Good morning.

My first priority as Commissioner is ensuring financial stability and all of my other responsibilities depend on that core aim. Financing the green transition, supporting technological innovation, Banking Union, Capital Markets Union – these all depend on us having a stable financial system.

And so this annual report and conference with the ECB puts focus on this topic. And I want to thank ECB Vice-President Luis de Guindos for participating today.

If we look back to last year’s report, published in early March 2020, it does not mention COVID-19 or the looming public health crisis. It was at that time we were just beginning to get a hint of the disruption that this virus could bring.

I remember in the middle of March leaving the European Parliament and travelling back to Ireland, thinking that everything would be back to normal in a few weeks. How wrong we were.

Because instead of that, well over a year later, we still have restrictions on everyday life, we have online meetings and we wear masks and that is the real symbol of this pandemic, which has been more severe that we could ever have anticipated.

It is fair to say that the past year has been very tough. The health crisis led to an economic crisis. But that economic crisis has, so far, not resulted in a financial crisis.

The European Union, national governments, the ECB, all stepped in to support the economy, businesses and jobs. And this collective action helped maintain financial stability, with banks playing a very important part because now the banks were part of a solution rather than part of the problem.

The reforms carried out after the global financial crisis have certainly shown their value in this particular crisis.

And today as we publish the report, a lot has changed. We are seeing a cautious return to a more optimistic outlook, as vaccination programmes gather pace. Cases and deaths are, thankfully, decreasing in Europe – although the EU is mindful of the global picture and is supporting the COVAX facility to make vaccines available worldwide because as we know, unless everyone is safe, then no one can really be safe.

So today we can take stock of where we are now – and also think about the future of the financial services sector in the European Union.


[Impact of pandemic]

So let me start first with the pandemic and its impact. Last year, GDP in the EU fell by over 6 percent – a sharp drop linked to the lockdowns that Governments put in place in order to control the health crisis.

And these were necessary restrictions and they were accompanied by economic intervention, preventing widespread insolvencies and supporting employment. Unemployment did rise, but stabilised at 7.5 percent in December 2020, about 1 point above the rate in February that year.

This very necessary intervention has helped prevent the worst impacts of the pandemic – and helped maintain financial stability, allowing banks to be part of the solution to the crisis.

But there was still a crisis, and it was not a crisis that has been experienced equally or consistently. Headline figures and averages hide a great deal of variation.

Sectors that depend on face-to-face contact and interactions, like hospitality and tourism, have seen big declines. Sectors that enabled remote working, like technology and financial services, were affected much less.

And if you look across member states, there are big differences. GDP dropped by as much as 11 percent in Spain and by 10 percent in Greece.

Coming to the an individual level, there are people whose experience of the pandemic is of a year of being largely confined to home, still working and earning money, but saving, not spending. I noted a Politico report of this week on house prices rising in many central and northern European cities – as many of households that have money to spend in a time of low interest rates are looking to the property market.

Others, particularly essential workers, kept going to work, in the healthcare sector, in supermarkets, in transport – keeping us all cared for, fed and supplied with goods while more at risk of infection.

And of course still others lost their jobs and faced significant financial pressures.

Here we will need to deal with all of these consequences over the next year or more, and that are vital for financial stability.

A key question will be how do we gradually unwind supports when the time comes, recognising the different and uneven impact across Member States, sectors of the economy and citizens themselves?


[Pandemic – risks to financial stability]

The report we’re publishing today notes the pressure on the balance sheets of households, companies, banks and governments. Three main risks to financial stability remain: disruptive repricing of assets; the sustainability of debt; and possible stress in the banking sector.

So I want to start first with disruptive repricing. Financial markets saw strong performance in the second half of 2020, thanks to monetary and fiscal support measures which ensured access to low-cost funding. But this risks a decoupling of valuations from fundamentals which might lead to volatility and sharp price corrections.

Secondly, there is the question of debt sustainability. Government debt has risen. Consumers benefited from loan moratoriums. Businesses have taken on debt – and debt levels were already high for non-financial companies even before the pandemic.

And third, we need to remain vigilant to stress in the banking sector. As I said, the sector has proved resilient during the crisis. But concerns about profitability and asset quality remain. Bank profitability was already an issue before the pandemic. And indeed in a severe scenario, the ECB has warned that non-performing loans could exceed the levels during the global financial crisis and reach €1.4 trillion.

None of these consequences are inevitable. But they are risks that we need to prepare for.

And given that our report last year failed to account for the pandemic, which became the defining economic event of the year – we also need to be aware of the need to prepare for unexpected events and build up a stronger financial system that is resilient to shocks.


[Capital Markets Union]

Now, as support measures eventually unwind, there will be a demand for equity capital to bolster the solvency of many companies.

