All restrictions on freedom of establishment and freedom to provide services in respect of self-employed activities of banks and other financial institutions have been abolished since the 1970s. The laws, regulations and administrative provisions of the Member States relating to the taking up and pursuit of the business of credit institutions have been coordinated within a single regulatory framework [Directive 2006/48].
The right of access is based on the mutual recognition of supervision systems, i.e. application of the principle of supervision of a credit institution by the Member State in which it has its head office, and the issue of a "single bank licence" which is valid throughout the European Union. The single licence authorises a bank established in a Member State to open branches without any other formalities or to propose its services in the partner countries. The principle of reciprocity governs the opening in the EU of subsidiaries of banks from non-member countries. Directive 2006/48 gives a definition of the own funds of credit institutions, a definition which is vital to the harmonisation necessary for mutual recognition. It also establishes a minimum level for the solvency ratio for credit institutions and the method of calculating the ratio to be observed between own funds and risk assets and off-balance-sheet items.
In the European internal market, the transparency, performance and stability of cross-border payment systems should match the properties of the best domestic payment systems. To this effect, a Directive harmonises the legal frame of payment services in the EU, including the conditions of information as well as the rights and obligations of the parts and purports to develop the infrastructures, procedures, common rules and standards needed for a pan-European payment system [Directive 2015/2366, see section 6.7]. In order to support effective and smooth financial mobility in the long term, another Directive lays down rules concerning the transparency and comparability of fees charged to consumers on their payment accounts held within the Union, rules concerning the switching of payment accounts within a Member State and rules to facilitate cross-border payment account-opening for consumers [Directive 2014/92]. A Commission notice provides a framework allowing banks to set in place cooperation arrangements aimed at making cross-border credit transfers easier and more efficient.
The financial crisis of 2007-2008 has shown that irresponsible behaviour by market participants can undermine the foundations of the financial system, leading to a lack of confidence among all parties, in particular consumers, and potentially severe social and economic consequences. Many consumers have lost confidence in the financial sector and borrowers have found their loans increasingly unaffordable, resulting in defaults and forced sales rising. As a response to the crisis, several EU Directives and Regulations were adopted or updated, forming a single rulebook for EU financial services, which is the foundation of the banking union [see section 7.3.4]. The legal instruments in the single rulebook ensure that there is strong regulation everywhere, without loopholes, guaranteeing a level playing field for banks and a real single market for financial services.
Thus, an updated directive coordinates national provisions concerning access to the activity of credit institutions and investment firms (referred to collectively as "institutions"), the modalities for their governance, and their supervisory framework [Directive 2013/36, last amended by Regulation 1222/2014]. This Directive contains the provisions governing the authorisation of the business, the acquisition of qualifying holdings, the exercise of the freedom of establishment and of the freedom to provide services, the powers of supervisory authorities of home and host Member States in this regard and the provisions governing the initial capital and the supervisory review of credit institutions and investment firms.
A Regulation contains the prudential requirements for institutions that relate strictly to the functioning of banking and financial services markets and are meant to ensure the financial stability of the operators on those markets as well as a high level of protection of investors and depositors [Regulation 575/2013, last amended by Regulation 2015/942]. Shaping prudential requirements in the form of a regulation ensures that all credit institutions and investment firms follow the same rules in all the Union, which should boost confidence in the stability of institutions, especially in times of stress. This should help to ensure that the Basel III international standards for bank capital adequacy are fully respected in all EU member states. With regard to the peculiarity of immovable property markets which are characterised by economic developments and jurisdictional differences that are specific to Member States, regions or local areas, competent authorities should be allowed to set higher risks weights or to apply stricter criteria based on default experience and expected market developments to exposures secured by mortgages on immovable property in specific areas.
To improve this situation a Directive lays down a common framework for certain aspects of the laws, regulations and administrative provisions of the Member States concerning agreements covering credit for consumers secured by a mortgage or otherwise relating to residential immovable property, including an obligation to carry out a creditworthiness assessment before granting a credit [Directive 2014/17, last amended by Regulation 1125/2014]. Member States should designate the national competent authorities empowered to ensure the application and enforcement of this Directive. They should also promote measures that support the education of consumers in relation to responsible borrowing and debt management, in particular in relation to mortgage credit agreements.
The Directive on deposit guarantee schemes constitutes an essential instrument for the achievement of the internal market from the point of view of both the freedom of establishment and the freedom to provide financial services in the field of credit institutions, while increasing the stability of the banking system and the protection of depositors [Directive 2014/49]. It is designed to protect depositors in the event of an authorised credit institution failing. It stipulates that there must be a guarantee scheme in all Member States, financed by the banking sector and covering all deposits up to a certain level. Member States must ensure that, in the event of deposits being unavailable, the coverage level for the aggregate deposits of each depositor is EUR 100 000 and that deposits above this level are protected in some cases.
A Directive establishing a framework for the recovery and resolution of credit institutions and investment firms provides authorities with a credible set of tools to intervene sufficiently early and quickly in an unsound or failing institution so as to ensure the continuity of the institution’s critical financial and economic functions, while minimising the impact of an institution’s failure on the economy and financial system [Directive 2014/59, last amended by Regulation 2016/1712]. This Directive ensures that shareholders bear losses first and that creditors bear losses after shareholders, provided that no creditor incurs greater losses than it would have incurred if the institution had been wound up under normal insolvency proceedings. It enables authorities, for example, to maintain uninterrupted access to deposits and payment transactions, sell viable portions of the institution where appropriate, and apportion losses in a manner that is fair and predictable. Those objectives should help avoid destabilising financial markets and minimise the costs for taxpayers [see section 7.3.4].
A clear regulatory framework for electronic money in the single market aims to enhance business and consumer confidence in this new form of payment, while ensuring that equal competitive conditions prevail for traditional credit institutions and other companies which issue electronic money [Directive 2009/110]. Electronic money institutions are included within the general scope of the provisions of the banking coordination directives. Companies which issue electronic money but which do not wish to provide the whole range of banking services have nonetheless the opportunity to operate throughout the single market on the basis of a single licence issued by a single Member State, which places them on an equal footing with credit institutions [see also sections 14.2.1 and 17.3.5].
The administrative or judicial authorities of the home Member State are alone empowered to decide on the implementation of one or more reorganisation measures in a credit institution, including branches established in other Member States [Directive 2001/24, last amended by Directive 2014/59, last amended by Regulation 2016/1712]. Other vital factors for the European banking system are: the Directive on annual accounts and consolidated accounts of banks and other credit institutions [Directive 86/635, see also section 17.2.1]; and the Directive on the obligations of branches established in a Member State of credit institutions and financial institutions having their head offices outside that Member State regarding the publication of annual accounting documents [Directive 89/117, see also section 17.2.1].
Payment cards are increasingly used in the Member States for obtaining cash from automatic cash dispensers or for paying for products or services directly and electronically at sales-point terminals or even at home. So as to encourage the interconnection of the networks, the Commission issued Recommendations: on consumer protection in the field of the new payment systems, and in particular the relationship between cardholder and card issuer [Recommendation 88/590]; on the transparency of bank charges relating to cross-border transactions [Recommendation 90/109]; and on transactions by electronic payment instruments, including electronic money products, and in particular the relationship between issuer and holder [COM/97/0353].