Download publication

Essay / Lecture

Europe’s radical banking union

Bruegel scholar Nicolas Véron argues in this thought-provoking essay that banking union ultimately enabled the European Central Bank’s announcement that it would buy large quantities of government bonds if needed and on the condition of a financial support programme.

By: Date: May 5, 2015 Topic: European Macroeconomics & Governance

Banking Union, even in its current incomplete form, is the single biggest structural policy success of the EU since the start of the financial crisis. This essay presents the sequence of events that led to its inception in late June 2012 and takes stock on its current status of implementation and prospects.

The essay argues forcefully that the political decision to initiate banking union was the decisive factor behind the ECB’s OMT programme, which put an end to the most acute phase of the euro area crisis, and that it also enabled the shift in the European approach to banking crisis resolution from bail-out to bail-in, which was prevented by the earlier policy framework of national banking supervision. In this sense, the banking union decision of mid-2012 was the crucial and largely unrecognized turning point of the entire euro area crisis.

The transfer of supervisory authority over all euro-area banks to the ECB, effective since last November, marks a profound change and is already resulting in more rigorous and consistent supervision.

After a few years of transition, the banking union framework can be expected to lead to a better integrated, more diverse and more resilient European financial system. It will also enhance European influence in shaping global banking regulatory standards and policies.

View comments
Read article More on this topic More by this author

Blog Post

A tangled tale of bank liquidation in Venice

What can we learn about the Italian banking sector from the decision to liquidate Veneto Banca and Banca Popolare di Vicenza? Silvia Merler sees a tendency for Italy to let politics outweigh economics.

By: Silvia Merler Topic: Finance & Financial Regulation Date: June 26, 2017
Read about event

Upcoming Event

Jul
6
12:30

Is there a way out of non-performing loans in Europe?

At this event we will look at the issue of non-performing loans in Europe. The event will also see the launch of the latest issue of "European Economy – Banks, Regulation and the Real Sector."

Speakers: Emilios Avgouleas, Giorgio Barba Navaretti, Giacomo Calzolari, Maria Demertzis, Martin Hellwig, Helen Louri and Laura von Daniels Topic: European Macroeconomics & Governance, Finance & Financial Regulation Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read about event More on this topic

Past Event

Past Event

Bail-ins and bank resolution in Europe

This invitation-only event will feature a presentation by Thomas Philippon of a report on bail-ins and bank resolution in Europe. Failed financial firms should not be bailed out by the taxpayers. Europe, unfortunately, has a weak track record of following this principle of good governance and sound economic policy. The banking union, with its new […]

Speakers: Thomas Philippon Topic: Finance & Financial Regulation Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: June 19, 2017
Read article Download PDF More by this author

Policy Contribution

German Bundestag

Charting the next steps for the EU financial supervisory architecture

The combination of banking union and Brexit justifies a reform of the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) in the near term, in line with the subsidiarity principle and the accountability of EBA and ESMA and their scrutiny by the European Parliament should be enhanced as a key element of their governance reform.

By: Nicolas Véron Topic: European Macroeconomics & Governance, Finance & Financial Regulation, German Bundestag Date: June 7, 2017
Read article Download PDF More by this author

Policy Contribution

The governance and ownership of significant euro-area banks

This Policy Contribution shows that listed banks with dispersed ownership are the exception rather than the rule among the euro area’s significant banks, especially beyond the very largest banking groups. The bulk of these significant banks are government-owned or cooperatives, or influenced by large shareholders, or prone to direct political influence.

By: Nicolas Véron Topic: European Macroeconomics & Governance, Finance & Financial Regulation Date: May 30, 2017
Read article Download PDF More on this topic More by this author

External Publication

Les banques européennes se retirent-elles de la scène internationale?

Dirk Schoenmaker conducts a comparative analysis of global systemically important banks (G-SIBs) and examines their evolution (Note: this paper is available only in French).

By: Dirk Schoenmaker Topic: Finance & Financial Regulation Date: May 23, 2017
Read about event More on this topic

Upcoming Event

Oct
18
09:00

Financial Stability Conference 2017

EU at Crossroads: How to respond to Misalignments in Bank Regulation and achieve a consistent financial Framework?

Topic: Finance & Financial Regulation Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read article More on this topic More by this author

Podcast

Podcast

How will Europe's banking system respond to future challenges?

After the financial crisis, the EU has taken measures to create conditions for a safer banking sector. One of the key measures to do that is the creation of the banking union. How successful has the implementation of the new framework been so far? How will issues in the Italian banking sector be addressed? And how will Brexit change the European banking sector?

By: The Sound of Economics Topic: Finance & Financial Regulation Date: May 5, 2017
Read article More on this topic More by this author

External Publication

The Banking Union: An Overview and Open Issues

Dirk Schoenmaker's chapter in 'The Palgrave Handbook of European Banking', a handbook that collates the expertise and research of leading academic and senior policy makers in the field of European banking

By: Dirk Schoenmaker Topic: Finance & Financial Regulation Date: May 2, 2017
Read article More on this topic

Blog Post

EBA relocation should support a long-term ‘twin peaks’ vision

As the Commission launches a review of European financial supervision, the authors argue that Europe needs to move towards a twin peaks model – dividing supervision of prudential and conduct-of-business issues. But this is a long-term vision, and will require institution building. The immediate priorities are to choose a new home for the EBA and reinforce ESMA.

By: Dirk Schoenmaker and Nicolas Véron Topic: Finance & Financial Regulation Date: April 5, 2017
Read article More on this topic More by this author

Blog Post

Italian banks: not quiet on the eastern front

Italian banks are back in the spotlight. After MPS failed to raise enough capital from private investors earlier this year, Banco Popolare di Vicenza (BPVI) and Veneto Banca take centre stage. The story of these two banks epitomises the strategy of delayed reform that has been so characteristic of the Italian banking crisis.

By: Silvia Merler Topic: Finance & Financial Regulation Date: March 31, 2017
Read article Download PDF More by this author

Policy Contribution

European Parliament

Carving out legacy assets: a successful tool for bank restructuring?

Separating ‘legacy assets’ from banks’ core business is central to the rehabilitation of Europe’s banking system. How can Europe progress in its ongoing effort to rid the financial system of legacy assets, and equip it with renewed growth?

By: Alexander Lehmann Topic: European Parliament, Finance & Financial Regulation, Testimonies Date: March 21, 2017
Load more posts