Europe-wide Supervision for Stronger Banks
President of the European Central Bank, Mario Draghi, argues that the disjointed nature of national supervision and resolution in Europe in 2008 led to markets fragmenting down national fault lines – with individual nations creating negative spillovers by defending domestic policy at the expense of united efficiency and stability.
Draghi says that a strong banking union and Europe-wide supervision addresses these shortcomings by pooling national financial policies at the EU level. The stronger, more uniform supervision that a Europe-wide framework provides leads to more resilient banks, and more confidence and consistency in cross-border banking.
A system-wide perspective also means supervisors can draw on a comprehensive dataset from across the EU when monitoring and mitigating risks. Cross-border linkages help to address systemic risks, while also providing a comparative assessment that can help identify bank-specific issues early on.
However, Mr Draghi believes that national legislation still stands in the way of a level playing field for banks, leaving the market in Europe fragmented: more efforts are needed to fully reap the benefits of a harmonised, integrated market.
Read the transcript of his speech, given on September 18 at the ACPR Conference on Financial Supervision, in full here.