European Banking Union: An Immediate Tool for Euro Crisis Management and a Long-Term Project for the Single Market

After the adoption of a single monetary policy which commits the European Central Bank to maintaining the euro's purchasing power and price stability in the Eurozone, the European Union is facing a new, but equally fundamental challenge: the implementation in a relatively short time of the so-called "Banking Union". Its purpose is twofold: (1) breaking the link between banking and sovereign risk, with the ultimate goal of achieving full protection of EU savers in the event of a crisis; and (2) ensuring uniformity of credit conditions - which are still too fragmented - within the European banking market, to ensure greater EU integration of the financial system. Starting from the Communication in which the European Commission stressed the need for a banking union, this paper intends to explore the complex process towards its establishment by looking at the EU institutional mechanisms and the legal aspects. In particular, the analysis will be based on two building blocks: (1) the Single Supervisory Mechanism, with a single supervisor at the heart of the banking union; and (2) the Single Resolution Mechanism as a new integrated resolution framework and a resolution fund to address the failure of banking institutions. The paper then assesses the next steps for a fully fledged banking union, necessary in order for this new instrument to lay the foundations for a genuine Economic and Monetary Union, thereby fostering financial and economic stability in the euro area and in the EU as a whole.

Roma, Istituto affari internazionali, October 2014, 33 p.
Publication date: 

1. Call for a banking union
    1.1. From financial integration to market fragmentation
    1.2. The role of the banking sector
    1.3. Towards a banking union for the Eurozone
2. Key steps to the Single Supervisory Mechanism (SSM)
    2.1. Euro area summit of 29 June 2012: the turning point
    2.2. European Commission's proposal to confer specific tasks on the ECB
    2.3. The green light at the EU level and adoption of the regulation on the SSM
    2.4. Preliminary step for the functioning of the SSM
3. Progress of the Single Resolution Mechanism (SRM)
    3.1. An SRM to follow the SSM
    3.2. European Commission's proposal to address the failing banks
    3.3. Towards the adoption of the regulation on the SRM
    3.4. Resolution process
    3.5. Single Resolution Fund (SRF)
    3.6. Single Resolution Board (SRB)
    3.7. Entry into force of the SRM
4. Open issues
The way forward

Research area