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Conclusion
A truly integrated European banking system with supervision and resolution at the European level fosters the stability of the Economic and Monetary Union. The authors' analysis suggests that the non-eurozone countries can also benefit from the stability of the banking union. It is interesting to note that the main non-eurozone countries that do not wish to join the banking union for political reasons (i.e. the UK and Sweden) would be the largest beneficiaries from the banking union.
Not joining is very costly on the budgetary front. It would be very demanding for the Swedish government to bear the full cost of a possible recapitalisation of Nordea outside the banking union, while only 20 per cent of the benefits accrue to Sweden. Similarly, the recapitalisation of some of the large UK banks during the great financial crisis put a severe strain on the UK government budget. The UK and Sweden thus preserve the expensive right to do potential rescues of their banks on their own. Political calculus dominates economic calculus.
Within the eurozone, Spain (with two large banks) and the Netherlands (with three large banks) are the winners of the banking union. To reap these benefits, the second stage of resolution needs to be completed as well. So far, heads of state have focused on the first stage of supervision.