Villeroy Calls for Deeper Financial Integration

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The European Union should use Britain’s exit from the bloc as an opportunity to seek deeper integration of its financial markets, according to French central bank Governor Francois Villeroy de Galhau.

In a speech in Bucharest on Friday, Villeroy made a series of proposals that would encourage more bank mergers, build a more unified payment system and boost the role of the euro in international transactions.

“Making the best of such a misfortune as Brexit is the surest way to overcome it,” Villeroy said. “Our collective response to Brexit should be the further integration of Europe.”

Brexit could leave the continent’s financial sector in a vulnerable position as it relies on London to handle large chunk of its transactions and trading. European Central Bank officials have long been clamoring for progress in completing the bloc’s banking union to prevent banks from losing more ground to the U.S.

Earlier this week, Villeroy and Bundesbank President Jens Weidmann called on leaders to double down on efforts to integrate capital markets to make the region more resilient to economic shocks.

Here are some key excerpts from Villeroy’s speech:

  • “A useful step toward forming genuine pan-European banking groups could be to lower capital requirements of European subsidiaries, while safeguarding their financial position through credible cross-border guarantees provided by the parent company, which could be triggered both in normal times and in crisis situations.”
  • “The EU needs to strengthen its position as rule maker through enhanced equivalence regimes. Brexit has given new momentum to this topic: a comprehensive reassessment of current equivalence regimes is essential given the scope of the relationships between the EU and the U.K.”
  • “In order to preserve our sovereignty, a European strategy for retail payments would be necessary, with a view to addressing market fragmentation and promoting unified European-based solutions.”
  • “The set-up of a unified collateral management platform operated by the Eurosystem will be another key step directly contributing to an effective capital-markets union.”
  • “A larger use of the euro would help to protect our businesses against foreign-exchange risks or legal disputes abroad”

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