But single supervision has to be complemented with a single resolution mechanism. Only if a bank can be resolved in an orderly manner, without endangering financial stability, will authorities have the ability, and the courage, to declare such a bank non-viable. We still have too many banks in Europe lacking a viable business model but not exiting the market.
A credible resolution framework can reduce supervisory forbearance as well as market turbulence and thus reduces the likelihood of a government bail-out. This will be essential in breaking the link between the balance sheets of banks and public finances. But even a sound banking union will not be sufficient to reach our goal of making the financial system more stable.