Sweden and the Banking Union State Secretary Karolina Ekholm SNS/COM seminar, March 16 2018 Ministry of Finance 1
Why is the Banking Union Important? ➢ 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 for Sweden? ➢ A robust EMU is crucial to outlook for the Swedish economy. ➢ Swedish financial sector closely integrated with the rest of the EU. Ministry of Finance 2
Risk Reduction vs. Risk Sharing ➢ 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: Banks net position to domestic sovereign as percent of • Indicators on sovereign exposures total net position to sovereigns. Source: EBA 100 • Indicators to track progress on the 90 build-up of bail-in buffers , including 80 amount of subordinated liabilities 70 60 50 40 30 20 10 0 AT BE CY DK FI FR DE HU IE IT LV LU MT NL PL PT SI ES SE UK' Ministry of Finance 3
Why Study Pros and Cons of Banking Union Membership Now? ➢ Important elements have now been in place for some time • SSM, ESM, SRM ➢ Brexit ➢ Denmark will take a final decision by autumn 2019 ➢ Nordea Ministry of Finance 4
Non-paper on the Future of EMU ➢ 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. Ministry of Finance 5
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