Reforming the hidden wirings of the banking union

Abstract

Calls for ‘completing the banking union’ are widespread. Different versions of what it means to ‘complete’

the banking union exist – as do fundamental criticisms about the emerging shape of this banking union.

Despite initial agreement in 2015, member states remain divided over a deposit insurance scheme and of a common backstop. While these themes dominate the discussion, too little attention is being paid to the ‘hidden wiring’ of the banking union. In this paper we take a closer look at how the current pillars of supervision and resolution operate. Despite the considerable progress in developing supervision and resolution, significant issues and tensions need to be resolved in order to ‘crisis-proof’ the system before the next crisis hits.