Almost two months ago, Russian troops began their attack on Ukraine, and the number of people who have lost their lives or livelihoods continues to rise exponentially.
While it is impossible to undo the tragedy of war, one of the legacies of this conflict should be the unity that this international crisis has engendered. And we should use what we have learned from this to secure peace and prosperity in Europe.
We have seen Germany, a country heavily dependent on Russian gas, make historic changes in foreign and defense policy in response to the crisis. The strength of a united Europe and of countries like Germany, which put European values ahead of their individual interests, was – if that can even exist – a positive consequence of these events.
We cannot and should not underestimate the importance of this unity – both for Europe as a political and as an economic association. And this will also be noticeable beyond the immediate current situation.
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But sanctions do not come for free. They require sacrifices, and even well-intentioned actions can have unintended consequences.
>> Read here: How strict regulation puts Europe’s banks at a disadvantage
We are already seeing the effects in the form of slower economic growth and higher inflation across Europe and in Germany’s industrialized economy. This affects individual citizens, households and companies, who are already seeing the burden when looking at their household bills and their livelihoods.
When it comes to cushioning these effects, the question will be what role banks can and must play. The banks, the heart of the global financial system, have a central role in responding to the events in Ukraine.
On the one hand, to enforce the sanctions imposed, and also to help cushion the impact on economies around the world, rather than amplify it.
I am convinced that banks have an important social function that goes far beyond lending. Andrea Orcel
As the cost of living rises and Europeans’ standards of living fall, I am convinced that banks have an important social function that goes well beyond lending: they provide economic support and know-how to people in need to steer the allocation of resources and mitigate the effects of this crisis.
As we saw in the pandemic, banks need to get back to basics. In many cases over the past two years, banks have been a lifeline for struggling small and medium-sized enterprises, helping with easy loans from the subsidy programs and with new funds that should boost the recovery of the European economy.
Further evidence of the important role of the financial sector in this crisis is the German government’s rescue package launched this month for war-affected companies, which includes a 100 billion euro short-term loan programme.
Our banks need to be there for businesses now and play their role in financing tomorrow’s Europe. However, the current geopolitical situation also makes it clear that greater economic unity is needed in Europe.
Europe is far from realizing its full potential
We are still a long way from realizing Europe’s full potential. For example, while the total market capitalization of US companies has increased by 120 percent over the past seven years to almost $55 trillion in 2021, the market capitalization of the euro zone has increased by only 50 percent to approximately $8 trillion over the same period -dollars increased.
Our economic and financial policies are too fragmented: we need unity and greater unity if we are to be successful. In recent weeks, as nations have come together to take on Russia, we have seen that this is possible.
But we must learn from this as we look to the future. Europe needs single capital markets, a functioning banking union, a single fiscal policy, and we need to get our banks and governments to work together.
Unfortunately, the EU internal market is not fully integrated, especially for services, including financial services. Now is the time to think boldly about our approach to banking in Europe and to reap the full economic benefits of a single market.
The creation of a banking union is an important step forward to end lockdown and remove regulations that prevent cross-border consolidation and the free movement of capital in the euro area.
For financial service providers who simply want to support their customers, the EU currently seems more like a conglomerate of 27 different markets. That needs to change.
The European banking sector needs a uniform set of rules
We need a banking sector that is perceived as a sector with a single set of rules. This would be a major benefit for consumers, banks and the economy and should not be overlooked given the impact of this war on Europe.
It is important to create a sustainable European banking sector that will continue to attract international capital in the future in order to boost economic recovery in Germany and Europe. The individual banks play a decisive role in this.
The banking sector has a responsibility to customers and communities during this turbulent time. Andrea Orcel
Banks are the financial link for individuals, businesses and governments and play a key role in nurturing talent across this continent. In this way, they enable the success of fiscal policies aimed at stimulating growth – particularly important in times of crisis.
The long-term economic impact of the Ukraine war on countries like Germany is yet to be seen, but the banking sector has a responsibility to customers and communities during this turbulent time.
Like many other companies, we at Hypo-Vereinsbank put together an aid package for people who had to flee Ukraine.
Bank accounts have been opened, staff have donated time and financial support, and we continue to help our German partners make strides towards a more sustainable, inclusive and just society.
Banks are the backbone of the global economy. They have a responsibility to offset the economic impact of global events, to help our economies and societies rebuild, and to defend our shared European values.
The uncertainty and instability of the past few weeks have emphasized this responsibility and the importance of a united Europe.
About the author: Andrea Orcel is Group CEO of Unicredit
More: Consolidation in Europe’s banking sector is coming – first nationally, then internationally