Journal of Finance and Investment Analysis

The establishment of the European Banking Union as a decisive step towards the completion of the Economic and Monetary Union The latest developments

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  • Abstract

    The financial and economic crisis occurred since 2008, has threatened economic stability in the whole euro zone. Besides it showed that the EU banking system was highly vulnerable to turbulences. This is why the EU competent institutions have elaborated since 2012 a strategy for the implementation of reforms in the financial, fiscal and economic sectors with the ultimate aim of strengthening the institutional architecture of Economic and Monetary Union (EMU). One of the building blocks on which is based the above project is the establishment of the European Banking Union (EBU). The EBU is based on a single regulatory framework, known as the single rulebook. This is a set of rules contained in EU regulations and directives governing the single market of financial services. The EBU covers three crucial for the stability of the financial system issues namely: (a) the supervision of banks which is necessary to prevent banking crises, (b) the management (settlement) of banking crises and (c) the deposit guarantees. The primary element of the EBU is the creation of a supranational (European) banks prudential supervision framework including on the one hand uniform rules on financial services applicable to all Member States and on the other a Single Supervisory Mechanism (SSM). This supranational system is complemented by the creation of an integrated European framework of banking sector crises settlement. Main pillar of this framework is a central supranational financial institutions resolution authority, the Single Resolution Mechanism (SRM) which is the necessary complement of SSM. The EBU last component is the establishment of an appropriate regulatory framework to provide effective deposit protection across the EU. The purpose of this paper is to analyze the general principles and specific rules governing the functioning of EBU, the emphasis given to the most recent developments related to this matter.

    JEL classification numbers: H3, H7, F6
    Keywords: Banking Union, Single Mechanism, Supervision, Resolution.