As announced by President Juncker in his State of the Union Address the EU
Commission issued a Communication on
the measures it will take for the completion of the banking union. The banking
union is seen by the Commission as essential for the good functioning of the
Economic and Monetary Union (EMU) and its ambitious goal is for the banking
union to be completed by 2019. For that purpose, a range of initiatives were
announced. This post will focus on the two developments which are more relevant
for consumer law which are: the measures on the European Deposit Insurance
Scheme (EDIS) and on reducing the level of non-performing loans (NPLs).
EDIS is a key component for the Banking Union as it will
ensure that all depositors in the EU enjoy the same level of protection and the
banking system will be more resilient against future crises. Unfortunately,
though the Proposal for EDIS was
brought in November 2015, the negotiations between the EU Parliament and the Council
have been brought to a halt as there is limited political consensus. In order
to address the concerns voiced during the negotiations, the EU Commission
suggests that EDIS will be introduced more gradually, taking into account the
progress made on risk reduction. In the first re-insurance phase, EDIS would
provide only liquidity coverage and no loss coverage. Also, the move to the
second phase of co-insurance would not be automatic but only when certain
conditions, such as the level of Non-Performing Loans, would be satisfied.
Furthermore, measures would be taken to enhance cooperation between national
deposit guarantee schemes, national authorities, the Single Resolution Board
and the European Banking Authority. The Commission is keen to achieve progress
in negotiations aiming to adopt the proposal in 2018.
As for Non-Performing Loans (NPLs), while their level has fallen,
they continue to present an important systemic risk and the EU Commission takes
a holistic approach in tackling the problem of existing NPLs as well as taking
steps to ensure they do not build up again in the future. Part of that is
regulating Asset Management Companies, developing secondary markets for NPLs
and enhancing the protection of secured creditors. Another measure that might
prove interesting also for legal scientists is that of increased transparency
on NPLs in Europe as more data will be available and comparable, making it
possible to examine the NPLs market in different jurisdictions and on an EU
level.
The completion of the Banking Union would be a positive development
also for EU consumers and hopefully serve to avoid a repetition of the recent
financial crisis. Do you think the new measures announced are a step in the
right direction? Please share your view in the comments.
