The smashed windows of a bank after clashes broke out during a protest against the Expo 2015 fair in Milan, Italy 1 May 2015. Riccardo De luca / AP/Press Association Images. All rights reserved.On 1 January 2016 the EU’s banking union – an EU-level banking supervision and resolution system – has officially come into force. The move to the banking union has been the most significant regulatory outcome of the crisis. It is ‘a change of regime, rather than an act of institutional tinkering’, as Christos Hadjiemmanuil of the London School of Economics writes in a comprehensive paper on the topic that this article is largely based on – and it is widely agreed that ‘even in its current incomplete form, [the banking union] is the single biggest structural policy success of the EU since the start of the financial crisis’.
A closer look, though, reveals the banking union, in its current form at least, to simply be the latest step in the EU’s post-crisis creditor-led path of austerity and asymmetric adjustment; one that could potentially put the final nail in the Economic Monetary Union’s (EMU) coffin.
The banking union’s original intention was to ‘break the vicious circle between banks and sovereigns’ by mutualising the fiscal costs of bank resolution. This was the result of a belated acknowledgement by European decision-makers, various years into the crisis, of the non-fiscal – namely, banking and monetary – nature of sovereign distress in the EMU.
