What is happening in the European banking system evidently requires direction and coordination by the authorities, who must be able to intervene each with its own peculiarities, united by full agreement with the Community rules. From the ECB, supported by the central banks of the individual EU countries, up to the EBA.
Just the European Banking Authority par excellence will not be based in London for a while yet. In fact, with the start of Brexit negotiations between the British government and the governing bodies in the European Union, the EBA will move and Italy is among the countries that could host its activities.
It should also be remembered that the United Kingdom is the home of Euro Swap and Options Trading, an activity intended to mitigate the risks on financial exposures to commodities, currencies and interest rates. 90% of the volumes in this sector are traded in euros and settled by banks located in London for over 400 billion euros.
Obviously, with Brexit, settlement in euros will no longer be possible from London, or rather the agreements on new "contractual and settlement" terms between the European and British markets will take years. So the move of the EBA becomes extremely urgent, being the Authority is one of the pillars of the European Banking Union and having among its functions that of guaranteeing the orderly functioning of the banking sector.
Many business cities have come forward to host the banks that will have to move from London, also offering commercial and tax concessions in a real competition that starts from the most interesting real estate sites and which are partly being rebuilt for the occasion.
Frankfurt, Dublin, Paris, Amsterdam, Madrid and Milan among the cities that could host the defecting banking institutions of the City. Why the Eba in Milan? There is no doubt that with the ECB in Frankfurt, the ESMA, a sort of European Consob which supervises financial instruments and markets, in Paris and the controversy triggered by the Apple affair in Ireland, Milan and Madrid are among the favourites. Currently, however, Spain already hosts three European agencies while Italy only two.
Many detractors of the Italy option argue that with a 30% concentration of European bad debts (NPLs) in Italian bank accounts, moving the EBA to Milan would seem like a paradox. But in the light of what we are experiencing on the markets and with the uncertainty about the fate of the exposure in derivatives of Deutsche Bank and Commerzbank it must be emphasized that the NPLs are perfectly quantifiable while a hypothesis of closure or termination of contracts in derivatives with counterparties in serious difficulty in terms of creditworthiness immediately sends us back to the Lehman case with thoughts.
And even if the agreement with the American authorities will limit the Deutsche Bank super-fine, this will not be enough to find a solution for systemic banks that see the skyrocketing prices of their CDS (which measure the risk of default). We also recall that the exposure to derivatives of European banks is double that of US banks and represents the real emergency to be defused and secured.
The Italian tradition of a solid and operationally well organized central bank has made it possible over the years to manage complex crises with sometimes pioneering solutions and in any case in full compliance with EU directives.
Let us not forget that Italy has been one of the six founding countries since the dawn of the current EU. In the meantime, however, with the need for a legislative change ratified by the European Parliament and the European Council, the time required for a decision is lengthening. And perhaps they will offer our Government a more shrewd starting point for reflection on an opportunity to be seized, which looks beyond domestic issues and embraces a European interconnection which would undoubtedly help efforts along the way of reforms and plans to support policies for a more tangible recovery consistent with the potential of our entrepreneurial economic fabric.
The EMA (the European Medicines Agency) and the EBA represent two peculiar realities for our country and only an active commitment to extend the experience of special economic zones, which in countries like Poland not to mention China they have made the difference in terms of economic growth, and an effective and intelligent use of EU funds would enhance an already fertile ground such as that of a city that has emerged victorious from a challenge such as the Expo in current times. A city where businesses, universities and financial institutions cooperate efficiently.
