High costs are being imposed on banks, especially those that have to comply with more than one rulebook and interact with more than one supervisor because of their cross-border activity. Furthermore, regulatory competition tends to reduce prudential standards and make the whole system more fragile.
In the view of the ECB’s Governing Council, a new fiscal compact comprising a fundamental restatement of the fiscal rules, together with the fiscal commitments that euro area governments have made, is the most important precondition for restoring the normal functioning of financial markets. To accompany fiscal consolidation, bold and ambitious structural reforms are essential.