The EU’s Commissioner for financial services, Mairead McGuinness, criticized member states for weakening EU laws aimed at managing failing lenders and preventing taxpayer bailouts for crisis-hit banks. McGuinness expressed disappointment at a legislative redraft produced by finance ministers on June 19, which she believes adds unnecessary complexity and does not improve financial stability, level the playing field, enhance depositor protection, or reduce the use of taxpayers’ money. She noted that the amendments made by the Council are a step backwards and suggested that banking nationalism is resurfacing, undermining efforts for a unified set of rules following the 2008 financial crisis.
Following the collapse of lenders like Dexia in 2011, EU laws were implemented to ensure that banks bear the consequences of their own failures and can be resolved by regulators without disrupting the financial system. An update proposed by the Commission in April 2023 aimed to address loopholes that allowed smaller and medium-sized banks to receive public funds when they collapse, as evidenced by Italy’s Banca Popolare di Vicenza and Veneto Banca in 2017. The proposed update needs to be agreed upon by the Council and lawmakers from the new European Parliament, with a text approved by MEPs before the June elections receiving praise from McGuinness. However, the Council’s version grants national authorities more control over the EU’s Single Resolution Board and eliminates provisions for managing failing banks based on economic merit.
Vincent Van Peteghem, the Belgian minister of finance who chaired the talks, stated on June 19 that the Council’s redraft represents a significant step forward in creating a more integrated and effective crisis management framework. He highlighted the agreement as a success for the Belgian Presidency, acknowledging the complexities and sensitivities of the file. The agreement is expected to bring benefits to financial stability and depositor protection, according to Van Peteghem. McGuinness, however, remains critical of the Council’s amendments, arguing that they do not serve to enhance financial stability, protect depositors, or prevent the use of taxpayers’ money in the event of bank failures.
McGuinness emphasized the importance of holding failing banks accountable for their actions and ensuring that they are managed appropriately by regulatory bodies without the need for taxpayer bailouts. The proposed update by the Commission was designed to close loopholes that allowed certain banks to receive public funds when they collapse, as was the case with banks like Banca Popolare di Vicenza and Veneto Banca in Italy. McGuinness praised the text approved by MEPs for addressing these issues effectively, but she expressed disappointment in the Council’s redraft, which she believes gives national authorities too much power over the resolution of failing banks.
In conclusion, McGuinness’s criticism of the Council’s amendments to EU financial laws highlights the need for member states to prioritize financial stability, depositor protection, and the prevention of taxpayer-funded bailouts for failing banks. The ongoing debates surrounding the management of crises in the banking sector underscore the challenges of balancing national interests with EU-wide regulations. Moving forward, it will be essential for policymakers to work collaboratively to ensure that the EU’s financial regulations are effective, transparent, and ultimately serve the interests of all stakeholders in the European financial system.
