This is because the euro area’s single monetary policy relies on a deeply integrated and resilient financial system to be effective and efficient in pursuing price stability. Indeed, European financial markets were already interconnected prior to the euro crisis.
But it was the arrangement by which national authorities were solely responsible for banking supervision which sparked a build-up of risks that finally spread across the entire Union, gravely endangering its very existence. This experience gave way to an understanding that banking supervision needed to be shifted to the European level. That step has delivered three concrete benefits.