2023-04-18 17:43:43
With the forced march of key rate hikes by the Federal Reserve in the United States and the European Central Bank since 2022, the issue of banking stability has come back to the fore. The bankruptcy of the Silicon Valley Bank on March 10, as well as the takeover of the bank Crédit Suisse by UBS on March 19, forced the Commission to put the work back on the job.
Fifteen years following the collapse of Lehman Brothers and the financial crisis, Europe has still not completed its Banking Union. From 2013, it set up a single banking supervisory mechanism, then, a year later, a single banking crisis resolution mechanism, which applies to large European banks, known as systemic because they might create a financial crisis in the event of bankruptcy. It has also created a single resolution fund (SRF), endowed by these same banks with some 80 billion euros by 2024. This sum should make it possible to compensate depositors if the banks’ shareholders do not have the means sufficient, and thus avoid having to resort to public funds.
From now on, the concern concerns smaller banking establishments. Today in Europe, in the event of bank failures as was the case in Veneto in 2017, financial institutions are treated as ordinary companies through traditional bankruptcy law, and can cause significant financial disruption and economic at regional level in the event of bankruptcy. Until now, these companies are most often supported by local authorities when they encounter difficulties. In Italy, the State had reinjected several billion euros into Veneto Banca and Popolare di Vicenza, to the chagrin of Brussels.
“Avoiding a ripple effect”
“Our new proposals ensure that the failure of any bank – regardless of size or business model – can be managed in an orderly and consistent manner to avoid a ripple effect in the banking system. At the same time, they aim to preserve financial stability, taxpayers’ money and depositor confidence.”assured, Tuesday, April 18, Valdis Dombrovskis, the Vice-President of the Commission.
Faced with a banking crisis, Brussels is proposing to integrate all banks into the single resolution regime for large banks. In the event of default, its customers will be able to benefit from both existing national guarantee funds – in France, the Deposit Guarantee and Resolution Fund – and from the single regulatory fund, supplemented by large establishments.
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