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The European banking sector - towards a single jurisdiction

Speech by Danièle Nouy, Chair of the Supervisory Board of the ECB, ACPR Conference, "Financial supervision and the role of national authorities in Europe", Paris, 18 September 2018

The banking union is helping Europe to have safer and sounder banks that are able to support the European economy. We have made good progress, but we are not done yet.

Moving towards a single jurisdiction…

In particular, the banking union and the SSM must further progress to become a single jurisdiction. The key word in banking union is “union” and that’s where I think we can do better. This requires three things: harmonisation, cooperation and solidarity.

First, we need to turn the rulebook for banks into a truly European one. Options and national discretions should be fully harmonised at the euro area level. Moreover, we need more regulations and fewer directives, as directives need to be transposed into national laws, leading to different outcomes across countries.

Second, countries still tend to put fences around their banking sectors. Such ring-fencing was deemed reasonable during the crisis, but times have changed! We now have the banking union and there are more benefits to be reaped from moving towards a single jurisdiction and a truly European banking sector.

So, in my view, we should pull down these fences. In particular, supervisors should be able to grant cross-border waivers for solvency, liquidity and large exposures. When it makes sense of course, and with supervisory conditions where appropriate.

This would support the development of a European banking sector that is better able to support the European economy.

Third, there is the idea of solidarity, as embodied by a European deposit insurance scheme, or EDIS. I know that solidarity is a thorny issue for some, but we cannot do without it. Europe needs EDIS and, given that the SSM has reduced risks considerably, now is the right time for us to set it up.

In the end, we have to strike the right balance between sharing some of each other’s risks and enjoying the benefits of being in a single jurisdiction, of which there are many.

… will help to address current challenges

Such a single jurisdiction will make it easier to address some of the challenges facing the European banks and banking systems. Let’s look at some of these challenges.

Banks lack profits, with a number of them not earning the cost of their capital. A larger market, in which banks are able to consolidate across borders, would help to get the banking sector back in shape. It would also put European banks in a better position to serve large European companies and to compete successfully with other global financial actors.

Might this European consolidation result in some banks becoming too big to fail? Not necessarily. They might be too big to fail for a single country, but not for the entire euro area.

Another challenge: Brexit is about to happen. Banking union makes it much easier to welcome safe and efficient banks that want to relocate – not only banks from the United Kingdom, but also from other countries, as in the case of Nordea, which is moving from Sweden to Finland. And this is not just true for single banks; it is also true for entire banking systems, such as that of Bulgaria, that might join the SSM through close cooperation.

To conclude: to meet these expectations, the SSM needs to be an agile supervisory authority that cooperates perfectly with the other European institutions and is respected by its global peers. To this end, there are indeed things which we could do better:

  • we need to improve the way we take decisions – real delegation of powers, embedded in the SSM framework, would be a huge help;
  • we need to further simplify processes – not least to avoid duplication of work between national supervisors and the ECB;
  • we need to become fully aware that, in the euro area, bank supervisors now have a European mandate, regardless of whether they work in Paris, Frankfurt, Brussels, or Madrid;
  • and finally, we need to foster the exchange of information and experiences between the national supervisors and the ECB.

Thank you for your attention.


European Central Bank

Directorate General Communications

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