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Banking Union – annual report 2023

TA-9-2024-0012 · P9_TA(2024)0012 · PE752.739

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Parliament's resolution on the Banking Union annual report 2023 reviews progress and gaps in the Banking Union, which covers the Single Supervisory Mechanism, the Single Resolution Mechanism and a single rule book. It calls for completion of the Banking Union, including a European deposit insurance scheme (EDIS) and the Capital Markets Union, and for the missing backstop to the Single Resolution Fund. It asks the Commission to assess barriers to cross-border mergers and retail banking, and urges measures to improve consumer choice and competition where lending rates are high. It calls on banks to keep implementing EU sanctions against Russia, on supervisors to monitor interest rate, sovereign exposure and asset quality risks, and for reform of the crisis management and deposit insurance framework. It also addresses gender balance in financial institutions and ECB and SRB appointments, crypto-asset prudential rules, non-bank financial intermediaries, and climate-related financial risks.

Key points

  1. Condemns Russian aggression against Ukraine and calls on banks to adapt strategies, address systemic risk and keep implementing and complying with EU financial sanctions.
  2. Calls on the Commission to create an EU-level database to coordinate banks' sanctions implementation, close loopholes and assess how EU banks apply sanctions.
  3. Notes limited direct banking exposures to Russia and Ukraine and calls on supervisors and ECB Banking Supervision to help remaining EU banks exit the Russian market in an orderly way.
  4. Calls for completion of the Banking Union, whose third pillar EDIS is still pending, and asks the Commission to keep completing the Banking Union and Capital Markets Union as key priorities.
  5. Says the two projects offer households and SMEs broader funding access, foster investment and jobs, support the economy, increase financial stability, fund digital and sustainable transitions and unlock growth.
  6. Encourages banks to use profits to build buffers and finance the economy, and notes banks tightened credit standards for firms and households for house purchases.
  7. Calls on the Commission to assess impediments to cross-border mergers and incentives for ring fencing, and to assess obstacles consumers face in using retail banking products.
  8. Urges EU institutions and bodies to consider measures to improve consumer choice and competition and ease the burden on mortgage holders and SMEs in member states with higher lending rates.
  9. Regrets the lack of gender balance in financial institutions' management bodies and in the ECB Governing Council, its Supervisory Board and the SRB Board, and calls for future appointments to close the gap.
  10. Calls on supervisors to keep assessing banks' interest rate risk exposures, and on the Commission to consider international standards when addressing the regulatory treatment of sovereign exposures.
  11. Welcomes the interinstitutional agreement to implement Basel III in the EU, notes pending implementation of Basel standards for crypto-assets, and awaits a Commission proposal by 30 June 2025 on prudential treatment of crypto exposures.
  12. Calls for rapid adoption of the crisis management and deposit insurance review, for full ratification of the Amending Agreement to the ESM Treaty to establish the Single Resolution Fund backstop, and for an ambitious EDIS with risk-based contributions.

Who is affected

  • EU banks: urged to build buffers, prepare for asset quality deterioration, implement sanctions and exit the Russian market in an orderly way.
  • Households and SMEs: should benefit from better access to funding, fair lending rates and improved retail banking choice.
  • Supervisory authorities: asked to monitor interest rate, sovereign exposure and asset quality risks and to address diversity in management bodies.
  • The Commission: asked to assess cross-border merger and retail banking barriers and to consider international standards on sovereign exposures.
  • The ECB, SRB and EBA: called on to help banks exit Russia, improve transparency and respect the write-down hierarchy in bank failure.

Figures and deadlines

  • 16 of 36 deposit guarantee schemes in the EU were below their required (minimum) funding level.
  • EU banks' return on equity is 5 points lower than that of US banks.
  • The non-performing loan ratio decreased to 2,24 % in the first quarter of 2023.
  • Annualised return on equity rose to 10,04 % in the second quarter of 2023, from 7,59 % in the same period of 2022.
  • The Common Equity Tier 1 ratio increased to 15,72 % in the second quarter of 2023, up from 14,96 % in the second quarter of 2022.
  • The liquidity coverage ratio fell to 158,00 % in the second quarter of 2023, down from 164,36 % in the second quarter of 2022.
  • The Commission is awaited to propose dedicated prudential treatment for crypto-asset exposures by 30 June 2025.
  • All banks should be fully resolvable by the end of 2023.