While we have made progress towards a functioning banking union, with the introduction of cross-border supervision through the Single Supervisory Mechanism and rules for managing failing banks through the Single Resolution Mechanism, it is not yet complete. A key outstanding issue includes the lack of a common system for deposit protection.
This is important as within the euro area, depositors in a country hit by a crisis may worry they are not protected to the same extent as depositors in other member states, incentivising them to move funds abroad. This could amplify shocks to our economies and banking systems.