EU Commission presents annual review of EU’s financial stability and integration

European Commission services have today published their annual European Financial Stability and Integration Review (EFSIR) report, which takes stock of recent developments in financial markets and the financial sector. The report highlights a positive trend in the recovery of the European economy, in spite of the challenging economic and political environment. It identifies private consumption as the main driver for growth, supported by improved bank funding and a better regulatory and supervisory framework.

EU banks are much more stable today than in the past: they are better capitalised and have sounder
business models. Valdis Dombrovskis, Vice-President responsible for Financial Stability, Financial Services and Capital Markets Union highlighted the changes introduced by the Commission to the banking institutional and legal environment in the past and how banks have adjusted to these changes.
He said: “We need to take decisive steps towards financial integration within the EU by completing Banking Union and Capital Markets Union. Only as an integrated market do we have the strength to
finance our economies, the depth and liquidity for markets to function efficiently, and the scope for innovative finance to develop and scale up”.

The report reviews recent developments in financial markets and the financial sector and their impact on financial stability and integration. Moreover, this year’s edition of the European Commission report focuses on two specific issues:
• Firstly, it reviews the various elements
–both existing and proposed
–of Banking Union and discusses the progress made so far in achieving its objective.
This is an ongoing project and a comprehensive bank reform package was delivered in November 2016 (IP/16/3731) to further strengthen the Banking Union. However, the measures already in place, such as increased capital requirements and the common frameworks for supervision and resolution, have reinforced financial stability considerably and are important steps to tackle the so-called bank sovereign loop.
• Secondly, the report devotes a chapter to macro-prudential policies in the EU and provides valuable insight into how these policies complement other economic policy measures seeking to dampen financial cycles.

Background

The annual European Financial Stability and Integration Review (EFSIR) provides an analysis of recent developments in financial markets and the financial sector and their impact on financial stability and integration. The European Commission regularly monitors these developments and analyses the underlying structural drivers in order to assess the effectiveness of existing policy actions and gain insight into the need for future actions in view of emerging risks and opportunities.

This year’s report was presented on the occasion of the annual high-level conference on “European Financial Integration and Stability” organized jointly with the European Central Bank (ECB). Besides the presentation of EFSIR, the achievements and further completion of the Banking Union and the development of deeper capital markets were the two main topics discussed at this year’s conference.

More information is available here: https://ec.europa.eu/info/finance-events-170519-financial-integration_en
The report can be downloaded here: European Financial Stability and Integration Review 2017