The Banking Union: An Overview and Open Issues

Chapter 17 in Palgrave Handbook on European Banking, Forthcoming

27 Pages Posted: 16 May 2016

See all articles by Dirk Schoenmaker

Dirk Schoenmaker

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM); Centre for Economic Policy Research (CEPR)

Date Written: May 16, 2016

Abstract

The move to European Banking Union involving the supervision and resolution of banks at euro-area level was stimulated by the sovereign debt crisis in the euro area in 2012. However, the long-term objective of Banking Union is dealing with intensified cross-border banking.

The share of the assets of national banking systems that come from other EU countries was rising before the financial and economic crisis of 2007, but went into decline thereafter in the context of a general retrenchment of international banking. Most recent data, however, suggests the decline has been halted.

While a crisis-prevention framework for the euro area has largely been completed, the crisis-management framework remains incomplete, potentially creating instability. Most importantly, risk-sharing mechanisms do not adequately address the sovereign-bank loop, with a lack of clarity about the divide between bail-in and bail-out. To complete Banking Union, the lender-of-last-resort and deposit insurance functions should move to the euro-area level.

Keywords: Banking, Banking Union, Banking Supervision, Resolution, Deposit Insurance

JEL Classification: F36, F42, G21, G28

Suggested Citation

Schoenmaker, Dirk, The Banking Union: An Overview and Open Issues (May 16, 2016). Chapter 17 in Palgrave Handbook on European Banking, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2780581 or http://dx.doi.org/10.2139/ssrn.2780581

Dirk Schoenmaker (Contact Author)

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam
Netherlands

HOME PAGE: http://www.rsm.nl/people/dirk-schoenmaker/

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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