While the initial ambition was to create a unified area where European banks could operate efficiently, we are still struggling with intra-European borders. The European banking sector remains far too fragmented. In 2019, the market share of the top five US banks was 43% [of domestic consolidated assets], compared with only 23% for the top five in Europe. There are still too many roadblocks to cross-border restructuring: geographical ring-fencing practices prevent groups from managing liquidity and capital efficiently on a consolidated basis. As a result, fewer than ten cross-border M&A deals have been signed since 2014, compared with 180 domestic deals over the same period, a historic low: at present, Banking Union has meant that our banks are actually not more Pan-European. This paradox is intolerable. Why it remains crucial. The creation of the Banking Union itself was a direct response to the sovereign debt crisis in Europe and its impact on the bank-sovereign nexus in a context of fragmented supervision. Beyond the need to mitigate any future crisis, the achievement of the Banking Union remains of the utmost importance, for both micro and macro reasons. At the micro level, moving further towards a true single banking market through cross-border restructuring is a matter of strategic autonomy. Genuine Pan-European banking groups could operate more effectively, raise their profitability thanks to scale effects and better face up to foreign competition, especially from the United States.
First, we have spent too much time and energy on protracted discussions on prerequisites and pre-conditions, such as a full EDIS, itself pre-conditioned by sovereign de-risking. Second, we should not focus on the creation of new instruments and their financing, but start by making existing ones work better. Third, in order to move beyond political divisions, we need to abandon the sequential approach in which the issues are discussed one after another, so that the smallest obstacle can bring the whole process grinding to a halt. I would like to call for simultaneous, parallel movements on several fronts and to broaden the scope of possible action. While welcoming the ambition of the Eurogroup’s “package” and its President, such a pragmatic method of small and parallel steps could help to move forward again. None of these steps is sufficient, but each of them taken separately would be welcome. Or if you prefer a restaurant analogy, call this proposal “à la carte” rather than a “set menu”… bearing in mind that at the end our lunch must be just as substantial and significant. II. Four pathways towards reigniting the Banking Union Building on this approach, I would like to share with you four possible and broader pathways towards a stronger Banking Union. 1. Moving beyond home/host issues. On this topic, I would like to start by issuing a wake-up call on the effective implementation of cross-border liquidity waivers within the union, as prescribed by the European legislation. They remain far too limited in practice.