It means market participants cannot rely to the same extent on being bailed out when the crunch comes. With regard to a banking union, I am sorry to disappoint those who would like it to be a means of mutualising liability for legacy assets on banks’ balance sheets. This, too, follows ultimately from the principle of subsidiarity.
Mutualisation of risk is conceivable only at some future date, but certainly not mutualisation of losses which arose on the watch of national supervisors. Anything else would be like taking out an insurance policy after the insured event has occurred. Banks now need to formulate resolution plans – I shall return to this shortly.