1. Banking Union: Where Are We Now and Where Are We Going?
Vitas Vasiliauskas
Chairman of the Board
17 October 2013

2. Outline Key elements of the Banking Union:
Single Supervisory Mechanism;
Single Resolution Mechanism;
Deposit Guarantee Framework.
Other financial sector reforms

3. Why a Banking Union?
A well-functioning single market requires integrated financial regulation and oversight:
The same high-quality standards for banks;
Safeguarding taxpayers’ money;
Timely intervention and effective crisis resolution.

4. Single Supervisory Mechanism
The ECB will assume new supervisory powers in November 2014:
Responsible for supervising significant banks (~130) and the functioning of the SSM as a whole;
Relies on the national authorities that remain responsible for supervising less significant banks.
Asset quality review followed by stress-testing to be announced in October;
Work on ensuring backstop arrangements.

5. Bank Recovery and Resolution Directive
Harmonises crisis management and resolution tools; minimises taxpayers’ exposure to losses;
On-going negotiations with the Parliament;
Main issues:
National discretion in using bail-in instruments and creditors’ hierarchy;
Minimum loss-absorbing capacity of banks;
Designation of the national resolution authority.
Presidency objective: final agreement by end-2013.

6. Single Resolution Mechanism
Aims at effective resolution of cross-border banks;
First discussions at the informal ECOFIN in Vilnius;
Main issues:
Role of the Commission;
Voting modalities in the Resolution Board;
Centralisation of decision-making powers.
Presidency objective: general approach in the Council by end-2013.

7. Deposit Guarantee Framework
Deposit Guarantee Schemes Directive aims at harmonising national frameworks;
The Presidency has recently started negotiations with the Parliament;
Presidency objective: final agreement by end-2013;
A European deposit guarantee scheme should be seen as a final objective.

8. Controlling systemic risks
Macro-prudential, or system-wide, regulation targets at preventing systemic risks;
Progress on establishing a European framework:
Establishing the European Systemic Risk Board;
Assigning macro-prudential mandates to national institutions;
Binding macro-prudential powers to the ECB.
Complements the Banking Union.

9. Structural Banking Reforms
Need to address the complexity of banking, distorted incentives and the too big to fail problem;
National initiatives on bank structural reforms in a number of countries;
A legislative proposal expected in November;
Presidency objective: initiate discussions;
Should complement the Banking Union.

10. Conclusion
Main priority — the Banking Union and resolution framework in particular;
Our main goal should be to have a complete framework;
The Banking Union needs to be complemented with:
A sound European macro-prudential framework;
Structural reforms of the EU banking sector.