Main results of the EU Economic and Financial Affairs Council, 21 June 2024

Thank you very much Chair, Vincent, and good afternoon colleagues.

First of all, huge appreciation for the work of the Belgian presidency. You have been incredibly busy and effective at a difficult time in the cycle of our European Union. Because you’ve raced in many ways to reach agreement with Parliament ahead of the end of the legislature.

You’ve finalised a number of Council positions, including:

• the review of the crisis management and deposit insurance framework for banks,
• the Retail Investment Strategy,
• and supervisory data sharing, and this is part of the Commission’s burden reduction efforts.

So we appreciate the efforts of the Belgian Presidency on moving these negotiations forward, and as you say, allowing the Hungarian Presidency to start trilogues,

But I do have to say, we have reservations on substance. And I want to start on CMDI, the crisis management file. Here we deeply regret that the Council negotiating position does not meet the objectives of the reform.

Our assessment of the Council position is that it would not improve depositor protection and financial stability.

The compromise text would not open the scope of resolution to significantly more banks, as it puts considerable constraints on access to industry-funded safety nets to finance resolution, and as it stands, would make the framework more complex and less effective than it is today.

It creates even more incentives to use national tools outside the harmonised resolution framework and increases the risk of using taxpayers’ money to handle failing banks.

The Council position would undermine the European dimension of the governance of the Single Resolution Board by reducing its strength, independence and capacity to act in the interest of the Union.

The draft compromise would also widen the gap between Member States in and outside the Banking Union – to a point where resolution may be more credibly applied to smaller and mid-sized banks outside the Banking Union.

From our point of view, this compromise is not in line with the Eurogroup statement of June 2022.

In fact, I fear that this compromise would be detrimental to the future of the Banking Union – as it will not foster harmonisation, but rather re-nationalise how crisis management and deposit insurance are implemented in the EU.

So you can see why I have and am concerned.

As we move towards the trilogues, we will engage with the aim of ensuring that the final political agreement represents a real step forward for the Banking Union.

I want to move to the second file, the Retail Investment Strategy, and one of the aims of our proposal is to encourage greater retail investor participation in the EU’s capital markets.

And this is a shared objective, I will assume.

That aim was echoed recently by the Eurogroup’s statement on the future of Capital Markets Union and in the European Council conclusions of April 18th this year.

Now here I regret that the Council’s text is inconsistent with the objective of increasing retail participation.

Our assessment is that the current position does not ensure that consumers are fairly treated or get good value for money.

The Council’s position substantially weakens the proposal, in particular by deleting the proposed partial ban on inducements and giving more discretion to firms when assessing whether their products provide value for money to retail investors.

I believe the Council position would not deliver a substantial increase in retail participation in capital markets, and it would not ensure a better deal for consumers.

The Retail Investment Strategy could bring about real change for retail investors and develop the Capital Markets Union, but I’m afraid that we risk missing that opportunity.

Existing problems in retail markets are likely to persist and this will need to be revisited.

Without a lot more retail participation in capital markets, it will not be possible to achieve a Capital Markets Union worthy of its name.

The Noyer report indicates that €15 trillion of EU household savings are sitting in bank deposits.

And this is money that could be put to work to finance innovative EU companies as well as the green and digital transitions.

But for that, we need to tackle the barriers that currently stop savers from becoming retail investors.

And that means reaching an ambitious agreement on the Retail Investment Strategy.

Third, on supervisory data sharing.

Again, we are unfortunately in a similar situation here.

The aim was to foster data-sharing among supervisors and to avoid duplicative data requests for financial institutions.

The Council’s position is much less ambitious than the Commission’s proposal.

It does not reflect our common goal to reduce regulatory burden and ensure the efficient reuse of reported data.

I suppose I am a bit surprised that Member States when calling on the Commission frequently to spare no effort on burden reduction do not themselves support a more ambitious outcome on this proposal.

And again our goal during the trilogues will be to reach an agreement that is as ambitious as possible around burden reduction.

Moving on to other files, colleagues, you will have heard our announcement this week on Basel.

Completing the Basel III reforms remains a major achievement for the European Union.

It is in our interest to implement Basel standards, and we maintain the date of January 1st, 2025 for implementation.

Banks are competitive only when they are resilient and well supervised.

In addition, as with any international agreement, it is really important that all parties implement faithfully.

And we are monitoring implementation in the rest of the world.

So based on our assessment, the entry into application of the Basel standards in the US is now highly unlikely to take place before January 1st, 2026.

In the Council, along with the Parliament, in case the level playing field could not be ensured, you empowered the European Commission to delay entry into application in one area.

And that area is market risk, or the “Fundamental Review of the Trading Book”, FRTB.

These rules are very important for investment banks, and a level playing field is vital for the competitiveness of those in the EU.

So on Tuesday I announced our decision to use the Commission empowerment to postpone the date of application of the market risk rules in the EU by one year, until January 1st, 2026.

This will ensure a level playing field, for internationally active European banks competing with other global players.

It gives us time to see what others are doing.

We will adopt this delay by way of a delegated act as soon as possible.

Given the length of the scrutiny procedure both in Council and Parliament, we could not wait any longer to make this announcement.

I would also add that we sincerely hope that the US will apply the Basel III standards at the earliest opportunity.

The delay of one year of the market risk rules in the EU should not be considered an encouragement to depart from this international agreement.

And I want to stress that here in the EU, we are firmly adhering to our date of January 1st, 2025 for entry into application of the bulk of the Basel standards.

So moving on, we welcome the good progress on Payments and Financial Data Access, which lays an excellent basis for the Hungarian Presidency to reach a general approach on both these files.

We also welcome the substantial technical work on the legal tender status of cash and the regulatory framework for the digital euro.

This digital euro project will take several years to realise, but it is important that the co-legislators agree on a clear regulatory framework.

Because this will give the ECB and market players the legal clarity they need to embark on the necessary investments to make the project a success for consumers, businesses and the financial sector.

And thanks to the Belgian Presidency, progress has been made on a first compromise for some parts of the proposal on insolvency.

Nevertheless, Member States continue to push for a lower level of ambition, and of course this is regrettable.

We strongly support the Hungarian Presidency’s aim to work on the file as a matter of priority.

I note that the Eurogroup in inclusive format and our leaders have identified insolvency laws as one obstacle to progress on the Capital Markets Union.

As I have said in the past, it is crucial to work with justice ministries on this file.

As you know, colleagues, I am nearing the end of my term as Commissioner for financial services. But I’m not gone yet.

And as many of you are travelling back to your capitals in few hours, I have just one ask of you.

I know it’s Friday, it’s a long week, but I have one ask.

I really would request that you call your justice ministries, your minister, your colleagues in government, as you travel back and ask them to find solutions on the insolvency file, rather than just finding problems.

Because this is an important file, and without it, we will remain fragmented and ineffective when it comes to Capital Markets Union.

And then perhaps at the next ECOFIN, you might let me know how you got on.

So in conclusion, Vincent, thank you again for all the work we have done together and the work that your team has helped us enormously with.

We will continue to give you all the support that you need during the rest of your Presidency.

And I look forward to working with Mihaly and his team from July onwards.

In the coming weeks, just to end perhaps on a point which will be of interest, we will start preparatory work for the priorities of the next mandate, especially Capital Markets Union.

And I just want to let you all know that the Commission services will initiate talks and visit Member States to get an understanding of your particular needs, your priorities and indeed your concerns around Capital Markets Union. And of course I will follow closely these discussions.

So thank you.

Source – EU Commission