Key pieces of the EU banking
union jigsaw are now in place: the single supervisory mechanism and European Banking Authority measures. Once these are in force, the ECB supervisory board can be created and the technical details of managing the new system can be filled in.
However, some odd-shaped parts of the puzzle have appeared. The original three-legged structure – single supervisory system, plus single resolution mechanism, plus single deposit guarantee system – has already had one leg chopped off as the pan-eurozone deposit guarantee scheme has been shelved. Germany has suggested that the single resolution mechanism may need a treaty change to give it full legal strength, and the single supervisory mechanics are being questioned.
There may, however, be a lumpier – and important – aspect of these measures that has been overlooked: they have created two classes of bank in the EU. These are the European and national players. The consequences, both immediate and medium-term, should be rapidly examined so that the implications for banks, the financial system and public finances can be understood. It represents a game-changing moment and is due within the next year, when the ECB takes over day-to-day supervision of EU banking. There will then be a one-off opportunity to examine whether the division is just perceptual or whether there are actual problems.
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