On 6 July 2016, the Committee on Economic and Monetary Affairs (ECON Committee) held their first hearing with Vice-President Valdis Dombrovskis – who will take over responsibility for financial regulation following Commissioner Hill’s resignation.
Vice-President Dombrovskis is already responsible for the Euro & Social Dialogue, and now will also cover Financial Stability, Financial Services and the Capital Markets Union. The special hearing before MEPs gave him an opportunity to set out his approach and answer questions, with inevitably lots of focus on the result of the UK referendum.
Vice-President Dombrovskis made clear his intention to keep on track and maintain momentum on the agenda begun by Commissioner Hill. He stressed the importance of a financial system with a strong and credible prudential basis, balanced by the need to support growth, and open to technology developments. He warned that while financial services will be the sector most effected by Brexit, single market access comes with commitments including free movement of people, and therefore the UK will not be able to cherry-pick.
On banking regulation, he stressed that Bank Recovery and Resolution Directive (BRRD) and deposit guarantee rules need to be fully implemented, and that focus was needed to complete banking union and the European deposit insurance scheme – without the need for an intergovernmental agreement. Looking forward, he said that measures were still needed to reduce risk, in particular TLAC would need to work with MREL, and therefore a revised Capital Requirements Regulation (CRR) would be published by end of the year.
Capital Markets Union (CMU), he said, was made all the more important if Europe’s main financial center was outside of the EU, and was needed alongside banking union. CMU progress will be reviewed next year with actions taken where more needs to be done. He committed to seeing through the Call for Evidence review of regulation emphasizing changes where prudential measures could be achieved in a more growth-friendly way. On retail financial services, he emphasized the need for a focus on more choice and better quality, responses to the Green Paper were still being analyzed with proposals due later in year, ‘Green finance’ and FinTech will be priorities.
Under questioning from MEPs, Vice-President Dombrovskis addressed some specific issues, including:
Overall Vice-President Dombrovskis gave a clear sense of direction on financial regulation and acknowledged the significance of Brexit on the shape of financial and capital markets. A challenge ahead will be to keep the balance in rule-making between the EU and the needs of the Eurozone.