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
Date Written: December 31, 2014
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: Suggested Citation