Restoring confidence in the banking sector and improving financial education are the main challenges of the industry in Europe. This restructuring would necessarily mean reducing the systemic risk and creating a less complex industry, according to the study released by the Spanish Financial Studies Foundation.
“Structural reforms that started from the Volcker, Vickers and Liinaken rules should establish measures, ideally at a global level, to avoid a competitive disadvantage and distortions to competition,” Alberto Placencia, partner of Ernst & Young and head of the report said. Measures must be “balanced and avoid a disproportionate migration of banking activities towards the non-regulated sector,” he added.
The level of financial integration that the EU banking union represents will also help to reduce the risks of the sector. Although deadlines are long, “the banking union is specific to the construction of the EMU.”
Governor of the Bank of Spain Pablo Linde stressed the news of the Council of financial stability (FSB) agenda, which was created in 2009 after the collapse of Lehman Brothers such as strengthening Basel III capital standards (Mr Linde noted that some of this framework specifications have adopted for the first time a macro instead of microprudential view).
As for defining which lenders are ‘too big to fail’ to fail, he stressed the importance of having introduced the concept of bail-in, i.e., of the rescue from the inside has been important in the country, against the bail-out.
However, he said, “the reform agenda is pointless if economic agents do not move from theory to action.”
In this regard, the implementation of Basel III to the EU directives is made up of more than 700 articles, which are also accompanied by additional guidelines.
“Regulators should think of the need to be more transparent,” Mr Linde concluded.