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Níl an t-ábhar seo ar fáil i nGaeilge.

Banking union – challenges ahead

Introductory remarks by Andrea Enria, Chair of the Supervisory Board of the ECB, session on “Banking Union – Challenges Ahead”, European Parliamentary Week, Brussels, 18 February 2019


Dear Chairmen,

Honourable Members of Parliament,

I am delighted to be here at the Interparliamentary Committee Meeting to discuss the challenges for our banking union with members from both the European and national parliaments. While the ECB now directly supervises the biggest banks in the euro area, the banking union’s effectiveness depends on the smooth and close interaction between European and national authorities and between European and national legislators.

In my brief remarks, I will first discuss the key risks in the euro area banking sector. I will then single out a few areas in which work remains to be done to strengthen our banking union.

Key risks in the euro area banking sector

The recent economic expansion in the euro area has helped to strengthen the resilience of euro area banks. Banks now have much stronger capital and liquidity positions than they did before the crisis. The quality of banks’ assets has also improved, but the legacy of non-performing loans (NPLs) is still weighing on a number of banks; it adversely affects their profitability and their ability to grant new loans. The supervisory framework for NPLs developed by the ECB promotes the active management of NPL portfolios and recommends targeted action to deal with the stock of legacy assets and prevent the future build-up of new NPLs.

Weak bank profitability and low market valuations are a source of concern. Action is required to enhance cost efficiency and improve the long-term viability of business models.

The risks to the environment in which euro area banks operate are currently tilted to the downside, amid geopolitical uncertainties, financial market volatility and tightening financing conditions. Banks also face challenges related to their IT systems and cybersecurity as digitalisation is proceeding.

Banks are progressing in their planning for Brexit. The majority of Brexit-related authorisation procedures for banks relocating to the euro area have been completed or will be completed in the coming weeks. With regard to euro area-based banking groups with operations in the United Kingdom, the current focus is on risk management, trading capabilities and the future activities of branches in the United Kingdom. The ECB expects banks to have addressed any remaining concerns by March this year.

Remaining steps towards completing banking union

While we have come a long way since the establishment of the Single Supervisory Mechanism (SSM) four years ago, the banking union is far from complete and the banking sector remains largely segmented along national lines. We need help from you as legislators at the European and national levels to improve this situation.

We welcome the progress reached on the risk reduction agenda, including all efforts to reach a final agreement on the banking package. This will mark an important milestone towards the completion of the banking union and should help to pave the way towards a European deposit insurance scheme. There are, however, still obstacles to the integrated management of bank capital and liquidity within cross-border groups operating in the banking union. This is also hindering the prospects for cross-border mergers, which are necessary to reduce the excess capacity we still have in the system.

The smooth operation of the SSM also requires a higher degree of harmonisation, as the application of different rules and processes in each Member State unduly complicates the conduct of supervisory tasks and jeopardises the level playing field. This is the case, for instance, for fit and proper assessments.

With respect to investment firms, reaching an agreement before the end of this parliamentary term in June is crucial to bring the supervision of systemic, “bank-like” investment firms under the umbrella of the SSM. This is both important and urgent, given the expected relocation of investment firms to the euro area in the context of Brexit.

We welcome the Euro Summit agreement reached last December on the ESM common backstop to the Single Resolution Fund and in particular the recognition that it can be used to provide both solvency and liquidity support. We are still missing a common framework for bank liquidation, enabling a smooth managed exit of defaulted banks from the market, as is the case in the United States, for instance.

Finally, while direct anti-money laundering supervision does not fall within the remit of the ECB, recent cases have shown that a more European approach to combating money laundering is needed to ensure the safety and soundness of banks in the banking union.


The banking union has been successful in promoting a more resilient banking sector. But it is still failing to deliver an integrated domestic market for banking business. Rather than smoothing idiosyncratic shocks to individual Member States, the banking sector still operates as a shock amplifier. A financial integration agenda for the banking union should rank high among the priorities of legislators and authorities for the next five years.

Thank you for your attention.


European Central Bank

Directorate General Communications

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