The Banking Union and European Supervision

The global financial crisis has revealed several drawbacks in financial regulation and supervision. The article, after having identified the main lessons from the financial and sovereign crises, reviews the main features of the Banking Union with particular regard to the SSM and assesses their effectiveness. The article argues that the establishment of the Banking Union is of fundamental importance to address the roots of the sovereign crisis and complete the project of the EMU. After the conclusion of the political negotiation on the SSM, a key challenge for the ECB in the short term is the preparation of the legal and operational framework to underpin an effective and efficient prudential supervision of banks in the years to come. The SSM will need to be complemented by the establishment of a Single Resolution Mechanism with a single resolution authority at its centre. Finally, a deepened EMU should be also accompanied by reinforced governance and accountability structures to keep the trust of citizens.