Banking union: French banks are increasingly critical

Posted Apr 18, 2022, 9:07 AM

They hide it less and less. After having been one of the drivers of the banking union in recent years, French banks are no longer actively campaigning for the completion of this flagship project of European construction. “This observation is correct, we have done it too,” sighs a source close to banking supervision.

The initial objective, only partially achieved, was to create a truly European terrain for banks. This presupposes a common supervisor (role held by the European Central Bank), common rules for “dissolving” a bank in difficulty, and finally common protection for savers’ deposits.

This last point (called “third pillar”) has become the blocking point of this construction. “The risk is now that we make new concessions, without getting anything in return”, especially from the “small” countries, slice a bank official in France.

Doubts are piling up

Last year, an article signed in the magazine “Bank”, by an official of the French Banking Federation announced the color. “The completion of the Banking Union can only be supported on condition that the target solution of this Banking Union has been fully clarified and shared,” he wrote at the time.

As time goes by, doubts accumulate on the French side: the banking union was supposed to provide the powerful French banks with a natural outlet, on which they would have played the role of consolidator. However, the national barriers remain strong, the public authorities (in Germany or Italy in particular) still manage to save “their banks”, and the regulations – believe the banks – do not encourage major cross-border acquisitions in Europe. French banks, moreover, already weigh heavily in Europe – Crédit Agricole and BNP Paribas in the lead – in the current framework.

Added to this is a recurring criticism: the sector contributes heavily each year to the financing of a bank relief fund (the “single resolution fund” or FRU), which will probably not be of use to them. The latter, initially planned to “weigh” around 55 billion euros by 2023, should rather reach 70 to 75 billion euros, due to the increase in bank deposits observed since the health crisis.

“We do not understand well”

For very different reasons, the “small” European countries are also stepping on the brakes: allowing a European banking area would mean no longer having control over the country’s bank deposits, a frightening prospect in the event of a financial crisis.

“We don’t really understand if the position of French banks is only tactical or if it really concerns the substance”, underlines Nicolas Véron, economist at Bruegel (Brussels) and at the Peterson Institute. “Despite the cost of the SRF, French banks have a strategic interest in seeing the Banking Union completed”.

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