Navigation and service

6 November 2019

Pro­pos­als for com­plet­ing the bank­ing union

The European banking union is an important next step in European integration. The banking union can protect taxpayers in the EU by creating the foundations for a robust financial sector that functions safely and efficiently in the interests of all EU citizens. Furthermore, a uniform single market for financial services can lead to more cross-border investment and increase growth potential in the EU.

The discussions on completing the banking union have been deadlocked at the European level for some time. In order to break this impasse, German Finance Minister Olaf Scholz will now present proposals at the European level. These proposals consist of four elements:

  1. Efficient supervisory regime and crisis management
    We need common insolvency and resolution mechanisms for all banks, irrespective of their size and whether they are systemically important. The EU should take a lead from the example of the American deposit guarantee fund, the Federal Deposit Insurance Corporation.
  2. Further reduction of risks
    The risks that currently exist must be further reduced in order to achieve the goal of a stable banking sector. This means, first of all, that the number of non-performing loans must be lowered. Second, the financial and sovereign debt crises have showed us that sovereign bonds are not a risk-free investment. The regulatory treatment of sovereign bonds should also reflect this. We need to tackle this problem.
  3. European deposit insurance
    A European deposit insurance mechanism should form part of the enhanced architecture of the European banking union. A European reinsurance scheme could balance out the varying capacities of the national deposit guarantee schemes. This could help to prevent bank runs from occurring due to depositors’ losing trust in the capability of the national system. This would stabilise the European financial system as a whole.
  4. European deposit insurance
    Tax law continues to be one of the key areas associated with distortions of competition within the EU. For this reason, more needs to be done to prevent arbitrage. Together with France, Germany is calling for the adoption of a common corporate tax base. Progress with the banking union must not be allowed to promote competition-distorting tax arrangements, especially those aimed at profit-shifting. For this reason, we absolutely need uniform taxation of banks within the EU.