Building a strong financial sector
Financial Stability Review, 2017, issue 21, 77-85
Over the past decade, the European Union (EU) has built a new regulatory architecture for its financial system, with a single rulebook for all financial actors across the single market. At its core are stronger prudential requirements for banks, improved depositor protection rules and rules to manage the recovery or resolution of a failing financial institution should the need arise. The Banking Union is now up and running. These reforms have made Europe’s financial sector stronger. EU Banks are more stable and resilient. Overall, they are much better capitalised and ready to withstand economic shocks. In spite of all of this progress, there remain areas where our regulatory framework still needs to be strengthened and adjusted. Strengthened to bear down on remaining sources of systemic risk, and adjusted to make our legislation more growth-friendly to support investment in the wider economy while sticking to strong prudential standards. That is why the European Commission (EC) recently proposed a substantial EU-banking reform package. It builds on existing legislation to reduce risk further, but recognises the importance of maintaining a diverse banking sector in Europe. It would introduce into EU law international standards agreed by the Basel Committee and the Financial Stability Board. The package would also make adjustments to help support a competitive banking sector, drawing on the responses to the Call for Evidence, our public consultation on our post-crisis rules. All these actions are part of a balanced approach where risk sharing and risk reduction go hand in hand as the EC works to complete the Banking Union and Europe’s post crisis regulatory framework. They would make EU financial system stronger, and help deliver the stability and investment we need for growth in Europe.
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