In a recent speech, Elizabeth McCaul, a Member of the Supervisory Board of the European Central Bank (ECB), discussed the shifting priorities in EU banking regulation, reflecting on the post-crisis regulatory climate.
"There is a natural ebb and flow of regulatory intensity driven by crises, economic conditions, and political priorities," McCaul noted. At the moment, she said, the focus is moving from safety and stability to a greater emphasis on competitiveness. However, safety and competitiveness are not at odds, McCaul argued: “A stable and secure financial system forms the bedrock of long-term competitiveness.”
While acknowledging progress in EU reforms since the financial crisis, she urged further action to complete the banking and capital markets unions. "Without a European deposit insurance scheme, there cannot be a truly single banking system," McCaul asserted, emphasizing the need for more unified deposit protections and a robust crisis management framework.
Emerging risks add complexity to the regulatory landscape. The rapid growth of non-bank financial intermediation (NBFI) presents new challenges, as the sector now stands at €32 trillion in the euro area. McCaul expressed concern over banks' exposure to private credit funds: “We supervisors do not have a full picture of the level of exposure and correlations.”
To address this, she proposed strengthened transparency and harmonized reporting requirements. Geopolitical tensions — such as conflicts in Ukraine and the Middle East — compound these risks, McCaul said. She highlighted the increased threat of cyberattacks from state actors, noting a rise in incidents across supervised entities.
In closing, McCaul emphasized the need to uphold a resilient regulatory framework to protect stability and competitiveness, underscoring that "crises fading in the rearview mirror should not be a harbinger of shifting priorities." She urged a balanced approach that supports growth, safeguards consumers, and fortifies the European financial system against future crises.
For more from Elizabeth McCaul, read her Preamble to the 2024 Compendium.
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