The discussions on the completion of the Banking Union are already at a standstill; we need, at least, to fully harness the existing measures! Supervisors must allow the effective implementation of liquidity waivers provided for in the level 1 text. In this regard, the fact that the SSM published guidance mentions the need, in a first phase, to comply with 75% of the liquidity requirements at the individual level in order to grant a cross-border waiver creates an additional obstacle. And we shall not give up on the extension of intra-group waivers to MREL and capital requirements. Let me add three possible ways of making progress: we could first think of a system of workable guarantees between the parent company and its subsidiaries. Backed by the common supervisor, they should provide enough reassurance to host countries, so that they could support waivers in local subsidiaries. Another step would be to ensure preferential treatment for intragroup exposures within the Banking Union. There should be no cases where there is a difference between the treatment of domestic and cross-border intra-group exposures, be it for liquidity or capital requirements. To go further, in parallel with the aforementioned options, we also need to explore the possibility of relying more extensively on the branchification of subsidiaries located in other Banking Union countries. This was the core of Andrea Enria’s statement yesterday. The branch would then abide fully by the home country’s prudential rules. The example of Nordea demonstrates the feasibility of such an option.
Before he does so, I would like to share with you my assessment of economic conditions on the mainland and in Puerto Rico. As always, what I have to say reflects my own views and not necessarily those of the Federal Open Market Committee (FOMC) or the Federal Reserve System. National economic conditions The mainland U.S. economy has continued to slowly recover from the after-effects of the housing boom and bust and the financial crisis. But the recovery has been disappointing. Despite a monetary policy that has been extraordinarily accommodative by historical standards, the economy has grown only about 2 percent over the past year. After a brighter start to the year, economic momentum has slowed in the last few months. (This may partly be a payback for the mild winter, which brought forward some spending.) Employment growth remains positive, but has slowed considerably of late as the economy has lost forward momentum, and the unemployment rate remains elevated. The headwinds retarding recovery are well known. Many consumers have been deleveraging in response to the large losses in wealth generated mainly by the collapse in home prices. The supply of credit – particularly mortgage credit – to many families remains constrained, limiting the degree to which many households can fully benefit from low interest rates. Although there have been some positive signs in the housing market recently, housing activity nevertheless remains at very low levels.