Towards a full banking union in europe: waiting for the next crisis?

Luís Brites Pereira, Miguel Rocha De Sousa

Research output: Chapter in Book/Report/Conference proceedingChapterpeer-review

Abstract

This chapter assesses the need for a complete European Banking Union (EBU) given the perceived shortcomings of Europe’s Economic and Monetary Union (EMU), especially the negative banking-sovereign linkages highlighted by the Eurozone crisis. If properly implemented, a complete EBU severs these linkages and strengthens the resilience of Europe’s banking sector. The design of an optimal EBU comprises three components: European Deposit Insurance System (EDIS), Banking Recovery and Resolution Directive (BRRD) and European Stability Mechanism (ESM), which could evolve to a European Monetary Fund (EMF). While such a design encompasses both risk-reduction and risk-sharing features, the former has been favored due to mostly political considerations. Indeed, completing EBU will require significant political will to adopt additional risk-sharing measures, such as a common fiscal backstop and a truly supranational EDIS, amongst others.

Original languageEnglish
Title of host publicationChallenges and Opportunities for Eurozone Governance
EditorsJosé Manuel Martins Caetano , Miguel Rocha de Sousa
PublisherNova Science Publishers, Inc.
Chapter5
Pages81-96
Number of pages16
ISBN (Electronic)9781536134759
ISBN (Print)9781536134742
Publication statusPublished - 1 Jan 2018

Keywords

  • Bank-sovereign linkages
  • European banking union
  • Eurozone crisis

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