In fact, large countries with strong public finances must renounce to provide domestic banks with the implicit subsidy of public support. This will reduce their strength in competing in the European space with an advantage and will be progressively reflected in banks’ ratings and funding costs.
On the other hand, countries with vulnerable public finances and smaller banks will no longer be able to support, and possibly keep, their national champions. Finally, in both cases, governments accept the transfer of supervision and resolution of banks to the European level in what has to be considered a remarkable sharing of sovereignty.