The creation of the banking union marks the most important milestone in European integration after the completion of Economic and Monetary Union. Providing the essential underpinnings for financial stability, the banking union will help make financial crises less likely to occur and identify risks more readily. By transferring the responsibility for banking supervision and resolution to the European level, the banking union will also weaken the close linkages between sovereign debt and banking crises. In addition, the banking union will reverse to some extent the fragmentation of financial markets in the euro area and contributes to a further deepening of economic and institutional integration.
The banking union rests on three pillars: the Single Supervisory Mechanism (SSM), the Single Resolution Mechanism (SRM), and a system of harmonized Deposit Guarantee Schemes (DGS). The SSM, which comprises the European Central Bank (ECB) and the national supervisory authorities of the participating countries, enhances the effectiveness of banking supervision and cross-border cooperation and coordination. Under the SSM, the ECB is responsible for the prudential supervision of all banks in the euro area, under a system of decentralised supervision that is based on a division of labor between the ECB and the national competent authorities (NCAs).
The SRM enables the competent authorities to intervene early and to recover or resolve a failing or failed bank. The underlying SRM Regulation enters into force on January 1, 2016.
The harmonized Deposit Guarantee Schemes ensure that across the EU, savings and investments up to EUR 100,000 are guaranteed. The relevant EU directive must be transposed into national law by the Member States by July 3, 2015; in Austria, the protection of savings up to EUR 100,000 is already in force.
The foundation of the banking union are the single rulebook, which comprises common EU-wide rules for banks, and the single supervisory handbook. The single rulebook spells out how to consistently apply the new rules – as laid down in the Basel III framework and the CRR/CRD IV package – for improving banks’ capitalization and liquidity levels as well as for strengthening banks’ refinancing structures. The single supervisory handbook sets out the supervisory approaches and methodologies to be applied in on-site inspections and the supervisory review and ensures the consistent and coherent conduct of supervisory tasks and processes under the SSM.