The Problems of the European Banking Union

Abstract

The Banking Union is a major step towards strengthening the European Union. Though a single-deposit guarantee scheme has yet to be established, the Single Supervisory Mechanism (SSM) and Single Resolution Mechanism (SRM) are already in place. However, it would be foolish to sit back now and expect the new institutions to provide immediate solutions. They will not. Not in the Eurozone and not in Spain. They will take years to find their feet, in the first place making different regulatory systems converge is a difficult and a slow process and, in the second, because they have been set up even while the aftershocks of the financial crisis rumble on.

The goal of all regulation ought to be to prevent insolvency, which would avoid costs for the taxpayer, disruption of the wider economy and job losses.

Paradoxically, the new regulation focuses on ensuring a good ‘burial’, by alternative funding via the bail-in mechanism but only when a bank has already gone under. On the contrary, efforts to reduce the number of casualties were softened.

A. de Juan

Article published in the Spanish daily El País on 15 April 2016, criticizing the slow progress and reverses suffered by the new European mechanisms, the advent of which was considered by many to be a panacea marking the end of the crisis.