The challenge of completing banking union

Banking Union represents one of the most important developments in European integration since the launch of Economic and Monetary Union (EMU). Yet the design of Banking Union agreed between 2012 and 2014 was a messy compromise among EU member states seeking to rebuild confidence in European banking sectors in the aftermath of the international financial crisis and in the midst of the euro area’s sovereign debt crisis. A decade after the launch of Banking Union proposals in June 2012 and fifteen years since the outbreak of the worst international financial crisis since the late 1920s, the design of EU bank regulation, supervision, support and resolution remains hotly contested, in both academic and policy-making circles. In this chapter, we highlight two main issues that need to be addressed in order to strengthen Banking Union: first, its incomplete institutional design and, second, the difficulty encountered in applying the different elements of Banking Union to loosen sovereign-bank ties.