New impetus is needed to put an end to the stalled European banking union – Villeroy


PARIS, September 10 (Reuters)European efforts to build a more unified cross-border banking system have come to a standstill amid opposition to deposit guarantee schemes, the head of France’s central bank said on Friday, urging new impetus to complete the project.

In a speech at a conference in Slovenia, Banque de France Governor François Villeroy de Galhau said Europe’s banking sector remains fragmented, with lenders reluctant to merge and expand to better cope with the crisis. foreign competition, increasingly from their peers on Wall Street.

“The banking union today lacks momentum and remains incomplete. Let us be frank: the project is at a standstill,” said Villeroy.

EU governments have created a single banking supervisor and a single bank resolution mechanism for lenders failing in response to the sovereign debt crisis in Europe a decade ago.

But efforts to bring the project to fruition have failed on plans for an EU-wide deposit guarantee scheme, which is particularly noticeable in countries like Germany where there are fears of exposure. to the risks of weaker banking systems elsewhere in Europe.

“We must neither relax now that the banking crisis is largely over, nor wait for the next crisis to act,” said Villeroy. “It is precisely because we are not in a crisis that we must move forward now.”

Faced with “intractable opposition” to a fully-fledged deposit guarantee scheme, he suggested changing his name from EDIS currently to something like the “common deposit scheme”.

While national deposit guarantees would still receive support under the shared mechanism, subsidiaries of foreign banks could be affiliated with their home country’s guarantee scheme, thereby protecting the host, Villeroy said.

Meanwhile, in parts of the banking union that were already operational, it was possible to improve the implementation of existing regulations for banks operating in several EU countries.

“There should be no case where there is a difference between the treatment of domestic and cross-border intra-group exposures, either for liquidity or capital requirements,” he said.

(Reporting by Leigh Thomas; Editing by Jan Harvey)

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