In addition to strengthening banking supervision and breaking the link between banks and sovereigns, the banking union also may allow the development of a deeper single market, although here there are considerable uncertainties and potential risks due to the fact that only a subset of the European Union will be taking the steps towards banking union.
The proposed way to square the circle between the single market and the banking union is to provide for a bifurcation between regulation and supervision. Banking supervision for the Eurozone (and opt-in countries) will be undertaken by the single supervisory mechanism operated by the ECB. But regulation, that is to say the process of agreeing policy on rules, will remain with the EBA.