European heads of state and government gathered in Sibiu, Romania for an informal meeting on 9 May 2019. They exchanged views on the main challenges and priorities for the European Union and discussed strategic plans for the next few years. The EU leaders looked back on the past five years – at what has been achieved, where they have fallen short of expectations, and what the most pressing issues are going forward.

Shaping the future

The week before the Sibiu meeting, the European Commission set out a number of policy recommendations for how Europe can shape its future in what is an increasingly uncertain and multipolar world. These covered issues from social justice and economic policy to sustainable development and the fight against climate change. They formed the basis for EU leaders’ discussions in Sibiu and included a number of issues in the area of financial services, banking and the capital markets union.

On the capital markets union, they agreed that progress has been made. Out of 13 proposals made by the Commission, only two – on crowdfunding and third-party effects on assignment of claims – are still pending. The new prospectus regulation means that companies, especially SMEs, will find it easier to raise funding on capital markets.  The pan-European personal pension product, as well as measures to improve the EU’s market for cross-border investments, will offer new saving and investment opportunities, while contributing to deeper and more liquid markets.

Progress has also been seen in the banking sector, where risks have decreased significantly. This is largely thanks to more stringent supervision. It is also due to the fact that EU banks now hold considerably more liquid assets and euro-area banks have reinforced their capital buffers by €812 billion since 2014. Furthermore, the number of non-performing loans is now close to pre-crisis levels. Thanks to this progress, the Euro Summit in December 2018 was able to pave the way for the next steps of the banking union.  

Unfinished business

The EU leaders meeting in Sibiu also looked at some of the issues that are still awaiting final agreement. In the financial sector, the main ‘unfinished business’ is the European deposit insurance scheme, or EDIS, and the backstop to the Single Resolution Fund.

The Commission’s November 2015 proposal for a European deposit insurance scheme would complete the banking union and be an essential component of a financial system built on a common currency. It would improve the protection of bank customers and further increase the stability and resilience of the financial system, both in the euro area and beyond.

The backstop to the Single Resolution Fund, which is agreed in principle but not yet operational, would further increase trust in the EU’s banking system. It would do this by providing a credit line to the fund and minimising even further the risk that taxpayers end up bailing out failing banks. The fund, which is pre-financed from contributions from euro-area banks, has a target size of around €55 billion. The size of the backstop will correspond to that of the fund.

Further work is also needed to deepen the integration of European capital markets so they offer greater opportunities to investors and European businesses.

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