Comment

The EU should increase financial coorperation

Summary Although Denmark is not in the euro, we are probably the country that has the most interest in a stable currency and capital market in Europe.

This entry was posted in Jyllands-Posten, September 10, 2018.
The EU's cooperation on the control of banks and the rest of the financial sector will be a priority in the coming years. There is a lot to catch up with. There has not been done enough to consolidate the economic and monetary union, and it is especially urgent with the completion of the banking union - linked to the European Central Bank - before the current good economic conditions change.

At the same time, the EU is faced with new challenges: In the US, Trump is rolling back the increased control of the financial sector introduced after the financial crisis. Britain is leaving the EU with the risk of jumping on the same bandwagon.

Finally, the recent whitewashing scandals have clearly demonstrated the need for cross-border action. Today, in reality, only the United States has information and sanctions that can be used to crack down on money laundering - even the ones happening in Europe. The EU must get up to speed as fast as possible.

Although Denmark is not in the euro, we are probably the country that has the most interest in a stable currency and capital market in Europe.

The single market would not have developed into the success it has become without the euro - and with Denmark as the big winner. When, after the financial crisis, the EU began to stabilize the financial market and established a banking union with a common banking supervision and a bank recruiting fund, Denmark was extremely active - with Margrethe Vestager as Minister of Economy.

We got almost all our wishes fulfilled, first and foremost the principle that it is the banks and not the treasury that pays the bill when a bank goes bankrupt.

The fact that Denmark played a role is due to the interest of the euro countries to involve non-euro countries, especially the British. There was also a belief in the EU that Denmark would enter the new banking union. However, at the establishment in 2014, Denmark chose to opt out, especially on the grounds that Great Britain did not participate. Certain parts of the financial sector also had greater confidence in our own banking supervision -a known entity - than the EU's new and untested supervision.

Now, the British are heading out of the EU, and the opportunities for non-euro countries to make an impact and gain the benefit of reinforced banking cooperation will disappear unless one enters the banking union.

At the same time, the European Banking supervision has passed the manhood test and developed a capacity and insight that no national banking supervisor can equal. Finally, the money laundering scandal (in Danske Bank) must have blotched the myth that national supervision can resolve everything on its own.

The government established last year a new committee on Danish participation in the banking union. The report will be issued next year - after the election. Hopefully, this will lead to a different decision than in 2014.

The reinforcement of anti-money laundering cooperation has already begun in the EU. The first step has been  taken by the European Banking Authority in which Denmark participates. But after brexit, non-EU countries will have an ever smaller role to play in this forum. It will become the members of the banking union who decide the pace.

The international financial market will probably also consider that the Common EU Banking Supervision has greater control over the sector than what can be provided nationally in those countries that are not in the system.

The fight against money laundering is not just a question of controlling financial transactions. It is also a question of combating crime. Therefore, not only the Danish FSA, but also the State Prosecutor for Serious Economic and International Crime are involved in Denmark, but with the same need to draw on EU cooperation. Europol and Eurojust (EU Prosecutor's Office) are active in the investigation of money laundering.
Unfortunately, Danish participation is limited by our reservations. One should think carefully about - during the forthcoming election campaign - the possibilities for touching the reservations before they are excluded in the foreseeable future.