Message from the CEO, Nina Schindler
The recent months have been characterised by many instances initiating reflections on the future of Europe. The Council has been discussing Mr. Letta’s report on the future of the Single Market and will do the same in June with a report from Mr. Draghi on Europe’s competitiveness. A bit more focused on financial services, the Eurogroup has reflected on the future of the Capital Markets Union. On a more granular level, the Commission services are gathering materials with a view to making proposals for the priorities of the next European Commission, such as competition to Capital Market Union, and the agriculture transition.
In this period of strategic reflections and with the European elections in sight, it is fitting to receive the views of Michael Hager, Head of Cabinet of Executive Vice-President V. Dombrovskis, on possible trends in the future Commission work plan and political landscape, and, from the vantage point of cooperative banks, the perspectives of Daniel Quinten, President of the EACB and member of the Board of the German Association of Cooperative Banks.
In the past months the EACB has worked intensively to formulate its own thoughts for the next legislative cycle. Drawing on the expertise of EACB member banking experts across Europe, recommendations have been articulated to unlock the full potential of cooperative banks in advancing Europe’s green, digital and strategic autonomy objectives. These proposals include fostering a European fabric of thriving and innovative companies of all sizes, and devising policies to ensure that cooperative banks can continue to meet investment demands and varying economic realities of European regions and citizens.
For more detail as to how we can ensure cooperative banks can contribute to the future of Europe, please have a look at the EACB manifesto released on 31 May 2024.
3 Questions to Michael Hager, Head of Cabinet, of Executive Vice-President Valdis Dombrovskis, European Commission
Michael Hager has been since December 2019, the Head of Cabinet, of Executive Vice-President of the European Commision, Valdis Dombrovskis. From March 2013 to November 2019, he was Head of Cabinet of Günther H. Oettinger, EU Commissioner. Before that, he was a member of the cabinet of Margot Wallström. He joined the European Commission in 2004 and was initially Parliamentary Affairs Coordinator in the Directorate-General for Internal Market, later Assistant to the Director-General. Hager holds a master's degree in history, politics, and Japanese studies from the Eberhard-Karls-Universität Tübingen.
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- All institutions are currently reflecting on a work program and on initiatives for the next cycle. In that context, the European Commission is also outreaching to stakeholders, as for example in the form of a dinner with Financial Market experts. What are your conclusions from these activities so far?
The agenda for the next political mandate is slowly but steadily taking shape. It is positive the industry is paying particular attention at it, as the EU is facing unprecedented geopolitical challenges that will require bold and creative actions. As we can all appreciate by reading the latest European Council conclusions and the Eurogroup statement, the Capital Market Union, and the broader financial services agenda, will be high on the agenda in the next mandate. This means acknowledging the fundamental role the EU financial industry has in channelling financial resources to EU companies. Competitive EU banks are good for the EU economy. Our financial industry needs to be competitive on the global stage. It is becoming clear from our engagement with stakeholders that the EU regulatory framework must foster investments and put the EU industry on an equal footing as other jurisdictions, while preserving financial stability.
- What do you think of the Council Paper about the Capital Markets Union?
We very much welcome the Eurogroup’s statement on the future of the Capital Market Union. It sets the vision of where the Member States see a need for action and will of course inform the Commission’s thinking about the next financial services agenda. A key area where we see potential in the near future is securitisation – consensus is emerging around the need to revive the EU market. The goal is clear: enable banks to increase their lending potential by freeing their balance sheets, while preserving financial stability. Another area where Member States tend to share views is the need to mobilise savings to deepen our capital markets and generate long-term returns for EU retail investors. This is a complex area, which will require a series of coherent actions.
- A change of the political landscape in the European elections could certainly also affect the composition of the European Commission as well as its plans, operation and ambitions. Do you already think/prepare for such scenarios?
The need to achieve a genuine Capital Market Union will be there regardless of the political landscape resulting from the European elections. It is unavoidable. If we want to be able to attract investments from outside the EU, to compete with established and emerging financial marketplaces, to create an ecosystem where innovative companies receive the risk capital to thrive, we can’t afford to remain small and fragmented. In the last 10 years, we have introduced several legislative initiatives to foster the integration of capital markets. Yet, stumbling blocks remain, for instance in the field of insolvency and different tax regimes. Lifting them will require strong political will from actors in the EU.
Reflections on the priorities for the next legislative cycle by Daniel Quinten, President of the EACB and Member of the Board of BVR
Daniel Quinten, has been a Member of the Board of Managing Directors of the BVR since January 1, 2022. Before this role, he was a Partner at KPMG AG Wirtschaft-sprüfungsgesellschaft from 2014, where he co-managed KPMG’s ECB Office and the Risk & Treasury advisory and audit team. Earlier in his career, Quinten served at Deutsche Bundesbank, holding key positions including Head of the Banking Supervision Law and International Banking Supervision division from 2011 to 2013 and Head of the Office of the Vice-President from 2006 to 2011.
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In the coming decade, Europe will need investments to the amount of trillions of Euro to support the green transition, the digital transformation as well as for the reinforcement of economic security and defense efforts. These amounts go beyond the capacity of any public sector. Mobilising private funds via banks and the financial markets will be crucial.
This requires strong and diverse banks capable of serving both pan-European and local projects. Besides European banking champions, strong regional banks are needed to finance the needs of local communities. On the other hand, we need deep and liquid capital markets that attract and retain European retail investors with attractive investment opportunities.
These ambitions and needs call for a policy environment that fosters the competitiveness of the European economy and its players, including banks. The single market must support new businesses, allow European companies to become profitable and to grow. European champions will only develop within a fabric of prospering and innovative companies of all sizes in the EU. In the banking sector, we need to promote a diverse landscape that allows both big European champions and strong regional champions to develop.
During the past decade, the EU has won the title of the world champion in regulation. At the end of the next decade, Europe should be the world champion in competitivity. We must realise that in order to achieve this, we need to revisit the heavy accumulation of regulation. A more principle-based regulation should provide higher flexibility. Moreover, regulation should be more proportionate by using more de-minimis clauses or less complex rules for smaller institutions. Less is more has to be the guiding principle.
The Capital Market Union is an idea which is put forward since several legislative periods. I‘m truly convinced that progress is needed if Europe wants to foster its competitiveness and manage the various transformation needs. I assume, that the attempt to harmonize at all price has slowed progress so far. However, the proposals made in the last few months should be discussed further and developed – not under the headline „harmonization“ but along clear principles: What fosters the mobilization and free flow of capital? What preserves good and proven financing structures? What helps to boost competitiveness of Europe‘s capital markets?
Last but not least and building on the thoughts above: United in diversity is a guiding principle since the foundation of the EU. The financial systems in the member states of the European Union are as diverse as the economic sectors are. Policy actions which trigger structural changes, such as mutualization of deposit insurance systems, might negatively affect real economy as well. This would be unwise given the need to foster competitiveness.