speech banking union and capital markets union : high time to move on keynote speech by luis de guindos, vice - president of the ecb, at the annual joint conference of the european commission and the european central bank on european financial integration brussels, 7 june 2023 it is a great pleasure to be participating in this year ’ s joint conference on financial integration. this event offers an excellent opportunity to reflect on key developments in the financial sector over the past year and to reassess priorities for advancing the integration, development and safety of the financial system. recent developments and the euro area banking sector in recent months, bank failures in the united states and switzerland have affected financial markets worldwide. this “ real - life stress test ” has provided valuable insights and lessons for the euro area banking sector and for our regulatory and supervisory framework. the european banking sector has proven resilient. and the enhanced regulatory and supervisory framework put in place following the great financial crisis has proven its worth. but it is still incomplete – the basel iii agreement still needs to be transposed into eu banking regulation in a full and timely manner. we cannot be complacent. during the recent bank failures, deposits were withdrawn much faster than during the great financial crisis. silicon valley bank lost more than usd 40 billion – almost 30 % of its deposits – in a single day. the extraordinary speed of deposit withdrawals was driven by the widespread use of online banking and the rapid dissemination of news via social media and was compounded by the highly concentrated customer base. [ 1 ] in this ever - faster digital world, banks, supervisors, central banks and legislators need to review the tools for safeguarding liquidity conditions and financial stability. the turbulence seen in financial markets this spring is a timely reminder of the benefits of strong regulation and supervision. while adequate regulatory standards are the first line of defence against bank failures, they must be supported by a second line of defence in the form of steady, powerful and agile supervision. harmonised and effective supervision and an enhanced resolution framework ecb banking supervision has successfully developed and promoted harmonised supervisory practices. it started to closely monitor risks related to rising interest rates when the first signs of inflationary pressures emerged, long before the bank failures in the united states. the european commission [ 2 ] and the european court of auditors [ 3 ] recently confirmed that the ecb has established itself as an effective and mature supervisory authority, and the ecb has already started to implement their recommendations. the eu has made

integration in the euro area. third, the capital markets union and the banking union are intrinsically linked. more integrated capital markets support cross - border banking activities, while more cross - border holdings would allow banks to diversify, making them more resilient. from issuance to underwriting, banks provide essential services for capital markets. therefore, a more resilient and integrated banking system also supports the smooth functioning and further integration of capital markets. key legislative initiatives to advance capital markets integration to move forward on the legislative front, we need to finalise the implementation of the commission ’ s capital markets union action plan – without compromising on its ambition. this includes implementing proposals such as the consolidated tape, the targeted harmonisation of insolvency rules and the upcoming initiative on the withholding tax framework. we welcome the recent statement made by the co - legislators in april, in which they committed to finalising cmu legislative initiatives during the current institutional cycle, and the recent agreement on the european single access point. the esap will help to mobilise and allocate capital by making it easier for investors to identify suitable firms and projects to invest in. likewise, the proposed targeted harmonisation of insolvency regimes should make it easier to reallocate resources from failing firms and provide more transparency for cross - border investors. finally, a more efficient and harmonised withholding tax framework will reduce the burden and costs for investors and facilitate cross - border investment. beyond the current institutional cycle and the cmu action plan, eu legislators should also look at structural issues, such as improving the current architecture to enable more consistent and harmonised supervision of markets. conclusion the euro area financial system recently passed a real - life stress test. at the same time, the events of this spring underlined the importance of making decisive progress on the european banking union and capital markets union projects. the financial market turbulence and contagion from the united states and switzerland would have been far more muted had we been closer to our goals. completing the banking and capital markets union projects will increase cross - border bank lending and enhance the dynamism of public and private equity markets. both are key to enhancing integration and stability in the euro area financial system, and they will also ensure that the funding for the green and digital transitions is available to meet the challenges ahead. thank you for your attention. 1. rose, j. ( 2023 ), “ understanding the speed and size of bank runs in historical comparison