The plan to protect European banks is gaining strength again

Brussels- Recent turmoil in entities in the United States and Switzerland has brought leaders European Union to give a boost to his plans to strengthen bank failure regulations, which is keeping the creation of a European deposit guarantee fund on hold, despite the fact that the sector in the bloc is in good shape.

“The eurozone banking sector is strong because we applied internationally agreed regulatory reforms to all of them after the global financial crisis. Recent events remind us how important it was to continuously improve these standards,” the statement said. President of the Central Bank of Europe, Christine Lagardeleaders, according to European sources.

The declaration approved by the leaders specifically calls for the implementation of the plan agreed in June 2022 for progress in the banking union, which called for strengthening the crisis management framework and the use of national deposit guarantee funds, but abandoned the project of having Common Deposit Guarantee System (EDIS).

This system is a key pillar to complete the European banking union created as a result of the last financial crisis, which established a single supervisor for large banks on the continent (integrated into the ECB) and the rehabilitation committee for the management of liquidations of bankrupt entities.

However, the proposal has been stalled for almost a decade due to the refusal of some countries, with Germany leading the wayjointly respond to the risks of the banks of any member of the eurozone, despite the fact that Brussels has on two occasions softened the proposal to try to move it forward, suggesting progress in stages and making it conditional on reducing the entity’s risks.

In recent years, Finance ministers tried to negotiate EDIS in parallel along with risk-reducing measures such as controlling banks’ exposure to sovereign debt, but the difficulties were always such that the Eurogroup’s role was not so much to approve EDIS as to “keep it on life support,” as a senior European civil servant reiterated.

Finally, after ascertaining the blockage of these two initiatives, In 2022, the ministers agreed to advance only in those areas where there is consensus: a directive to improve the crisis management framework and strengthen national guarantee deposits.

This minimum plan is what leaders now want to promote, despite the fact that countries like Spain have argued that the current context reinforces the importance of creating this European guarantee system.

He President of the Eurogroup Paschal Donohoeupon arriving at the meeting, he conveyed the general message of the appointment when he emphasized in press statements that the European banking system is strong thanks to the “political decisions” that were made as a result of the financial crisis in 2008, but he asked them to “not be complacent” and to continue with the strengthening of the financial regulation of the community.

The Irishman called not only for moving forward with new proposals on the crisis management framework, which the European Commission must present “soon”, but also for the implementation of already agreed agreements, such as ratification of the Treaty on the European Stability Mechanism which would allow it to provide an additional line of 68,000 million euros from 2024 to the Single Resolution Fund, which already has more than 66,000 million to help finance bank resolutions when there is no alternative.

ANDItaly itself has been blocking the procedure for monthswhere ratification is politically very sensitive.

“We learned lessons from last time and I think we are more resilient now, for example compared to the USA, but there are things we can do,” he summarized Estonian Prime Minister Kaja Kallas.

He Belgian Prime Minister Alexander De Croohe noted that European legislation was “very different” from that of the United States, but called for the completion of outstanding aspects of both the Banking Union and the Capital Markets Union.

For his part, he Dutch Prime Minister Mark Ruttehe coincided with highlighting the need for progress in banking regulation and defended work in this regard since 2008 against “criticism from companies and banks that they are probably too strict”.