On banking Union – annual report 2024

MOTION FOR A EUROPEAN PARLIAMENT RESOLUTION

on Banking Union – annual report 2024

(2024/2055(INI))

– having regard to its resolution of 16 January 2024 on Banking Union – annual report 2023,

– having regard to the Commission’s follow-up to Parliament’s resolution of 16 January 2024 on Banking Union – annual report 2023,

– having regard to document published by the European Central Bank (ECB) on 25 March 2024, entitled ‘Feedback on the input provided by the European Parliament as part of its resolution on Banking Union 2023’,

– having regard to the ECB’s 2023 Annual Report on supervisory activities, published in March 2024,

– having regard to the 2023 Annual Report of the Single Resolution Board (SRB), published on 28 June 2024,

– having regard to the adoption of the Anti-Money Laundering Directive (AMLD) and the Anti-Money Laundering Regulation (AMLR), and to the establishment of the Anti-Money Laundering Authority (AMLA),

– having regard to the implementation of the Basel III standards, namely to the adoption of amendments to the Capital Requirements Directive and to the Capital Requirements Regulation,

– having regard to the adoption of Commission Delegated Regulation (EU) 2024/2795 of 24 July 2024 amending Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to the date of application of the own funds requirements for market risk,

– having regard to its position at first reading of 24 April 2024 on the proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 806/2014 as regards early intervention measures, conditions for resolution and funding of resolution action,

– having regard to its position at first reading of 24 April 2024 on the proposal for a Directive of the European Parliament and of the Council amending Directive 2014/59/EU as regards early intervention measures, conditions for resolution and financing of resolution action,

– having regard to its position at first reading of 24 April 2024 on the proposal for a Directive of the European Parliament and of the Council amending Directive 2014/49/EU as regards the scope of deposit protection, use of deposit guarantee schemes funds, cross-border cooperation, and transparency,

– having regard to the report of its Committee on Economic and Monetary Affairs of 23 April 2024 on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) 806/2014 in order to establish a European Deposit Insurance Scheme,

– having regard to the Commission proposal of 14 March 2018 for a Directive of the European Parliament and of the Council on credit servicers, credit purchasers and the recovery of collateral (COM(2018)0135),

– having regard to the Five Presidents’ Report of 22 June 2015 entitled ‘Completing Europe’s Economic and Monetary Union’,

– having regard to Enrico Letta’s report of 10 April 2024 entitled ‘Much more than a market – Speed, security, solidarity: empowering the Single Market to deliver a sustainable future and prosperity for all EU Citizens’,

– having regard to Mario Draghi’s report of 9 September 2024 entitled ‘The future of European competitiveness’,

– having regard to the Eurogroup statement of 11 March 2024 on the future of Capital Markets Union, and to the Eurogroup statement of 16 June 2022 on the future of the Banking Union and the Eurogroup follow-up thereto of 28 April 2023,

– having regard to the Basel Committee on Banking Supervision’s disclosure framework for banks’ cryptoasset exposures and to the targeted amendments to its prudential standard on banks’ exposures to cryptoassets, both published on 17 July 2024,

– having regard to the Basel Committee on Banking Supervision’s core principles for effective banking supervision, published on 25 April 2024,

– having regard to the ECB’s Financial Stability Review of May 2024,

– having regard to Peterson Institute for International Economics Working Paper No 24-15 of 25 June 2024 entitled ‘Europe’s banking union at ten: unfinished yet transformative’,

– having regard to the Single Supervisory Mechanism supervisory priorities for 2024-2026, published in December 2023,

– having regard to the SRB’s biannual reporting note to the Eurogroup of 13 May 2024,

– having regard to the outcome of the 2023 EU-wide transparency exercise of the European Banking Authority, published on 28 July 2023,

– having regard to Special Report 12/2023 of the European Court of Auditors of 12 May 2023 entitled ‘EU supervision of banks’ credit risk – The ECB stepped up its efforts but more is needed to increase assurance that credit risk is properly managed and covered’,

