The EU Financial Markets Commissioner wants to talk to Finance Minister Christian Lindner on Friday about the introduction of a European deposit insurance scheme.
(Photo: Reuters)
Frankfurt In the struggle to relocate financial transactions after Brexit, the EU Commission is increasing the pressure on banks. EU Finance Commissioner Mairead McGuinness said in Frankfurt on Thursday that it is unacceptable that the majority of derivative transactions are still being processed in euros (euro clearing) in Great Britain. The EU will therefore set incentives for further relocations. “On Monday we will start a public hearing.”
Processing houses intervene between buyers and sellers in trade and step in if one of the parties involved fails. Many European banks want to continue processing their derivative transactions in London. They like that the waiver to use UK clearing houses is set to be extended until the end of June 2025. They also believe that the Commission will not force a relocation to the EU for fear of financial market risks.
McGuinness strongly disagreed with this assessment. “We will do this because it is important to us,” said the Irishwoman. She will do most of the work during her term of office as EU Commissioner, which runs until 2024. McGuinness warned the banks against relying on further exemptions. “Don’t bet on overtime!”
Deutsche Börse should be happy about that. The company has expanded its market share in euro clearing in recent years, but the gap to its London competitor LCH is still huge.
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“Breakthrough” in European deposit insurance?
McGuinness is in Germany for three days to talk to financial managers, supervisors and politicians. On Friday she will meet Finance Minister Christian Lindner in Berlin. Among other things, she wants to discuss with him the completion of the banking union, which in her view includes the introduction of a uniform European deposit insurance scheme (Edis).
The Commission already submitted a proposal in 2015, but has not made any progress since then – mainly because of resistance from Germany. However, McGuinness sees a chance that there will be “a breakthrough this year” in the negotiations for Edis. She expects Eurogroup boss Paschal Donohoe to present a roadmap for further action at Edis by June, to which the commission will then react.
The new federal government is willing to negotiate an EU deposit guarantee as part of an overall package – but only in a scaled-down version. Instead of joint liability for failures, Germany envisages a reinsurance system in which national security systems support each other in emergency situations.
McGuinness left open whether the EU Commission would be happy with such a solution. She will speak to Lindner about the proposal “to better understand the concept of reinsurance,” she said. In principle, however, it is important for Europe’s credibility not to debate for too long. “We must act now.”
More: Financial advice, retirement provision, deposit insurance – what the traffic light plans mean for German banks.