The European Commission's president-elect Ursula von der Leyen has put forward the nominees for her new team of commissioners and the new Commission is due to take office soon. Valdis Dombrovskis remains in charge of the directorate general for financial stability and capital markets, as part of his portfolio as ‘Executive Vice-President for an economy that works for people’. As the new Commission begins its next five-year term, what are the main priorities likely to be in the area of financial services?

Green finance

To meet its 2030 climate and energy targets, the EU needs between €180 billion and €290 billion in additional annual investments over the next decade. To reach climate-neutrality by 2050, even more investment will be needed – not just public funding, but private investment too. Therefore, the new Commission will focus on encouraging more people to invest in green projects – and making it easier for them to do so. A fundamental part of this will be the work on a unified EU classification system, or taxonomy. A taxonomy will contribute to the fight against ‘greenwashing’. Greenwashing, which is when a company or organisation uses PR or marketing to make it appear more environmentally friendly than it actually is, is currently widespread in the financial sector. A taxonomy will also form the basis for the continuing work on standards and labels, such as a Green-bond standard or an EU Ecolabel. 

Looking further ahead, a Sustainable Europe Investment Plan will be drawn up to unlock €1 trillion of sustainable investment over the next decade. It is possible that the European Investment Bank will be transformed into the EU Climate Bank, with a total financial capacity of up to 50% of its resources dedicated to climate by 2025.  And the EU will continue cooperating with international partners in order to mobilise private finance globally for green and climate-friendly investments. As part of this, the EU and a number of other countries in October launched the International Platform on Sustainable Finance.

FinTech, payments and cryptocurrencies

Another key policy area for the upcoming mandate is FinTech and the move to a digital economy. A FinTech strategy will be developed to ensure that European policies keep up with the digital transformation of the financial sector and that companies, consumers and investors can embrace these new opportunities while still remaining protected. Crypto-assets, including stablecoins – a form of cryptocurrency whose value is fixed by pegging them to the price of another asset – present many opportunities. They may make it easier to offer cheap, fast payments and help ensure that financial products and services are accessible and affordable to as many people as possible.  At the same time, digital technologies also present serious challenges, and a number of issues need to be addressed, such as cybersecurity, unfair competition, money laundering and terrorist financing, privacy, consumer protection and possible threats to financial stability.

Banks and the banking union

Continuing the work to make the banking sector more resilient and complete the banking union will be a major focal point in the next few years. A particular priority is reaching an agreement on a European insurance deposit scheme, so that people can be reassured that their bank deposits are protected at all times. Also important is finalising the common backstop to the Single Resolution Fund – a last-resort insurance measure to shield taxpayers in the event of a bank failure. These are the missing elements needed to complete the banking union.

In the banking sector more generally, work will continue to tackle non-performing loans. Levels of non-performing loans have fallen by more than half since 2014, but they still remain too high in some Member States. Another priority will be the implementation of the final set of Basel III global banking standards, in a way that continues to improve the solidity, stability and resilience of the banking sector, whilst ensuring it still plays its essential role in financing the real economy.

The capital markets union and access to financing for companies

EU companies are still overly reliant on bank financing and too often small and medium-sized firms (SMEs) have to move abroad to get the funding they need. So the ongoing project to create a genuine capital markets union will continue to be a priority. To support this, there are plans to create a private-public fund to facilitate SMEs’ access to public equity. The single market for capital needs to work for businesses but also for consumers. Trust in the financial system generally – and in the financial system of other Member States in particular – remains low. Consumers rarely make use of the opportunities the single market for financial services offers, for instance looking outside of their own country to find the best savings product for their retirement pensions. Making the rules clearer and more consistent across different products and delivery channels could help change this. 

In addition, the new Commission will be exploring ways to make cross-border investments easier. For instance, investors have frequently cited a need for greater harmonisation of insolvency laws and tax proceedings. The Commission will also look at ways to improve the supervisory system, including assessing the effectiveness of the recently agreed rules on the European Supervisory Authorities.

Fight against money laundering/Sanctions/role of the euro

There will be a new, comprehensive approach to fighting money laundering and the financing of terrorist activities. This will focus primarily on strengthening supervision and enforcement of legislation, including across borders. The new Commission will continue to work for a multilateral, rules-based global financial order and to ensure effective enforcement. It will also focus on strengthening the international role of the euro. The euro is already the second most important currency in the international financial system, after the US dollar. Targeted measures to make the euro more attractive could be pursued for instance in the areas of payments services, benchmarks and foreign exchange markets.

Further information: Read President-elect’s mission letter to VP Dombrovskis; Answers to European Parliament; Watch VP Dombrovskis’ hearing.