The Difficult Construction of European Banking Union: Introduction (original) (raw)
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The Difficult Construction of European Banking Union
2020
Banking Union represents one of the most important developments in European integration since the launch of Monetary Union. Furthermore, the design of the Banking Union agreed between 2012 and 2014 was a messy compromise among European Union (EU) member states. It is not surprising then that Banking Union has sparked a lively academic debate and triggered an ever-growing number of publications from different disciplinary backgrounds. This edited volume is located at the intersection of two major waves of academic research on Banking Union. The first wave of academic work focuses upon the economic rationale underpinning the supranationalisation of control over banking-regulation, supervision, support and resolution-and the political dynamics and legal issues that shaped the design of the Banking
Banking union:state of play and proposals for the way forward
Banking Union: state of play and proposals for the way forward , 2022
This paper examines the current state of play of the Banking Union project aiming at unveiling the weaknesses and gaps of this still incomplete framework. In this context, the implementation so far of the Banking Union legislation sheds light on the vulnerabilities concerning supervisory change, transparency, trust and a proper allocation of bank failure costs since all these criteria are deemed as essential contributing factors to promoting financial stability at European level. Taking into consideration the latest steps towards completing the Banking Union framework until June 2022, this paper aims at depicting the proposed leeway potentially capable to align resilience and flexibility with the view of mitigating any persisting shock-amplifying factor against financial stability.
European Banking Union: Context, Structure, Challenges and Opportunities
EU Financial Regulation and Markets: Beyond Fragmentation and Differentiation, 2021
The European Banking Union (EBU) has had a complex strategic, political, economic and legal formation, and throughout the current turmoil there has been a special emphasis on preserving its stability and further development. The EBU formally consists of three interconnected pillars applicable to the euro area: (1) the Single Supervisory Mechanism (SSM) that encompasses European Central Bank’s (ECB) direct and indirect prudential supervision; (2) the Single Resolution Mechanism (SRM) that provides for a harmonized resolution framework; and (3) an envisaged safety net in the form of the European Deposit Insurance Scheme (EDIS). Additionally, the EBU is based on the common EU-wide Single Rulebook. A strong incentive for the EBU’s creation originated both from the repercussions of the global financial crisis and the European sovereign debt crisis. The EBU has experienced constant challenges from its very beginning, including the opposition to any indication of a transfer union, and criticism related to its design. Although progress is recommended on all elements, the most compelling is timely completion of the EDIS. From its inception, the EBU’s main goal has been to break the “vicious circle” between sovereigns and their banks – and that is in the focus of this article. Furthermore, this article explores the structure, achievements and inadequacies of the EBU pillars, and analyses potential threats and opportunities related to this segment of European integration.
The road towards the establishment of the European Banking Union
Munich Personal RePEc Archive No 62463, 2015
The rising delinquencies in the U.S. subprime mortgage market in 2006 and the succeeding collapse in housing prices had a considerably negative impact on the functioning of the European financial systems and the smooth operation of European economies. Indeed, in the Euro-area, what started as a financial crisis escalated to a twin crisis after being doubled by the eruption of a massive sovereign debt crisis in 2010. The lack of an established set of bank supervision and resolution strategies at the Euro-area level, the vicious circle between banks and European nation-states, the threats for the sustainability of the common currency, and the deterioration of the market conditions were the key factors which lately led to the acceleration of the steps towards the creation of a banking union in Europe. The principal aim of the European Banking Union is to shape the necessary legal and institutional framework and provide the authorities with powers and tools to deal with ailing banks in order to prevent the devastating effects that a future shock may have on the financial system, the real economy, and the society. This paper presents the formal reactions of the sovereigns and the European Central Bank to the twin crisis, and critically discusses the key problems and the inherent weaknesses which led to the establishment of a banking union for the Euro-area member states. The structure of the banking union, the various aspects of its operation, and its future prospects are also presented and discussed.
EU Financial Regulation and Markets Beyond Fragmentation and Differentiation, 2020
The European Banking Union (EBU) has had a complex strategic, political, economic and legal formation, and throughout the current turmoil there has been a special emphasis on preserving its stability and further development. The EBU formally consists of three interconnected pillars applicable to the euro area: (1) the Single Supervisory Mechanism (SSM) that encompasses European Central Bank’s (ECB) direct and indirect prudential supervision; (2) the Single Resolution Mechanism (SRM) that provides for a harmonized resolution framework; and (3) an envisaged safety net in the form of the European Deposit Insurance Scheme (EDIS). A strong incentive for the EBU’s creation originated both from the repercussions of the global financial crisis and the European sovereign debt crisis. The EBU has experienced constant challenges from its very beginning, including the opposition to any indication of a transfer union, and criticism related to its design. Although progress is recommended on all elements, the most compelling is timely completion of the EDIS. From its inception, the EBU’s main goal has been to break the “vicious circle” between sovereigns and their banks – and that is in the focus of this article. Furthermore, this article explores the structure, achievements and inadequacies of the EBU pillars, and analyses potential threats and opportunities related to this segment of European integration.
Towards European Banking Union
2015
• New obstacles to the European banking union have emerged over the last year, but a successful transition remains both necessary and possible. The key next step will be in the second half of 2014, when the European Central Bank (ECB) will gain supervisory authority over most of Europe' s banking system. This needs to be preceded by a rigorous balance sheet assessment that is likely to trigger significant bank restructuring, for which preparation has barely started. It will be much more significant than current discussions about a bank resolution directive and bank recapitalisation by the European Stability Mechanism (ESM). • The 2014 handover, and a subsequent change in the European treaties that will establish the robust legal basis needed for a sustainable banking union, together define the policy sequence as a bridge that can allow Europe to cross the choppy waters that separate it from a steady-state banking policy framework.
Time to address the shortcomings of the banking union
Frankfurt a. M.: Leibniz Institute for Financial Research SAFE, 2020
Discussions about the banking union have restarted. Its success so far is limited: national banking sectors are still overwhelmingly exposed to their own countries' economies, cross border banking has not increased and capital and liquidity remain locked within national boundaries. The policy letter highlights that the current debate, centered on sovereign exposures and deposit insurance, misses critical underlying problems in the supervision and resolution frameworks. The ECB supervisors' efforts to facilitate cross-border banking have been hampered by national ringfencing. The resolution framework is not up to its task: limited powers of the SRB, prohibitive access conditions and limited size of the Single Resolution Fund limit its effectiveness. A lack of a coherent European framework for insolvency unlevels the regulatory field and creates incentives to bypass European rules. The new Commission and European Parliament, with the new ECB leadership, provide a unique opportunity to address these shortcomings and make the banking union work.