NEWS

In response to the financial and debt crisis in the euro area, MEPs want to guarantee the stability of the banking system and protect small savers.

The full European Parliament voted the 2017 annual report on the banking union on Thursday, March 1.

The EU has proposed building the banking union on the basis of three pillars: the supervision of the largest European banks by the European Central Bank, a single resolution regime for troubled banks and a deposit guarantee system.

The first two are already in force, but an agreement on the deposit system has not yet been reached.

Identify the risks to stability

Since the beginning of the financial crisis in 2008, more than 1,500 banks have closed in the EU. As supervisor of the largest banks in the EU, the European Central Bank (ECB) wants to ensure that the risks to financial stability are addressed as quickly as possible.

In June 2017, for example, the ECB already concluded that two Italian banks were failing or that they would probably fail, since they could not raise enough capital to cover the losses on their overdue loans.

"The ECB should improve the indicators that are being used to determine a possible deterioration in the financial situation of a bank," said Belgian MEP Sander Loones, of the group of European Conservatives and Reformists, author of the parliamentary report.

Uncollected loans totaled 1 trillion euros in July 2017. According to Loones, “supervisors must act faster.” They should also “be able to impose more stringent requirements upon identification of bad loans,” he added.

Isolate the bankrupt bank

When a bank goes bankrupt, it should not harm the economy in general. To avoid this, when it is detected that the entity is failing or is likely to fail, an orderly restructuring should be carried out. In the EU, the authority responsible for doing so is the Single Resolution Board.

"Priority must be given to address the overwhelming risks that still exist in certain national banking systems," Loones said. "And any agreement on the European Monetary Fund should aim to ensure that in such cases, in the end, the banks themselves pay the bill," he added.

Protection of small savers

In November 2015, the Commission proposed to establish a European deposit guarantee system for the euro area. The objective was to offer stronger and more equitable protection for small savers in case of banking problems.

Sander Loones: "Any common deposit guarantee system that is fair to all citizens, whether German or Italian, should incorporate this principle." The MEP believes that "first, there should be a risk reduction, and only then , there may be shared risk. ”“ I’m sure you can find that balance between responsibility and solidarity, ”he said.

Parliament has struggled to protect small savers since the beginning of the financial crisis. Now, all deposits of up to 100,000 euros are protected through national deposit guarantee schemes throughout the EU.