The overall picture of the European banking system after eleven years of
the financial crisis of 2008 is much better but it creates scepticism. The EU after the
financial crisis of 2008 took courageous decisions to rescue Euro-area member
states while also setting the roadmap for consolidating the European banking
The Single Supervisory Mechanism (SSM), the Single Resolution Board (SRB),
is complementary and fully effective in giving new capabilities to the European
by Thanos S. Chonthrogiannis
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Reasons obstruction the consolidation of the European banking system
The only observed delay concerns the European Deposit Insurance
Scheme-(EDIS). The high percentage of non-performing loans (NPLs) in the
banking system of Southern euro area member countries such as Greece, Cyprus
and Italy do not allow further promotion and progress of the specific policy
that concerns this important part of European banking consolidation.
Germany has insisted on its fixed position since 2015 that there should be
a quantification of risk in government bonds held in their portfolios by banks
indirectly photographing the bonds of the Governments of the countries of
Italy, Greece and Cyprus respectively, considering that Governmental bonds
should cease to be considered as risk-only investments.
On the other side is Italy, Greece and Cyprus that disagree with Germany’s
perspective on this issue because they know that in such a case the systemic
banks of these countries would have to increase the own funds rates that they
retain based on Basile convention causing the effect of further increasing
their systemic banks operating costs.
Without the European deposit guarantee, the system is not fully stabilised
and cooperation between European banks is not facilitated. In the current era,
eurozone banks are faced with structural profitability problems, which will be
steadily deteriorating due to the prevailing policy of negative interest rates
applied by the ECB.
For the reader who wants to be informed in depth and in detail how the
European deposit guarantee facility can be used for the development trajectory
of the euro area economy should read the analysis titled “How the
Guaranteed Deposits in
the EU can
help to develop
New challenges facing the eurozone banking system
The new challenges to come faced the European banks are not a few or easy. Such challenges are
1. The Brexit and its handling and given that the City of London will be lost from the EU’s bays-one of the most important financial centers worldwide,
2. The application of the Basel IV rules, which will require a mandatory increase in the percentage of funds that retained by banks in the form of own funds,
3. The limitation of “Shadow banking” with very large funds to operate outside the framework of strict rules applicable to banks.
The conclusion that we are finding is that Europe’s banking system clearly
has an improved picture compared to the previous ten years, but remained
unresolved significant structural weaknesses, leading it to tackling new future
challenges that either these new challenges will become the cause to enlarge
these structural weaknesses or lead to new accelerated implementation of past
and new policies to successfully tackle all these challenges.