The Banking The Banking Executive Magazine - June 2024 Issue

European banks have made signifi- cant progress since the European debt crisis between 2008 and 2012. According to a report by Bloomberg, 71% of European banks surpassed market expectations in their first- quarter earnings in 2024. Spanish banks have demonstrated particular strength as they benefited from higher interest rates, thereby boosting their lending income. Over the past decade, banks in the country have managed to enhance their effi- ciency by reducing staff and branches. The revenue of the Spanish flagship lender, Santander jumped 10% year on year in the first three months of 2024, driven by growing lending in- come due to the high interest rate. BANKS RISKS AHEAD While banks may maintain their growing momentum, a potential risk may be ahead amid the outcome of the 2024 EU election. Banking sys- temic stability can be challenged during a time when there is no inte- grated solution in response to a "bank-run" type of crisis. THREAT TO EUROPEAN INTEGRATION During the COVID-19 pandemic the EU took unprecedented steps to- wards a fiscal union with an 800-bil- lion-euro recovery fund, with France a key player in making that happen. A rightward shift in that country and beyond may weaken the case. The risk premium on bonds issued by Italy, a key beneficiary of the pan- demic recovery programme, widened but remains well contained. Citi experts see that longer-term, di- minished prospect, for programmes similar to the recovery fund would imply a higher structural risk pre- mium on the bonds of the bloc's high debt countries. MAIN ISSUES ON THE EU FUTURE AGENDA While each country has its own na- tional concerns, there are some gen- eral themes on the EU future agenda: • Russia’s war in Ukraine, and how to boost the EU’s own defense ca- pacities; • The sluggish EU economy; • How to make the EU’s ambitious climate and environment plans compatible with the interests of workers such as farmers and tradi- tional industrial manufacturers; • How to make the EU more com- petitive on the world stage; • The EU’s recent migration and asy- lum pact; • The rise of the far right. FUTURE OF THE EU AFTER 2024 ELECTION The 2024 European election opens the next chapter for the European Union. The newly-elected Members of the European Parliament (MEPs) will take a number of key decisions on who will head EU institutions and resume Parliament’s work. The first plenary session of the new legislative term will take place from 16 to 19 July in Strasbourg. Before that session, the newly-elected Mem- bers will form political groups based on shared political ideas. At the first plenary, the Parliament will elect its new President, vice-presidents and quaestors as well as decide on the number of MEPs who will be sitting in each parliamentary committee. At a later stage, MEPs will vote to elect a new President of the European Commission. Then they will assess candidates for commissioners through public hearings. The new Commission will need to secure Par- liament approval in a plenary vote to take office. the BANKING EXECUTIVE 14 ISSUE 186 JUNE 2024