Banking Union: The Way Forward

European Banking Union: Challenges and Prospects, David Mayes, Geoffrey E. Wood and Juan Castaneda, eds., Forthcoming

17 Pages Posted: 19 Feb 2015

See all articles by Thomas Huertas

Thomas Huertas

Goethe University Frankfurt - Institute of Law and Finance; Center for Financial Studies

Date Written: December 31, 2014

Abstract

The EU’s banking union aims to break the “doom loop” that makes governments dependent on banks and banks dependent on governments. However, current arrangements address only the first objective: the single supervisory mechanism should make banks less likely to fail. The single resolution mechanism should make banks resolvable, or “safe to fail,” so that investors, not taxpayers bear the cost of bank failure and restructuring. To make banks less dependent on governments requires additional measures. Limiting the exposure of banks to individual governments is a start, but true insulation of banks from governments may require the introduction of a Euro charter for euro banks. That in turn could create the basis for a single deposit guarantee scheme, the third and to the man in the street arguably the most important aspect of banking union.

Keywords: banking union, single supervisory mechanism, single resolution mechanism, deposit guarantee scheme, banks

JEL Classification: G20, G21, G28

Suggested Citation

Huertas, Thomas, Banking Union: The Way Forward (December 31, 2014). European Banking Union: Challenges and Prospects, David Mayes, Geoffrey E. Wood and Juan Castaneda, eds., Forthcoming. Available at SSRN: https://ssrn.com/abstract=2566166

Thomas Huertas (Contact Author)

Goethe University Frankfurt - Institute of Law and Finance ( email )

Campus Westend - Grüneburgplatz 1
Frankfurt, 60323
Germany

Center for Financial Studies ( email )

Grüneburgplatz 1
Goethe University
Frankfurt am Main, 60323
Germany

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