– having regard to the statements by Claudia Buch, Chair of the Supervisory Board of the ECB, at the hearings conducted by Parliament’s Committee on Economic and Monetary Affairs on 21 March 2024 and 2 September 2024,

– having regard to the statements by Dominique Laboureix, Chair of the SRB, at the hearings conducted by Parliament’s Committee on Economic and Monetary Affairs on 21 March 2024 and 23 September 2024,

– having regard to its resolution of 14 March 2019 on gender balance in EU economic and monetary affairs nominations,

– having regard to Rule 55 of its Rules of Procedure,

– having regard to the report of the Committee on Economic and Monetary Affairs (A10-0000/2024),

A. whereas the Banking Union (BU) encompasses the Single Supervisory Mechanism, the Single Resolution Mechanism and high minimum standards in the area of deposit insurance;

B. whereas a completed BU would improve the competitiveness and stability of the banking sector and consumer choice, and facilitate access to financing;

C. whereas fragmentation and the lack of cross-border consolidation of the EU banking sector is affecting its global competitiveness; whereas the profitability gap between EU and US banks has widened;

D. whereas a strong banking sector is key to delivering economic growth, financing small and medium-sized enterprises (SMEs) and start-ups and ensuring the transition to a green and digital economy;

E. whereas in April 2024, it adopted its position on the review of the crisis management and deposit insurance framework;

F. whereas in April 2024, its Committee on Economic and Monetary Affairs adopted a report on the Commission’s proposal to establish a European deposit insurance scheme;

General considerations

1. Asks the Commission to ensure that the completion of BU remains a key priority; highlights that this project offers households and SMEs access to broader funding, increases financial stability, reduces the impact of economic downturns, funds the transition to a green and digital economy and unlocks the EU’s growth potential;

2. Notes that a more integrated BU would help to make the EU banking sector more resilient; notes that better cross-border integration of banking business would increase the potential for private risk sharing and ensure diversification in the EU banking market;

3. Regrets that EU banks’ ability to finance major investments is constrained by higher costs, smaller scale and lower profitability that is not sufficient to ensure their competitiveness;

4. Acknowledges that EU banks still operating in Russia have downsized their activity; calls on supervisory institutions to further assist those banks in pushing ahead with exiting the Russian market;

5. Notes that the creation of a separate jurisdiction for EU banks with substantial cross-border operations would help to complete the BU;

Supervision

6. Welcomes the adoption by co-legislators of the new banking package implementing Basel III standards in the EU; stresses that the Commission should evaluate thoroughly whether a delay in implementation is necessary to maintain the competitiveness of EU banks; welcomes, in this regard, the delegated act postponing the date of application of the new market risk framework by one year to 1 January 2026;

7. Notes that the average Common Equity Tier 1 ratio has remained at high levels, at 15.81 %;

8. Notes that the non-performing loans ratio has remained stable at 2.30 % and the liquidity coverage ratio at 159.39 %;

9. Notes the lack of progress on the proposal for a directive on credit servicers, credit purchasers and the recovery of collateral, which intends to provide banks, under certain conditions, with a mechanism for accelerating the value recovery from secured loans via extrajudicial enforcement of procedures in order to further develop secondary markets for non-performing loans;

10. Notes that the current levels of banking sector profitability may provide an opportunity for some Member States to implement additional targeted increases in macroprudential buffers and help to preserve banking sector resilience;

11. Welcomes the creation of the new Authority for Anti-Money Laundering and Countering the Financing of Terrorism;

12. Stresses the need to enhance the resilience of non-bank financial intermediaries and establish a level playing field with the banking sector, including by designing specific regulatory and supervisory tools to prevent a liquidity crisis;

Resolution

13. Welcomes the objective of the proposal on crisis management and deposit insurance of ensuring a more consistent approach across all Member States to the application of resolution tools and deposit protection to enhance financial stability, taxpayer protection and depositor confidence; notes that small banks do not pose any risks to financial stability;

