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Today: Online seminar ‘The Future of the Banking Union’

The online seminar ‘The Future of the Banking Union’, with members from the DG Financial Stability, Financial Services and Capital Markets Union at the European Commission took place on 10 November.

The aim of this online semiar was to provide an overview of the way the Banking Union is evolving and the ways it should develop in the coming year to be better equipped to cope with future risks. As presented in the recently published European Commission Communication on “Completing the Banking Union”, the seminar described and discussed the measures to be adopted to complete the Banking Union and to make the European banking sector more resilient.

The seminar was with a brief introduction by Mario Nava, Director for Financial System Surveillance and Crisis Management, on the broader context in which last October the Commission issued a communication on completing the Banking Union, setting out an ambitious but realistic path in order to achieve political agreement and put in place the missing pieces.

After this introduction, the speakers then focused on the three main aspects addressed by the Commission Communication. First, Policy officer Giulia Bertezzolo explained the most recent plan for setting up the European Deposit Guarantee Scheme (EDIS) and to introduce a common fiscal backstop, which would reinforce the overall credibility of the bank resolution framework within the Banking Union. Participants were asked in real time what would are, in their opinion, the most important instruments to ensure that EDIS would be effective. According to the majority (57%), both liquidity coverage and loss coverage are equally important.

The presentation then continued with an outline by Economist Markus Aspegren who explained the plans at European level aiming to reduce NPLs that hinder banks from providing new credit to the real economy, and limit economic growth. In his talk, he touched upon the concrete actions announced to address NPLs that will be part of the package planned for spring 2018. Asked which policy area is the most important in order to tackle NPLs effectively, 44% of the participants answered ‘supervisory policies’, 32% answered ‘structural reforms’ and 22% ‘ development of a secondary market for NPLs’.

Finally, the presentation was closed by Davide Lombardo, Senior Economist with the EU/Euro Area Financial Sector Unit, who discussed the basic concepts of Sovereign Bond-Backed Securities (SBBS), addressing both the potential advantages and the challenges. Engaged in a poll question, 44% of the participants stated that the most important instrument to break the bank-sovereign loop would be EDIS and the completion of the Banking Union, while for 35% of them it would be the creation of a safe asset ensuring diversification of banks’ sovereign exposure.