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Can Europe's banking union ever be completed?

Publishing date
01 July 2024
Authors
Nicolas Véron
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The banking union started in 2014 with the transfer of prudential supervisory authority over euro-area banks from national bodies to the European Central Bank. Thus, was born the crisis-prevention component of the banking union project, known as European Banking Supervision or the Single Supervisory Mechanism. It has been a resounding success. As a result, there are currently no worries about the safety and soundness of euro-area banks, which is tremendously helpful at a time of elevated external threats and internal political uncertainties. This achievement demonstrates the European Union’s ability to get things done and is well worth celebrating.

Nearly everyone agrees that the other component of the banking union project, which is about crisis management and resolution, is incomplete and that there is a need for reform. The latest attempt to do so incrementally, known by the initials CMDI for crisis management and deposit insurance, appears to be failing with a recent compromise among finance ministers that the European Commission has described as even worse than the status quo. Instead, what is needed is a legislative package that shifts the entire banking crisis intervention framework to the European level, as was done with supervision.
Simultaneously, banks’ concentrated sovereign exposures should be disincentivised by regulation so that member states do not subvert the Europe-wide safety net to secure preferential funding from domestic lenders.

All this is achievable but will require more commitment from top leaders than they have provided in recent years. Europe’s interest is not to procrastinate, but rather to build on the banking union’s initial accomplishments and finish the work before the next systemic financial crisis erupts.

Nicolas Véron’s book, ‘Europe’s Banking union at ten: unfinished yet transformative’, offers a comprehensive exploration of the first ten years of the banking union. Read it here and rewatch the launch event here.

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About the authors

  • Nicolas Véron

    Nicolas Véron is a senior fellow at Bruegel and at the Peterson Institute for International Economics in Washington, DC. His research is mostly about financial systems and financial reform around the world, including global financial regulatory initiatives and current developments in the European Union. He was a cofounder of Bruegel starting in 2002, initially focusing on Bruegel’s design, operational start-up and development, then on policy research since 2006-07. He joined the Peterson Institute in 2009 and divides his time between the US and Europe.

    Véron has authored or co-authored numerous policy papers that include banking supervision and crisis management, financial reporting, the Eurozone policy framework, and economic nationalism. He has testified repeatedly in front of committees of the European Parliament, national parliaments in several EU member states, and US Congress. His publications also include Smoke & Mirrors, Inc.: Accounting for Capitalism, a book on accounting standards and practices (Cornell University Press, 2006), and several books in French.

    His prior experience includes working for Saint-Gobain in Berlin and Rothschilds in Paris in the early 1990s; economic aide to the Prefect in Lille (1995-97); corporate adviser to France’s Labour Minister (1997-2000); and chief financial officer of MultiMania / Lycos France, a publicly-listed online media company (2000-2002). From 2002 to 2009 he also operated an independent Paris-based financial consultancy.

    Véron is a board member of the derivatives arm (Global Trade Repository) of the Depositary Trust and Clearing Corporation (DTCC), a financial infrastructure company that operates globally on a not-for-profit basis. A French citizen born in 1971, he has a quantitative background as a graduate from Ecole Polytechnique (1992) and Ecole Nationale Supérieure des Mines de Paris (1995). He is trilingual in English, French and Spanish, and has fluent understanding of German and Italian.

    In September 2012, Bloomberg Markets included Véron in its second annual 50 Most Influential list with reference to his early advocacy of European banking union.

     

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