European Banking Union as a Response to the Fragmentation of the Internal Market Resulting from the Financial and Sovereign Debt Crisis

The last 30 years of developments in financial services legislation have been rapid and astonishing both in Europe and internationally. At a European level since the late 1980s, the EU has invested time and effort in encouraging the establishment of a single, integrated market in financial services. The cycle of Directives for the full liberation of capital movements within the EU closed with Directive 88/361/EEC.1 In addition, the Second Banking Directive 89/646/EEC,2 the essential instrument for the achievement of the internal market for banking services, laid down the foundations of unrestricted rights of establishment and provision of services for credit institutions across the EU, by eliminating the most obstructive differences between member states’ national laws governing credit institutions. In the same year, the Directives on the own funds and solvency ratio of credit institutions were issued to protect savings and create equal conditions of competition between European credit institutions.3 Furthermore, Investment Services Directive 93/22/EEC,4 coupled with Directive 93/6/EEC on the capital adequacy of investments firms and credit institutions, created the basis for the freedom of establishment and cross-border provision of investment services within the EU by investment firms and credit institutions entitled to provide such services, thus enhancing the single European capital market.