On 19 September 2013 LCLC had the pleasure to attend and contribute to the Conference on the Integrated European Banking Union hosted by the Lithuanian Embassy in London and City of London Corporation. LCLC Member Lina Geciauskaite reports:
The event provided a high-level platform to facilitate the discussion on the European Banking Union that would have a single bank supervisor and a single resolution for distressed banks in the EU. The conference started with opening speeches by the Rt Hon David Lidington MP, minister for Europe, Foreign and Commonwealth office and Mr Rimantas Sadzius, the Lithuanian Minister of Finance.
In his speech Minister Sadzius emphasized that the creation of the Banking Union is ‘an absolute priority’ during the Lithuanian Presidency of the Council of the European Union, which commenced on 1 July 2013. The Single Supervisory Mechanism (SSM) was voted in favour by the European Parliament on 12 September 2013 and is due to be implemented in October 2014. As a result the Eurozone’s biggest banks will be directly supervised by the European Central Bank (ECB). The next step will be adopting a Single Resolution Mechanism (SRM) set to work as an efficient bail out mechanism for banks in the EU.
Although the UK is not a member of Eurozone and nor will it be, Rt Hon David Lidington MP welcomed the creation of a well designed European Banking Union and stressed that it was ‘ an important part of economic and monetary union and a step forward in breaking the vicious circle between banks and sovereigns’. Andrew Bailey, Deputy Governor and CEO of the Prudential Regulation authority (PRA) noted that although the European banking sector had a difficult start in meeting its objectives, the resolution at present is in a much better shape and that UK fully supports the reform. He encouraged to work towards a not overly constrained set of regulation, its consistent implementation, and a better communication on its implications across the member states.
The discussion that followed the speeches focused on typical EU problems, which could potentially slow down the reform. Amongst those, issues such as complacency, time lost in coordination and the risk that national politics drive negotiations were mentioned.
Mr Marius Jurgilas, board member of the Lithuanian Central Bank and LCLC alumni said the coordination problem to be the essence of the EU crisis. In his presentation Marius made a simple and interesting analogy to the game theory, whereby he compared the EU members to a standard family consisting of a man and a woman who can’t agree where to spend their . None of their preferred options would be a desirable solution for both. A possible solution could be an independent event, e.g. rain, depending on which they would agree on the preferred choice for both.
Other guests in the panel discussion included Mr Stefano Cappiello from the European Banking Authority, Ms Sharon Bowles, MEP, Mr Martin Merlin from European Commission, Mr Cyrus Ardalan from Barclays and Dr Thomas F Huertas from Ernst & Young.
During the discussion Mr Merlin from the European Commission emphasized the importance of the EBA and ECB cooperation in successful implementation of asset quality review and stress testing as part of the reform. Mr Ardalan from Barclays warned of a false sense of security in the recovering EU economy, and thought that ‘the situation could easily reverse itself’. Dr Huertas from Ernst & Young raised some challenging questions e.g. should the financial burden of the resolution reform continue to fall on tax payers, or should banks pay as well; and whether retail banking should be separate to trading. He also suggested that there is ‘nothing inherently permanent to the statement that London is the centre of the financial industry in Europe’.
The overall optimism regarding the implementation of the SSM and SRM was felt throughout the discussion and the panel facilitator concluded that the guests reached ‘an unreasonable level of agreement’.
The conference was followed by a reception where discussions continued. Among participants there were Lithuanian representatives from leading financial institutions and the government of Lithuania.
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