How can we make sure that, beyond state support, capital markets cater for the demand for risk capital?

Part of the response is building a deep and integrated capital market, which will help sustain capital supply over time.

And that’s why the Commission published the Capital Markets Union action plan last year to tackle key obstacles to integration.

The plan aims to facilitate cross-border investments. It outlines how to enable long-term investment. It looks at how to bring retail investors to capital markets. And it does not shy away from long-term obstacles like the tax burden in cross-border investments and supervision.


[Supervisory convergence]

The massive relocation of capital in the wake of the pandemic creates new relationships between market participants.

One company’s debt is an investor’s asset. And debt has risen a lot. But we need to avoid these new linkages creating undue risks to financial stability.

On top of that, Brexit has led to fragmentation and we might see a multi-hub financial structure emerge in the European Union.

That all means that monitoring and supervision is even more important – and it needs to be consistent across the Member States. Integrated capital markets need a common set of rules, consistently applied by all national regulators.

A citizen living in one EU Member State can invest in a fund established in another one – but they need to trust the supervisor of that country in the same way as their national one.

On the other side of that equation, national supervisors will increasingly supervise firms providing services to clients in other Member States and need to ensure investors are protected, wherever in Europe they are based.

Converging supervision and coordination of national supervisors is vital. Last Friday, the Commission concluded a targeted consultation on supervisory convergence and the single rulebook. We received over 100 replies, and are now assessing them.

We need financial supervision that guarantees the integrity of our financial markets and protects investors. As borders closed and cross-border activity was disrupted, the pandemic reminded us of the vital importance of the Single Market.


[Longer-term outlook]

While there are risks to financial stability because of the pandemic, it can also work as a catalyst.

The massive disruption in normal business and working methods due to lockdowns forced financial services providers to use technology.

And the pandemic shows that sustainability is not integrated enough in our economies – while the recovery offers a chance to support sustainable finance.

These twin green and digital transitions affects all market participants – banks, asset managers, insurers, regulators and retail investors.



Digitalisation has changed how we access financial services. But the change is more fundamental than the widespread adoption of mobile banking. Digitalisation will change how financial companies do business and how consumers act.

Banks collect data from their clients and optimise the services they offer. FinTech companies are introducing new technologies like artificial intelligence. Consumers are just a click or a swipe away from a wider range of products – with high expectations about being able to make instant payments, adjust an insurance product or switch quickly between accounts or apps.

But with all these changes, new risks arise. Supervisors have to adapt to new business models and risks.

Just last September, the Commission adopted a digital finance package, including legislative proposals on crypto-assets and digital resilience.

That proposal on digital resilience is very important when we’re talking about financial risks. Cyber criminals looking for customer data or just for money have the potential to disrupt the activities of banks and financial firms. The Financial Times this week noted an S&P report that the financial sector was the most heavily hit sector when it comes to cyber-attacks, one quarter of these cyber-attacks over the past five years targeted the financial sector.

Digitalisation will need to be carefully considered in our retail investment strategy, which we’re planning for early next year.

We want a framework that empowers retail investors to take the right decisions and one that protects them – encouraging their participation in capital markets. Digitalisation can provide easier access to capital markets at a lower cost – including access to more complex or riskier products.

Technological changes may pose challenges to existing retail investors and the existing investor protection rules may no longer be fit for purpose. So we need a framework to take advantage of digitalisation while addressing potential emerging risks. We will also look at financial literacy, including digital financial literacy. It’s crucial that consumers understand the risks and rewards of retail investing, as well as the different options that are available. 



The pandemic demonstrates that the economy and financial system should be more resilient to sustainability risks, such as events like droughts, fires, flooding – or indeed another pandemic.

Unlike traditional risks, these risks are forward looking, so using historical data won’t necessarily show the real risk.

There are also transition risks, which arise as we move towards a low-carbon economy. There might be risks to banks or investors if there is a sudden fall in the price of fossil fuels, for example.

The cornerstone of our work on sustainable finance is the EU Taxonomy for sustainable activity – a game changer in our fight to ensure climate resilience.   

From 2022, banks, investment firms and insurance undertakings will disclose the alignment of their activities with the EU Taxonomy, which will help show how sustainable they are.

But more will be needed to meet the challenges ahead. And that’s why the Commission will shortly be presenting its Renewed Sustainable Finance Strategy.

This strategy will aim to make sure that climate and environmental risks become mainstream in the financial system – which is essential for a stable financial system that is resilient to the impacts of climate change.



It is clear that the economic consequences of the pandemic will occupy us for the near future.

But it is also important to address the question “what’s next?”

Today’s panel discussions will help us better identify challenges and opportunities for financial services – especially the impact of climate change on financial stability.

I look forward to a lively and inspiring debate.

Thank you for your attention.