On 9 September 2024, the European Commission (Commission) published a report by Mario Draghi (former European Central Bank (ECB) President) on the future of European competitiveness.

Banking Union

To increase the financing capacity of the banking sector, the report asserts that the EU should aim to revive securitisation and complete the Banking Union. It recommends that the Commission make a proposal to adjust prudential requirements for securitised assets and that in parallel, the EU should review transparency and due diligence rules for securitised assets. The report also calls for the setting up of a dedicated securitisation platform, as other economies have done, which would help to deepen the securitisation market, especially if backed by targeted public support. Furthermore, the report calls on the EU to assess whether current prudential regulation, in light of the possible upcoming implementation of Basel III, is sufficient to have a strong and international competitive banking system in the EU. A minimal step towards completing the Banking Union would be to create a separate jurisdiction for European banks with substantial cross-border operations that would be “country blind” from the regulatory, supervisory and crisis management viewpoints.

CMU

Among the policy recommendations for the Capital Markets Union, the report recommends that the European Securities and Markets Authority (ESMA) should transition from a body that coordinates national regulators into the single common regulator for all EU security markets. An essential step to transform ESMA into a regulatory and supervisory agency similar to the Securities and Exchange Commission is to modify its governance and decision-making processes along similar lines as those of the ECB Governing Council, so as to detach them as much as possible from the national interests of EU Member States. To overcome likely opposition, the EU regulator will have to share supervision with national regulators and elicit their cooperation along lines similar to what the European Stability Mechanism does with national central banks in euro area bank supervision.