A successful Banking Union needs to be a well-crafted system that rebuilds trust in the safety and soundness of the EU banking sector.
As a foundation for this, ESBG supports the adoption of the Deposit Guarantee Schemes and the Bank Recovery and Resolution Directives, acknowledging in particular the already existing mechanisms, such as Institutional Protection Schemes, which have aligned purposes.
Updated: January 2017
Single Supervisory Mechanism (SSM)
ESBG recognises the importance of an SSM as a means to achieve coherent and strengthened supervision fitting the Eurozone. Nevertheless, the ESBG is of the opinion that clear mandates should apply to the system of supervision and that the duties and responsibilities of the ECB, EBA and national competent authorities should be assigned in a proportionate and comprehensive manner. Provided this framework is well-defined and implemented, the ESBG supports the role of the ECB as a legal entity responsible for the SSM and seconds the possibility offered to the ECB to take responsibility of any bank if the situation so requires. In addition, national competent authorities should have a significant role to play due to their expertise and proximity to the institutions operating in that Member State.
Single Resolution Mechanism (SRM)
ESBG focused its attention on the respect of proportionality principle. Moreover its adherence to some private national mechanisms, such as Institutional Protection Schemes, should be taken into account in order to properly assess the risk conveyed by an institution.
Deposit Guarantee Schemes (DGS)
Up to date the Commission has not launched a proposal for a common European Deposit Guarantee Scheme including a single European Deposit Guarantee Fund. ESBG welcomes that the Recast of the Directive on DGS has finally been adopted in spring 2014 providing a harmonised framework of protection for deposits of up to €100,000 in the European Union. Currently, deposit guarantee funds still remain at national level with a reasonable target level of 0.8% of covered deposits and the possibility of an adjustment to 0.5% in certain cases. Meanwhile, the Commission has also launched a proposal for a common European Deposit Guarantee Scheme including a single European Deposit Guarantee Fund.
Prior to the Eurogroup and the European Council meeting held on 28-29 June 2012, European Council President Herman Van Rompuy, in collaboration with the presidents of the European Commission, the Eurogroup and the ECB, prepared a report entitled "Towards a genuine economic and monetary union", which stated the conditions to be put in place in order to form a "Banking Union". The rationale behind this framework is to break the vicious circle between the sovereign debt crisis and the banking crisis by rebuilding trust; for this purpose, a European banking supervisor should be set up and should have funds available to comply with the function of a common supervisor.
Such an integrated financial framework was initially contemplated as follows
- the setting up of a common European banking supervisor, whose role would be played by the ECB within a Single Supervisory Mechanism (SSM)
- a European Single Resolution Mechanism (SRM)
- a European deposit insurance scheme (DGS), introducing a European dimension to national deposit guarantee schemes for banks overseen by the European supervisor.