Veron, N., (2014), “Tectonic shifts – banking union is a long-term process that will dramatically reshape Europe’s financial system”, Bruegel, 7 Μαρτίου.
On June 29, 2012, the leaders of euro area countries set in motion what is now universally known as European banking union, or the transfer of banking policy from the national to the European level. The first step, the empowerment of the European Central Bank as the new supervisor of most of Europe’s banking system, has a fair prospect of meeting—by late 2014 or early 2015—its stated aim of addressing the long-standing fragility of Europe’s banking system. But banking union will not stop there, and its structural implications will unfold well beyond the transition to centralized supervision.
Banking union was initiated to resolve a pressing problem. The euro area crisis highlighted the damaging vicious cycle of either weak government balance sheets, which undermined banks’ soundness, as in Greece, or banks’ weaknesses, which damaged government credit, as in Ireland. This linkage became a threat to the entire euro area and its financial system in mid-2011 and forced policy action in 2012. But the underlying problem of European banking system fragility long predates the outbreak of the euro area sovereign debt crisis in 2009-10.
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