Open AccessEuropean Banking Union – an institutional analysis
Author(s) -
Barbara Majewska-Jurczyk
Publication year - 2020
Publication title -
central european review of economics and management
Language(s) - English
Resource type - Journals
ISSN - 2544-0365
DOI - 10.29015/cerem.896
Subject(s) - banking union , recapitalization , european union , deposit insurance , financial regulation , financial system , business , sovereignty , economic and monetary union , economics , international economics , political science , law , politics
Aim: The Banking Union is an important step towards a genuine Economic and Monetary Union. The strengthening of the European banking system has become a topic of debate since the 2008 crisis when it became clear that stability and security of the system security may require increased supervision over operations conducted. The Banking Union was created to avoid the situation that taxpayers are first in line to pay for bailing out ailing banks. The Banking Union consists of three pillars: 1) the Single Supervisory Mechanism (SSM), which centralizes supervision of European banks around the European Central Bank, 2) the Single Resolution Mechanism (SRM), which the main purpose is to ensure the efficient resolution for recapitalization failing banks, and 3) the European Deposit Insurance Scheme (EDIS), which is still unfinished. The creation of the Banking Union is accompanied by a remarkable transfer of sovereignty to the European level. This article aims to provide an overview of the changes unfolding across the Banking Union from a law and economics perspective and to explain the role of the European Central Bank in supervision over the banking system, which is different from the policy of controlling prices through determining the level of interest rates and keeping inflation under control.
Design/Research methods: The analysis of the functioning Banking Union is based on the review of literature and analysis of reports and legal acts.
Findings: The Banking Union supports financial integration in the EU by implementing a common set of rules and a common supervisory and resolution mechanism. The creation of the Deposit Insurance Scheme is likely to contribute to the protection of banks and consumers in case of a potential future crisis. The author argues that the European Central Bank as a supervisor of the financial market should create a second supervisory body, which would significantly strengthen the system and allow the ECB more efficiently fulfill its task as chief supervisor.