Completing the Banking Union: Graham Bishop speaks at European Liberal Forum webinar
The Banking Union is an essential pillar of the EU’s Economic
and Monetary Union. In recent times it has become clear that it is a
strength of the entire European economic system, vital for mitigating
the impact of negative contingencies of the economic cycle.
The conclusions of
the European Council on the possibility for the Commission to receive
empowerment “to borrow funds on behalf of the Union on the capital
markets” are one more step into the direction of a more integrated
European financial system. However, the Banking Union is still not completed and not as resilient and weather-proof as one would wish.
Recently, the European Liberal Forum published a Discussion Paper which
addresses technical questions concerning the state of the art of the
European Banking Union system, examining the various proposals to
counter the crisis and the possible use of complex analysis from the
world of artificial intelligence to prevent crisis at micro-level.
Graham Bishop's contribution focussed on these areas:
markets are signalling that the EU banking system is in serious trouble.
The ECB can provide
liquidity but the loan losses may erode capital significantly – a different
The Next Generation
project can provide “safe assets” for banks to reduce their dependence on their
home sovereign – the much-discussed Doom Loop
But it will not be
big enough, or have the appropriate maturity structure, to remove all the risks
However, the change
in EU governance from consensus to QMV may also eventually herald the
completion of the banking union with EDIS.