Claudia Buch: Financial integration in the Baltics - lessons in resilience and transformation

Keynote speech by Prof Claudia Buch, Chair of the Supervisory Board of the European Central Bank, at the International Financial Markets Conference, organised by the Ministry of Finance of Lithuania, Bank of Lithuania and the Lithuanian Banking Association, Vilnius, 4 October 2024.

The views expressed in this speech are those of the speaker and not the view of the BIS.

This year we are celebrating the tenth anniversary of European banking supervision under the Single Supervisory Mechanism (SSM). With the SSM and the banking union more broadly, Europe has demonstrated its ability to respond to crises in a united way – with greater harmonisation and integration rather than retreating to national solutions and fragmentation. A lot has been achieved in the past ten years in terms of enhancing resilience, reducing risks, and applying common rules and supervisory standards.

But these achievements pale in comparison to the transformation and integration witnessed in the Baltic region. Over the past 30 years, the Baltic states have gone through an unprecedented process of institution-building following the disintegration of the former Soviet Union. There has been a massive economic transformation in response to changes in relative prices and an almost complete reorientation of trade flows. Accession to the European Union and the adoption of the euro around ten years ago have been the most visible symbols of this transformation.

Progress has been impressive. While the GDP per capita of the Baltic states was around one-third of the euro area average in the mid-1990s, it has now reached two-thirds. In many areas, the Baltics are leading the way in terms of the digital transformation. They have attracted foreign direct investment, know-how and capital inflows. And their banking markets are closely integrated, in particular with the Nordic region.