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William R. Rhodes and Stuart Mackintosh

Europe's Halfway Banking Reforms Have Run Out of Time

Scandals and failures will continue to plague the sector until it completes the unified regulation it promised more than a decade ago, including deposit insurance similar to that of the U.S.

Former Wirecard CEO Markus Braun prepares to testify at the Bundestag commission

Former Wirecard CEO Markus Braun prepares to testify at the Bundestag commission

Photographer: Pool/Getty Images 

Europe’s banking sector continues to be shaken by scandals and failures. German public prosecutors are facing demands to bring charges against the German banking arm of Greensill Capital. Germany's financial regulator, BaFin, has been humiliated by the 3.5 billion euro Wirecard scandal. Serious money laundering cases involving large banks in many euro zone countries have shaken faith in Europe’s bank regulation and oversight.  Fixing this erosion of trust by completing the Banking Union is long overdue. Action is now urgent and essential.

Leaders in the euro zone responded to the 2008-2009 global financial crisis by committing themselves to a banking union that was to include reform of the regulation of the largest banks, action on bank resolution and common deposit insurance for the bloc's members. The rationale was sound: To ensure future financial and economic stability, the continent needed reforms to strengthen and regulate Europe’s largest banks, which underpin about 70% of lending across the euro zone. Doing so would bring considerable economic benefits, we were assured. Yet more than a decade later the banking union is still unfinished. It's time to complete the task and make Europe, and her banks, better able to weather future economic storms.