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European Commission


Member of the European Commission, responsible for Internal Market and Services

UK banks and the EU single market: What now?

British Banking Association's Annual International Banking Conference

London, 17 October 2013

Minister, ladies and gentlemen.

Thank you Anthony Browne for inviting me today.

It’s a pleasure to be here at the BBA’s annual international banking conference.

The slogan for today’s conference is very well chosen.

Customers. Growth. Standards.

I couldn’t have put it better myself.

The financial reforms we have introduced in Europe over the last five years could nearly all fit under these three headings.

Reforms to restore confidence in banks among customers.

Reforms to return the financial system to being an instrument of growth.

At the service of the wider economy.

Reforms to ensure standards of behaviour and standards of governance.

To make sure the excesses of the past stay in the past.


We addressed failures of supervision by creating an entirely new supervisory system for Europe. Including the European Banking Authority here in London.

We tackled the banks' lack of capital and liquidity.

Brought in obligations to hold more and better capital.

So that now, despite what some continue to say, large European banks are as well capitalised as their American counterparts.

We reformed the opaque and largely unregulated derivatives markets. To make them simpler, safer and more transparent.

We brought credit rating agencies under control. And set strict rules to address conflicts of interest.

We recently made proposals to address the financial stability risks posed by the shadow banking sector.

And we proposed to regulate financial benchmarks.

To prohibit manipulation.

To make sure benchmarks are supervised effectively.

And that they are transparent, robust and reliable.

To protect consumers and investors.

And help restore confidence in financial markets.

Our proposal is coherent with the IOSCO Principles and with the recent developments here in the UK.

A word on the touchy subject of … BANKERS' BONUSES

The financial crisis was caused in part by excessive risk taking and inadequate risk governance.

We strengthened the existing framework.

To help restore people's confidence in the financial sector.

CRD 4 introduces rules on bankers' pay.

As part of a balanced political compromise.

To support value creation.

And discourage undue risk.

To strengthen risk governance and help curb the excesses of the past.

This is not about employment policy or interfering with salaries.

This is about ensuring that banks manage risks and remain prudentially sound. Ensuring shareholders play their role. Holding the executive to account, including on pay.

The issue of bankers’ pay is in fact the only one on which the UK has been outvoted since I have been in charge of financial regulation.

Consensus is very important to me. Support from the EU’s largest financial hub essential.

So I regret what happened in this case and I regret the UK has chosen to take a case to the European Court.

Especially when the rules are in line with international principles agreed in the context of the G20 and the FSB.

I remain confident that the measures are balanced and reasonable, in the interests of financial stability. And that our legal basis is the right one.


It has been a busy few years.

We have made tremendous progress in Europe.

But what I'm here to discuss today is – what's next.

There are still many challenges to be addressed.


First, despite all the progress made as regards more stringent capital rules and new resolution tools, there may still be banks that are too big to save and too complex to resolve.

That is why we are working on a common framework on the structural reform of banks and plan to come forward with a proposal in the coming weeks.

This is also to prevent divergent solutions - in individual EU countries – could disrupt how the European market works. Nobody would gain from that.

Here in the UK, you are in the process of implementing Vickers.

We will of course take that into account.


Despite substantial improvement, more needs to be done on the quality of banking assets.

To restore full confidence in the EU banking sector.

The European Central Bank’s assessment of banks’ balance sheets and the EBA’s asset quality review will provide further reassurance.

We don’t expect dramatic results.

But of course, these exercises may throw up certain funding gaps.

That is the point.

We are shining a light into the dark corners.

Showing that we have nothing to hide.

And we will have the necessary tools in place to address the weaknesses.

Ministers confirmed this once again in Luxembourg Tuesday.

Either banks with capital shortfalls will need to reduce their assets or they will have to go to the markets. The latter are now operating much more smoothly.

If banks are not able to raise capital in the markets – which could still be the case for a few – we will have a clear framework in place, with bail-in, and national and if necessary European backstops.

Next big project: the BANKING UNION

Banking Union is a crucial project for stability and growth.

Not only in the euro area but in the EU as a whole.

We all need a strong and stable euro.

And strong and stable euro area banks.

The first step was finally concluded Tuesday. Ministers approved the Single Supervisory Mechanism.

This is a momentous step: the start of a new era for the supervision of Eurozone banks.


Ladies and gentlemen,

I understand the concerns about how the banking union will be governed.

Banking Union will benefit non-euro countries. But it also raises fears.

Especially in the UK, with its large financial sector that is so integrated in the European financial system.

But rest assured.

We have no interest in undermining the UK.

No interest in threatening London’s place as the largest European financial centre.

We want to strengthen and integrate the single market, not weaken it.

That is why we have made sure that the UK and other non-euro countries have the safeguards they need.

Notably in relation to voting arrangements.

They won't be changed.

But there is no need either for additional safeguards that would undermine the Single market.

We need to pay urgent attention to finalising the Single Resolution Mechanism and the Bank Recovery and Resolution Directive.

To get the banking union off the ground.

Different issue, but equally important:


We are completing the repair process and establishing the Banking Union.

Now, we can turn to financing the economy for the longer term.

Move from recovery mode to growth mode.

Funding areas that will power our economy in the future.

Like energy-efficient vehicles and buildings.

Intelligent networks.

Or helping promising small firms.

We’ve already taken significant steps in this direction.

Approved a Regulation on Venture Capital.

And made a proposal for European Long-Term Investment Funds.

But it's clear that a lot more has to be done.

To help diversify the European financing landscape.

We'll have to develop and expand market funding models.

Making them easier, more accessible and more transparent.

Encouraging long-term investment will need concerted action. Involving the markets and governments in Europe.

Finally a word on …


We also have to ensure that the global financial system works.

We have played a leading role in driving the G20 agenda.

And have delivered on all of our G20 commitments.

The challenge now is to make the agreed rules work together.

And for all parties to respect the robust legal frameworks in place in each other’s territories.

Especially with our American friends.

One example is the issue we have with EU and US rules on OTC derivatives.

I wrote to CFTC chairman Gary Gensler to insist on substituted compliance for trading venues. And a bit more time, to allow our MiFID-rules to be agreed.

Now that the US Government is up and running, I look forward to resuming discussions.

And I am confident a solution will be found very soon.

But this is only one difficult agreement in one area.

We need to have more structured cooperation.

In Europe, we believe strongly that financial services should form an integral part of the TTIP (Transatlantic Trade and Investment Partnership) framework.

It is a unique opportunity

Our financial markets are highly integrated.

And our level of cooperation needs to match that.

I know that here in the UK there is strong support for an ambitious TTIP.


Ladies and gentlemen

The reforms undertaken in Europe in recent years have been far-reaching.

But they were necessary.

Not only to shake off the failings of the past.

But to put us back on the path to growth.

Of course it hasn’t always been easy.

Change never is.

But we have been working together in the European family to make it happen.

And like in any family, it is normal and natural for us to disagree on certain things.

I am sure that we will be able to move past these differences.

I look forward to the continued valuable input of UK stakeholders like the BBA and its members on issues that concern us all.

Completing the banking union to ensure a strong and stable euro.

Making the rules that have been agreed work in practice. And have their intended effect.

Providing long-term financing. And funding for a new, greener economy.

And engaging with our partners around the world for a stronger, safer global financial system.

Thank you for your attention.

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