NEWS

MEPs approved a battery of measures on April 16 to prevent future financial crises and move towards the Eurozone Banking Union.

In the wake of the global financial crisis and the banking crisis and sovereign debt in Europe, the banking union was created in the eurozone. European leaders agreed that the European Central Bank (ECB) should supervise the most important providers of funds to create a single regulation and centralize the funds that can fight future banking crises.

Rescue of banks

To go further, Parliament approved new measures. The two reports on bank bailouts of Swedish MEP Gunnar Hökmar, of the European People's Party, seek that, in the event of another crisis, European countries ensure that their financial institutions can assume sufficient losses. The objective is to ensure that the impact on financial stability and on taxpayers is minimal.

"The new requirements will reduce risks in the financial system and, at the same time, we can ensure that banks can play an active role in financing investments and growth," explains Hökmar.

The reports stress the importance of having competent authorities that can intervene quickly and help any institution that is in a deteriorating financial situation.

Reduce the risks

Two other reports from the German Socialist MEPs Peter Simon point out that the banking union is necessary to create cross-border markets where customers can benefit from the positive effects of an integrated European banking system. According to the texts, it is currently more attractive for a eurozone bank to concentrate on its domestic market than to expand to another EU country.

"The diversity of the European banking sector is protected by reducing the bureaucratic burden of small, regional and risk-averse European banks that large compliance departments or external advisors can not afford," says Simon.

The German MEP also wants the European Systemic Risk Board of the ECB to play a more important role in coordinating with the EU countries on the measures to be taken when risks in the financial sector are systemic. The financial crisis in Europe showed that policies to prevent and address imbalances in institutions were inadequate.

"The Parliament managed to ensure that banks will have to assess the risks related to the environment and social issues in the future and take measures to address those risks adequately," he explains. The MEP adds that these rules will create a more sustainable financial sector and will enshrine sustainability in EU banking.

Next steps

The EU institutions will continue to work on what the European deposit guarantee system should look like to complete the Banking Union.