A banking union for Europe: making a virtue out of necessity

Maria Abascal, Tatiana Alonso, Santiago Fernandez de Lis and Wojciech Golecki

No 1418, Working Papers from BBVA Bank, Economic Research Department

Abstract: Banking union is the most ambitious European project undertaken since the introduction of the single currency. It was launched in the summer of 2012, in order to send the markets a strong signal of unity against a looming financial fragmentation problem that was putting the euro on the ropes. The main goal of banking union is to resume progress towards the single market for financial services and, more broadly, to preserve the single market by restoring the proper functioning of monetary policy in the eurozone through restoring confidence in the European banking sector. This will be achieved through new harmonised banking rules and stronger systems for both banking supervision and resolution, that will be managed at the European level. The EU leaders and co-legislators have been working against the clock to put in place a credible and effective set-up in record time, amid intense negotiations (with final deals often closed at the last minute) and very significant concessions by all parties involved (most of which would have been simply unthinkable just a few years ago). Despite the fact that the final set-up does not provide for the optimal banking union, we still hold to its extraordinary political value and see its huge potential. By putting Europe back on the right integration path, banking union will restore the momentum towards a genuine economic and monetary union. Nevertheless, in order to put an end to the sovereign/banking loop, further progress in integration is needed including key fiscal, economic and political elements.

Keywords: European Single Market; European Monetary Union; Banking Union; Banking resolution; Banking supervision; Single rulebook; Financial fragmentation (search for similar items in EconPapers)
JEL-codes: F36 G21 G28 H12 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2014-07
New Economics Papers: this item is included in nep-cba, nep-eec and nep-mon
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