In his intervention on the Banking Union annual Report for 2023 at a plenary debate of the European Parliament, former Prime Minister Alfred Sant concurred with the calls in the Report for the completion of the banking union and the urgent establishment of the European Deposit Insurance Scheme (EDIS). This will guarantee on a European basis to all depositors a full refund of their money should a European bank they deposit their money to would fail. He called for the swift introduction of EDIS to reinforce the commitment to a robust and resilient European banking system.
Alfred Sant highlighted the insufficient lee-way allowed for the flexible implementation of banking policies on a European basis. “A case in point is the treatment regarding the roll-back of the sovereign debt-bank nexus. Correct as the approach is overall, its application to small-scale, peripheral members of the European Union could prove toxic”, he warned.
Sovereign debt-bank nexus refers to the interconnectedness and potential risks between sovereign government and banks within the European Union’s financial system. The completion of the Banking Union is seen as a crucial step to address the sovereign-bank nexus and prevent a “doom-loop”, where financial troubles in one sector could negatively impact the other. This will enhance financial stability and reduce the risk of taxpayer funded bailouts.
Labour MEP Sant agreed with the multifaceted benefits that a fully developed banking union would bring including stability and lower costs for customers. However, he stressed that the Report does not take into account the need for the European Union to develop globally competitive banking units able to compete with US major banks and other bank behemoths. A question that still needs to be answered, Sant claimed is whether the absorption by larger conglomerates of most of Europe’s smaller banks is acceptable.
The Report was adopted with 372 votes in favour, 155 votes against and 132 abstentions. Alfred Sant voted in favour.