Lagarde in Frankfurt:
- Celebrating 10 years of Single Supervisory Mechanism (SSM)
- Bank capital ratios improved significantly: CET1 up from 12.7% (2015) to 15.8% (mid-2024)
- Euro area needs more banking consolidation – only 2 euro area banks rank in global top 10
- Banks need to help fund €5.4 trillion in green/digital/defense investments (2025-2031)
- Pushes for reduced national ring-fencing of capital/liquidity
- Wants bigger securitization market (US market 3x larger than Europe’s)
- Reducing the ring-fencing of capital and liquidity along national lines would allow funds to flow freely within banking groups and facilitate lending across borders
Key quote: “Currently, only two banks incorporated in the euro area rank among the ten largest banks in the world, holding the eighth and tenth positions.”
Lagarde is pleased with banking supervision progress but wants to see bigger, more integrated European banks to compete globally and fund major economic transformations. She’s pushing for reduced national barriers and expanded securitization markets to make this happen.
This is not a factor for the euro but my schedule shows another speech from her at the bottom of the hour. I can’t imagine that’s truly the case but I’ll keep an eye out.