EU’s top bankers clamour for united capital markets
Europe’s most senior bankers have pleaded in concert with the EU to speed up its banking and capital markets union projects, warning that the region risks falling further behind the US and China in the global economy.
“If you really want to have a competitive edge” versus the Americas and Asia, “we must complete the banking union,” Deutsche Bank CEO Christian Sewing said on Tuesday at the Bloomberg European Capital Markets Forum in Milan.
“We need one single standard,” he said.
A decade after the global financial crisis and a sovereigndebt crisis that almost tore the single currency apart, work on a single banking framework remains incomplete. That is delaying a necessary process of consolidation that would create European banks large enough to compete globally.
The EU may also be running out of time to complete the projects, as a wave of nationalist and populist opinion in member states makes large-scale integration harder to deliver.
“The largest exporting economy and the largest economy in Europe does not have banks today able to support their SMEs [small and medium-sized enterprises],” UniCredit CEO Jean Pierre Mustier said at an event in Paris, adding that the problem is not limited to Germany.
“Europe will succeed if we have bigger banks which will be more efficient, which will deliver better services to their SMEs and which will support growth.”
SMEs are the backbone of most economies.
Stumbling blocks to completing the union include a common deposit insurance, which countries such as Germany fear would leave them on the hook to underwrite weaker lenders in southern economies.
Officials also fear that banks in the bloc are still hiding potential time bombs in their balance sheets in the form of complex structured assets.
Banks need to speed up disposal of their bad loans and shrink their hard-to-value investments if they want to feel comfortable enough to merge, European Central Bank president Mario Draghi said at the same event as Mustier.
For much of the region, especially those parts scarred by the euro debt crisis between 2010 and 2013, deposit insurance remains the most pressing issue, and one that is now overdue.
“Risk reduction has gone all the way, and now the moment for introducing the risk-sharing mechanism is certainly right,” UniCredit chair Fabrizio Saccomanni said at Bloomberg’s forum in Milan.