NEWS Release - The European banking sector – growing together and growing apart - Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the LSE German Symposium, London, 2 March 2017
Two major events provide the frame for my speech today. Both of them took place in June – one in 2012, the other in 2016. One of them took place in Brussels, the other here in the United Kingdom. One of them made Europe grow together; the other made Europe grow apart.
On 28 June 2012 in Brussels, the leaders of the EU decided to take banking supervision to the European level and explore the idea of a fully fledged banking union. They took a decisive step towards a more united Europe. On 23 June 2016, the people of this country voted to leave the European Union. They took a decisive step away from a united Europe.
Both events – while very different in nature – will fundamentally change Europe. From the perspective of banks and their supervisors, both events have had and will have a huge impact. Let us take a closer look.
Growing together – European banking supervision
In June 2012, the euro area was a bad place to be – if you were an investor, a bank or a country that had lost the trust of the markets.
On 1 June that year, the Financial Times wrote “Spain suffers €100 billion exodus”. In the days thereafter, its front-page stories focused on ailing Portuguese and Spanish banks. In mid-June, its headline was “Fears rise over EU handling of debt crisis”.
By then the markets had driven the bond yields of some euro area countries to new heights. In other words, if the governments of those countries wanted to sell bonds to finance their debt they would have to pay much more. The media started speculating about a break-up of the euro area, as did some politicians.
Two weeks later though, something had obviously changed. On the last day of June, the Financial Times, on its front page, said “Markets rebound following EU deal”.
What had happened?
What had happened was that an EU summit had taken place in Brussels. There, the leaders of the EU agreed on a package of measures to stabilise the euro area. They decided on a €120 billion pact for growth; they decided that the rescue funds, the European Financial Stability Facility and the European Stability Mechanism, could directly recapitalise banks under certain conditions; and they pledged to use the instruments of the rescue funds flexibly and efficiently.
Another important element of the package was to create a “Single Supervisory Mechanism”, as it was called. Banking supervision was to be taken from the national to the European level.
Just two years later, European banking supervision became reality. In November 2014, the ECB began to supervise banks in the euro area. But how does the new European system work? And why is it better than the old national ones?
Some people think that the ECB has become the sole supervisor of all banks in the euro area. Well, it is true that European banking supervision has put an end to the patchwork of national supervision. But in essence, it is a common European undertaking.
In the euro area, we divide banks into two groups: large ones and small ones. And it is the 126 largest banking groups which are directly supervised by the ECB – they are called “significant institutions” and account for 82% of the euro area’s banking assets. For each of these large banks, we have set up a “Joint Supervisory Team”, or JST. These JSTs are headed by ECB staff and comprise supervisors from both the national authorities and the ECB. It is these teams that actually supervise the banks. They are at the heart of European banking supervision.
Directorate General Communications
Sonnemannstrasse 20, 60314 Frankfurt am Main, Germany
Tel.: +49 69 1344 7455, E-mail: media@ecb.europa.eu
Website: www.ecb.europa.eu
page source http://www.ecb.europa.eu/
