European Commission Advocates Completion of the Banking Union by 2019

The European Commission has published a Communication in which it calls for completion of the Banking Union by 2019 and provides a path on how that could be achieved. The Banking Union is made up of the Single Supervisory Mechanism, the Single Resolution Mechanism and the deposit guarantee scheme. The Communication is addressed to the European Parliament, the Council of the European Union, the European Central Bank, the European Economic and Social Committee and the Committee of the Regions. The Communication sets out the Commission's view on the steps needed to complete the Banking Union. In summary, those steps are:

1. Agreement by the co-legislators on the November 2016 risk reduction legislative proposals by mid-2018 at the latest.

2. Agreement by the co-legislators on the proposed European Deposit Insurance Scheme that would ensure protection of all depositors across the Banking Union in the event of a bank's failure. The Commission proposes that impasse between the European Parliament and the Council could be addressed through various methods, including a more gradual introduction of EDIS.

3. Operationalizing the backstop for the Single Resolution Fund to reinforce the bank resolution framework.

4. Introducing measures to further reduce the build-up of non-performing loans. These measures would be establishing a blueprint for Asset Management Companies to be set up by Member States, introducing measures to facilitate the development of a secondary market for NPLs, a prudential back-stop to prevent the build-up of future NPL stocks and the introduction of an accelerated mechanism for enforcing collateral. The Commission has committed to adopt the NPL package by spring 2018 and recommends agreement by the co-legislators by the end of 2018.

5. Considering further whether to introduce a framework for the development of Sovereign bond-backed securities.

The Commission's view is that it is imperative to agree the necessary measures by the end of 2018, but notes that full application of the various elements could be phased-in gradually.

The Commission published the first report on the review of the SSM alongside the Communication. The report provides a positive assessment of the SSM and, as a result, the Commission is not recommending any legislative proposals.

View the Communication.

View the SSM report.