2023-04-18 22:14:24
Further unification of the banking system in the EU, after a long pause, has again continued: the European Commission (EC) has formulated amendments to the European Directives that will allow creating the missing “third link” of a single system – the European deposit insurance system, as well as common rules for supporting banks. The February collapse of Credit Suisse (CS) probably resisted the consolidation of the system – the risks of an uncoordinated response to new banking problems in Europe are significantly higher than before.
The European Commission yesterday officially published draft amendments to three current European directives regulating the actions of national structures in the EU part of the euro area and in a number of EU countries outside it, which allow for the creation of a single bank deposit insurance scheme (EDIS) and harmonization of rules in a short time the work of national financial and banking regulators in relation to banks. In general, a draft decision on this issue was published back in May 2021, the last time it was publicly discussed at a meeting of the Supervisory Board of the European Central Bank (ECB) in May 2022, and then no decision was made. It is likely that the implementation of “bank fragility” in February 2023 during the collapse of SVB in the USA and CS (the sale of the Swiss group to its competitors, UBS, also affects the EU banking sector in many respects) moved the process off the ground – the ECB and the European regulatory council Single Resolution Board ( SRB) supported the decision yesterday, announcing the completion of (year-long) consultations on the matter. The timing of the creation of EDIS is not called, theoretically, nothing prevents the creation of the “third pillar” of the euro area from 2024.
Recall that the banking system of the euro area and the EU operates in a rather unusual regulatory environment. The euro area has a single issuing bank, the ECB, but national central banks, and in some cases separate regulatory structures after the creation of the ECB, retained some of the functions of national financial supervision: they issue banking licenses in Europe, although the ECB has supervisory powers in relation to 111 banking institutions in the euro area and macroprudential supervision (since November 2014), there are also three European supervisory agencies for the financial market (EBA for banking, EIOPA for insurance and pension funds, ESMA for the securities market) and advice for systemic risks (ESRB) and Restoring Banking Stability (SRB).
SRB, in fact, presented the EDIS project in 2021 – in the ideology of European regulators, it is he who is the missing “third pillar” of a full-fledged European banking union. In other words, if issuance activity in the euro area (and in Bulgaria, as well as in Croatia, which was previously not part of the euro area, but was subject to common banking rules for the EU) is unified, and banking and financial supervision are consolidated to varying degrees by common rules of action, then there are no uniform rules for deposit insurance and crisis management in banks – they are the prerogative of national banks.
EDIS, in the now agreed SRB proposals, adjusted slightly at the request of the ECB, will have access to “external funds” earmarked within the euro area (and in non-euro area Bulgaria) to run deposit insurance and crisis management systems. All European structures are mainly interested not in competition between jurisdictions at the level of insurance guarantees for deposits (they are more or less harmonized), but in a variety of rules under which “rescue” operations are carried out in relation to banks and procedures for reorganizing and liquidating bad banks, which in different EU countries differ significantly.
Currently, the resources that can theoretically be directed (outside the ECB, in this case responsible only for providing emergency liquidity) amount to more than €66 billion: since 2016, 21 member countries of the emerging European Banking Union have invested in it 1% of the amount of funds covered by deposit insurance systems at the national level, it was assumed that the full implementation of the SRF fund would not occur before 2023. Since 2015, SRF can be replenished by member countries of the union with credit lines. Since 2017, the amount of total funds in the SRF (they can be used for insurance transactions and the buyout of banks in any country of the banking union), which at the start was 40%, has been increased to 60%, in 2024 all the fund’s funds should become common and mutually available .
Back in 2021, the SRB, thus becoming a significant institution of the EU common financial market, estimated the time needed to create a full-fledged EDIS and complete the creation of a banking union at five years – during this period, separate national bank deposit insurance systems should be eliminated, as there is no need. But, probably, they will not wait until 2026 – EDIS as such has a chance to start working in 2025, but theoretically this is possible from 2024. Note that Bulgaria is the only member of the union outside the euro area, but from January 2024 the country intends to abandon the national currency. Meanwhile, the procedure for joining the ECB-EBA-EDIS system of other EU countries with national currencies – Poland, Romania, the Czech Republic, Hungary, as well as Sweden and Denmark – has not yet been described in the EC documents: a hypothetical banking crisis in Europe, the likelihood of which the events of recent months is only slightly increased, they will have to resolve it themselves anyway.
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