final implementation this year will be key to strengthening it. In the future, consolidating what has been achieved will depend on improving banks’ results, always on the premise of being more efficient and continuing to finance sustainable economic growth. There are other challenges and obligations, although in this case for the authorities. The normalization of monetary policy would top the list of challenges, and completing the banking union would be the first obligation.
The ECB appears to be opting to normalize monetary policy gradually. It cannot be otherwise, given low inflation expectations despite stronger-than-expected growth. Bank financing has been key to this economic improvement. It is also important for European authorities to assess the risks to financial stability arising from wholesale markets and shadow banking. In the latter case, proportionate regulation may be necessary, focused on the activity rather than so much on who carries it out.
The authorities must have a clear strategy that includes a timeline for completing the banking union. The acid test to validate it will be to have European credit institutions, rather than national institutions with a European presence as is currently the case. Cross-border transactions can help the sector’s stability by diversifying risks and improving efficiency. Under the current framework of single supervision and resolution, formally completing the banking union requires a common deposit guarantee in Europe (EDIS). This would provide confidence and stability to savers, as it would limit the risk of contagion at national level and strengthen the banking union.
José Luis Martínez Campuzano, AEB Spokesperson
