Sweden and the Banking Union State Secretary Karolina Ekholm - - PowerPoint PPT Presentation

Sweden and the Banking Union

State Secretary Karolina Ekholm SNS/COM seminar, March 16 2018

Ministry of Finance

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➢Reform with potential to make EMU robust to financial crises in individual MS.

• Breaking the “doom-loop” between banks and sovereigns.

➢Promote the single market for financial services.

• Integrated markets + National rules and decision-making = Problems

Why is the Banking Union Important?

Ministry of Finance

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Why is the Banking Union Important for Sweden?

➢A robust EMU is crucial to outlook for the Swedish economy. ➢Swedish financial sector closely integrated with the rest of the EU.

➢How much do risks in national financial systems have to be reduced before risk sharing mechanisms (backstop for SRF, EDIS) can be put in place? ➢Straightforward risk reduction indicators ‒ NPL, capital, liquidity ➢More controversial:

• Indicators on sovereign exposures
• Indicators to track progress on the

build-up of bail-in buffers, including amount of subordinated liabilities

Risk Reduction vs. Risk Sharing

Ministry of Finance

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10 20 30 40 50 60 70 80 90 100 AT BE CY DK FI FR DE HU IE IT LV LU MT NL PL PT SI ES SE UK'

Banks net position to domestic sovereign as percent of total net position to sovereigns. Source: EBA

➢Important elements have now been in place for some time

• SSM, ESM, SRM

➢Brexit ➢Denmark will take a final decision by autumn 2019 ➢Nordea

Why Study Pros and Cons of Banking Union Membership Now?

Ministry of Finance

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Non-paper on the Future of EMU

Ministry of Finance

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➢ Discussions should take place in inclusive format (EU27). ➢ A stronger EMU requires actions at national level and compliance with rules. ➢ Focus on initiatives with public support and that are most central for a well- functioning EMU.

• Initiatives that are crucial for delivering stability and increases growth potential.

➢ Prioritise completing the Banking Union. ➢ Strengthen ESM. ➢ Support implementation of structural reforms.

• While respecting national responsibility for such policies.