Second, sound financial, accounting, loss provisioning and tax systems need to be set up to create a favorable institutional environment to enable the financial institutions to develop soundly and provide good financial services. Third, the government should remove unwarranted controls and establish effective incentives to encourage the financial institutions to improve their services and contribute to better allocation of resources.
But while we have made significant progress, the banking union is not yet complete. We still need a backstop for the Single Resolution Fund (SRF) to underpin its credibility, and a common fully mutualised European deposit insurance scheme – EDIS. While discussions are progressing on the SRF backstop, the negotiations on EDIS have stalled.