How the European Banking Union works


The Banking Union is the result of the work within the EU on improving regulation and supervision of the financial sector that began after the financial crisis. The purpose of the Banking Union is to create a structure for the joint supervision and management of banks in crisis, together with a joint system for deposit insurance. This is described in an economic commentary published today by the Riksbank.

The Banking Union is the most ambitious initiative taken so far within the EU to strengthen the financial sector's resilience and break the damaging link between bank and state that exists in many countries. Banks within the Union that nevertheless experience difficulties shall be restructured or wound up in an orderly manner and at a minimal cost to the taxpayer, thanks to a central function for the management of banks in distress, so-called resolution. Moreover, the responsibility for protecting depositors' money shall be raised from a national to a common European level.

Large parts of the Banking Union are now in place, but some work remains to be done before the European Banking Union is fully up and running. Of the three pillars on which the Union is built – banking supervision, resolution and deposit insurance – the first two are relatively complete, while the third has become the subject of political controversy. Non-euro area countries are not obliged to join the European Banking Union, but the Swedish government has decided to investigate whether Sweden should join a so-called close cooperation.


The Riksbank's Economic Commentaries contains short analyses and debate articles, for example. The opinions expressed in economic commentaries are those of the authors and are not to be seen as the Riksbank's view.

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