Creating the Banking Union: Steps

When the financial crisis spread in 2008, Europe had 27 different regulatory systems for banks in place, largely based on national rules and national rescue measures, although some limited European minimum rules and coordination mechanisms already existed. The pre-crisis framework was not capable of responding to the financial crisis. Since 2008 the European Commission has tabled around 30 proposals to create, piece-by-piece, a sounder and more effective financial sector (see Banking Union divides Europe). It also corresponds to the EU's implementation of its G20 commitments on financial regulation.

09/2012 – 12/2012. First Steps

The European Council of June 2009 unanimously recommended establishing a single rulebook applicable to all financial institutions in the single market. The rulebook is a corpus of legislative texts covering all financial actors and products: banks have to comply with one single set of rules across the single market. For this reasons, the Commission proposed a single supervisory mechanism (SSM) for banks led by the European Central Bank (ECB) in order to strengthen the Economic and Monetary Union. The set of proposals is a first step towards an integrated “Banking Union” which includes further components such as a single rulebook, common deposit protection and a single bank resolution mechanisms. The proposals concern:

- A regulation giving strong powers for the supervision of all banks in the euro area to the ECB and national supervisory authorities i.e. the creation of a single supervisory mechanism;

- A regulation with limited and specific changes to the regulation setting up the European Banking Authority (EBA) to ensure a balance in its decision making structures between the euro area and non-euro area Member States;

- A communication outlining the Commission's overall vision for rolling out the banking union, covering the single rulebook, common deposit protection and a single bank resolution mechanism.

19/03/2013 – 29/10/2013. Single Supervisory Mechanism (SSM)

The Parliament and the Council reached a political agreement on the Single Supervisory Mechanism package. COREPER on 18 April approved the final compromise texts. On 21 May, the EP Plenary held a general debate on the SSM regulation. Following the European Parliament Plenary vote on the legislative resolution for the European Banking Authority (EBA) Regulation and the Council agreement conferring specific supervision tasks on the European Central Bank, the European Union formally adopted the creation of a bank single supervisory mechanism (SSM), led by the European Central Bank, with the objective to strengthen the Economic and Monetary Union. Both legal texts were published in the Official Journal on 29 October 2013.

10/07/2013 – 19/12/2013. Single Resolution Mechanism (SRM)

The Commission proposed a Single Resolution Mechanism for the Banking Union. The Single Resolution Mechanism complements the Single Supervisory Mechanism which was proposed by the Commission in September 2012. It is set to centralise key competences and resources for managing the failure of any bank in the Euro Area and in other Member States participating in the Banking Union. Council agrees general approach on Single Resolution Mechanism. Negotiations with the European Parliament will start in early 2014 to allow for its adoption before the end of the current legislative period.


Fig. 1 Transition to a Banking Union:

Editor: Giovanni AVERSA