The establishment of the single rulebook and the launch of the European Union’s banking union with its rules and institutions constitute a commendable success in this regard. The banking union is currently based on two pillars: the Single Supervisory Mechanism and Single Resolution Mechanism. However, since these were put in place, the political will to complete the banking union has waned.
The banking union is missing critical elements – a fully-fledged European deposit insurance scheme, a backstop to the Single Resolution Fund and the provision of liquidity in bank resolution – which jeopardises its fundamental benefits. As we progressed along the road, new and bigger hurdles emerged. Policy-makers focused excessively on ‘risk reduction v. risk sharing’ and lost sight of the banking union’s overall objectives.