That said, we still have not reaped the full benefits of more harmonised regulation and more integrated supervision, and we need to make sure that we consolidate and build on the progress already made. From a regulatory perspective, aside from transposing the Basel Accords into EU law (the CRR 2-CRD 5 package introducing new prudential requirements such as the NSFR and the leverage ratio), we need to advance further on the application of uniform regulations. We also need to pull down all the barriers to euro area banking integration by removing all regulatory obstacles to cross-border transactions – in terms of solvency, liquidity or large exposures – and by adjusting the calculation of capital requirements for systemic institutions. In short, we need to recognise that the euro area must be treated as a single jurisdiction where a single rulebook is enforced. In terms of supervision, the priority now is to bring the largest investment firms within the scope of the SSM. We also need to increase cooperation between national authorities for the oversight of cross-border institutions (home-host relations), and for anti-money laundering and countering the financing of terrorism – the importance of which is recurrently driven home by the news. To complete the Banking Union, we also need to render its second pillar, the Single Resolution Mechanism or SRM, fully operational. The euro area has had a common resolution mechanism in place for banking crises since 2015.
Like the SSM, the SRM is based on a common regulatory framework (the BRRD Directive and the SRM regulation), and is structured around a Single Resolution Board and joint resolution teams. Although the SSM and the SRM have both been successful in managing the first bank liquidations or resolutions (i.e. those concerning the Veneto banks and Banco Popular), the second pillar still has to be finalised. Achieving this goal is essential, both to prevent the contagion of banking crises and to ensure the continuity of critical banking functions. In this regard, France has worked hard for the creation of a common backstop, the main features of which were decided just a few months ago. Three issues still need to be addressed however: the duration of the credit lines provided by the backstop; the creation of a rapid decision-making process in the event of an emergency; and the provision of liquidity to banks in resolution. Once these matters have been resolved, we can hope, and at the Banque de France it is our firm belief, that a pragmatic compromise can be found on the third pillar – the deposit guarantee scheme. c. … and building a Capital Markets Union to create a true Financing Union Evidently, financial integration is not just about achieving banking union. Ensuring the balanced and sustainable financing of the economy also implies deeper integration of capital markets, which fosters greater geographical diversification in savings and meets corporate firms’ financing needs – notably equity financing.