Understand
the Economy and Banking

The Banking Union is the set of European rules and institutions for the supervision, resolution and guarantee of bank deposits in the member countries of the European Union where the legal currency is the euro. The objective of the Banking Union is to ensure a stable, secure and integrated banking system. In addition to all countries that adopt the euro, some EU countries that do not adopt the euro have decided to participate voluntarily.

The Banking Union is relies into three pillars:

The 1st pillar of the European Banking Union is Common Banking Supervision (SSM – Single Supervisory Mechanism)
The European Central Bank (ECB) is responsible for the direct supervision of the significant banks in the Eurozone and in cooperation with national authorities for the supervision of less significant banks, with the aim of ensuring that banks operate in a healthy and prudent manner, reducing the risk of bank failures.

The 2nd pillar of the European Banking Union is the Single Resolution Mechanism (SRM)
managed by the Single Resolution Board (SRB), which deals with the orderly resolution of banks in crisis, minimising the impact on taxpayers and the economy. It uses a Single Resolution Fund (SRF) financed by the banks themselves, to cover the costs of resolution.

The 3rd pillar of the European Banking Union is the European Deposit Insurance Scheme (EDIS)
It is still being defined and aims to strengthen deposit guarantee and financial stability in the Banking Union by integrating the resources of the national deposit guarantee schemes of the Eurozone countries. Deposit guarantee schemes in the 27 countries of the European Union have been harmonised by Directive 2014/49/EU.

Financial stability
The Banking Union aims to reduce the risk of banking crises and strengthen the resilience of the banking sector.

Taxpayer protection
Prevent bank failures from falling on taxpayers through the use of public funds.

Banking market integration
Promoting the integration of the European banking market, ensuring a level playing field between the banks of the different Member States.

Investor and consumer confidence
Increase confidence in the European banking system, protecting depositors and investors.

Strengthening of the Eurozone
The Banking Union contributes to strengthening the Eurozone, creating a more cohesive and secure banking market.

Reduction of systemic risk
Reduces systemic risk and the possibility of financial contagion between member countries.

Supporting the real economy
The Banking Union promotes the stability necessary for the healthy functioning of the real economy, facilitating access to credit for individuals, households and businesses.

Improved supervision and resolution
Introduces stricter supervision and more effective resolution processes, reducing the likelihood of disorderly bank failures.