5. The Banking Union Revisited

This chapter gives an account of the implementation of banking union in Europe. The expected benefits from a banking union are reviewed. Then the author analyses and discusses its components with a special focus on the supervision and resolution of banks. The challenges are both functional and institutional, involving micro- and macroprudential considerations. As regards the European Central Bank (ECB), will there be possible conflicts of objectives when it cumulates its monetary policy function with its new supervisory role? For banking supervision, how can the division of labour between the ECB and the national competent authorities (NCAs) be combined with the necessary coordination between them? The same kind of challenge applies to resolution and deposit insurance. The chapter also relates the launching of the banking union to other structural issues, such as the separation of bank activities and the financing of the real economy (investment and growth) in the new regulatory framework. At the end it touches upon the Capital Markets Union (CMU) project.