14. Highlights the importance of preserving shareholders’ and creditors’ primary responsibility for bearing losses in the event of a bank’s failure, which is still a key lesson learned from the global financial crisis; stresses that the bail-in of shareholders and creditors must remain the main source for resolution financing before any recourse is made to industry-funded sources;

15. Recalls that a sufficient minimum requirement for own funds and eligible liabilities is crucial for a credible resolution framework and for ensuring that resolution authorities have sufficient flexibility to effectively apply the resolution strategies needed in a specific crisis situation; warns that reductions in this minimum requirement, resulting from specific resolution strategies in the resolution planning phase, could hamper the resolvability of banks;

16. Highlights that liquidity support in resolution should not be based on any additional public funds; notes that any reliance on taxpayer money for the resolution of banks should be avoided;

17. Welcomes the ‘SRM Vision 2028’ strategic review initiated by the SRB to set its long-term goals, address new challenges and further strengthen collaboration with the national resolution authorities and other stakeholders;

18. Welcomes the SRB plan to streamline the annual resolution planning cycle to ensure that it is increasingly efficient and has a greater focus on testing banks’ resolvability and the operationalisation of resolution strategies;

19. Welcomes the fact that the Single Resolution Fund has now been built up; calls for the full ratification of the Amending Agreement to the ESM Treaty by all Member States, including the establishment of a common backstop to the Single Resolution Fund;

20. Highlights the need for additional efforts to ensure full resolvability for all banks falling under the scope of resolution; recalls that achieving resolvability cannot be considered a ‘moving target’ and therefore calls for more standardisation and harmonisation of the resolvability assessment;

Deposit insurance

21. Underlines the fact that the Commission’s proposal to establish a European deposit insurance scheme was published back in 2015, and that the landscape has changed significantly since then;

22. Notes that national deposit guarantee schemes have been introduced successfully and have proved their functionality in a number of cases; underlines the need to take specific national characteristics into account and to preserve the well-functioning systems for smaller banks that are already in place in some Member States;

23. Underlines the necessity to take the specifics of institutional protection schemes into account and preserve their functioning;

24. Takes note of the Eurogroup statement of 16 June 2022 on the future of the BU;

25. Recalls that breaking the link between bank and sovereign risk remains a challenge for the BU; emphasises that the risk on banks’ balance sheets can be reduced further through the regulatory treatment of sovereign exposures;

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26. Instructs its President to forward this resolution to the Council, the Commission, the European Central Bank, the Single Resolution Board and the European Banking Authority.

EXPLANATORY STATEMENT

While the Banking Union – annual reports 2022 and 2023 focused on the war in Ukraine and the ongoing Russian aggression against Ukraine, this report focuses more on the challenges for the EU and for the European Parliament, as mirrored in the new mandate of the Commission, namely the EU priorities to foster competitiveness, to strengthen the European single market and to boost economic growth.

The Union is currently at a turning point, which will determine the economic future in the upcoming decades. The 2024 reports of Enrico Letta and Mario Draghi underline that the EU needs a major turnaround to be able to compete with the US or China. Against this background, the Banking Union is a major cornerstone of competitiveness. A strengthened Banking Union will enable the EU to generate the necessary capital to make the European economy fit for the future.

EU banks play a key role in financing the required investments since bank loans are still the most important source of external financing for companies. However, EU banks suffer from a lower profitability compared to their US counterparts caused by too many regulatory hurdles and by an incomplete Banking Union. A robust and competitive banking sector is necessary to finalise the BU. In the last year, while co-legislators made much progress on crucial legislation for the Banking Union, the EU still has to monitor closely if the EU economy, EU citizens and EU banks benefit from those adopted proposals. This report provides realistic and achievable recommendations, which could help to strengthen further the Banking Union.

However, not only EU businesses need better access to capital. EU citizens are currently struggling to afford housing or to finance investments in sustainable renovations. It is therefore crucial to boost the profitability of EU banks, since this would in turn allow them to provide private households with better and easier access to affordable loans.