The firm, cohesive European commitment to Banking Union helped counter financial fragmentation but its incomplete setup seriously jeopardises its key benefits. As the SSM was put in place and the SRM started working, the political will to build the third pillar – a European Deposit Insurance Scheme (EDIS) – and complete the overall architecture waned.
This brings new challenges for the supervisory authority responsible for stability and especially for ensuring that the regulatory framework and intermediaries’ management of their operational risks are adequate. Quite often the market is well ahead of regulators in perceiving the existence of problems in collective action, risk management and infrastructure shortcomings. It is essential that intermediaries promptly inform the Bank of Italy.