Banking union for non-EA countries

Blog post

Banking union for non-EA countries

In a recent blog entry we estimated the total assets and number of banks in the euro area underdirect ECB supervision according to the agreed criteria

Publishing date: 15 January 2013
Authors: Guntram B. Wolff

In a recent blog entry we estimated the total assets and number of banks in the euro area underdirect ECB supervision according to the . We now extend the research to all EU countries. In this blog, we start with the statistics before discussing the more complicated home-host issues and how they are treated in the new compromise legislative text.

preliminary_banks_and_assets_coverage_of_the_BU_non-EA_01

The graph is showing all EU countries that are not in the euro area and is based on the non-comprehensive but quite extensive database of . It applies the conditions regarding absolute and relative size:

i. The total value of its assets exceeds 30 billion euro; or,
ii. The ratio of its total assets over the GDP of the participating Member State of establishment exceeds 20%, unless the total value of its assets is below 5 billion euro; or,
iii. It is among the three most significant credit institutions in the participating Member state,unless justified by particular circumstances.

The share of total assets of banks covered would be very heterogeneous: going from over 95% of total assets with just 23% of total number of banks in countries with important financial centres like UK and Sweden, to an average coverage of 49% of total assets and 13% of total number of banks in Easter European member states.

In seven of the 10 non-EA state members of the EU (Bulgaria, Czech Republic, Hungary, Latvia,Lithuania, Poland and Romania), only the top 3 banks could be under direct supervision of the ECB if they would decide to join the SSM; as only 3 or less banks of their national financial systems surpass thresholds of absolute (more than €30 billion) or relative (above 1/5 of its host country GDP) size in total assets in a consolidated basis.

However, it is important to highlight that at the moment not everything is yet defined:paragraph 11a of the proposal conferring states that the ECB and the national competent authorities of non-participating Member States should reach an understanding describing how they will cooperate with one another and clarifying“the consultation relating to decisions of the ECB having effect on subsidiaries or branches established in the non-participating Member State whose parent undertaking is established in a participating Member State”.

About the authors

Guntram B. Wolff

Guntram Wolff is a Senior fellow at Bruegel. He is also a Professor of Economics at the Université libre de Bruxelles (ULB).

From 2022-2024, he was the Director and CEO of the German Council on Foreign Relations (DGAP) and from 2013-22 the director of Bruegel. Over his career, he has contributed to research on European political economy, climate policy, geoeconomics, macroeconomics and foreign affairs. His work was published in academic journals such as Nature, Science, Research Policy, Energy Policy, Climate Policy, Journal of European Public Policy, Journal of Banking and Finance. His co-authored book “The macroeconomics of decarbonization” is published in Cambridge University Press.

An experienced public adviser, he has been testifying twice a year since 2013 to the informal European finance ministers’ and central bank governors’ ECOFIN Council meeting on a large variety of topics. He also regularly testifies to the European Parliament, the Bundestag and speaks to corporate boards. In 2020, ranked him one of the 28 most influential “power players” in Europe. From 2012-16, he was a member of the French prime minister’s Conseil d’Analyse Economique. In 2018, then IMF managing director Christine Lagarde appointed him to the external advisory group on surveillance to review the Fund’s priorities. In 2021, he was appointed member and co-director to the G20 High level independent panel on pandemic prevention, preparedness and response under the co-chairs Tharman Shanmugaratnam, Lawrence H. Summers and Ngozi Okonjo-Iweala. From 2013-22, he was an advisor to the Mastercard Centre for Inclusive Growth. He is a member of the Bulgarian Council of Economic Analysis, the European Council on Foreign Affairs and advisory board of Elcano. He is also a fellow at the Kiel Institute for the World Economy.

Guntram joined Bruegel from the European Commission, where he worked on the macroeconomics of the euro area and the reform of euro area governance. Prior to joining the Commission, he worked in the research department at the Bundesbank, which he joined after completing his PhD in economics at the University of Bonn. He also worked as an external adviser to the International Monetary Fund. He is fluent in German, English, and French. His work is regularly published and cited in leading media.