What is the banking union?

A rulebook for the EU financial sector

In response to the 2008 financial crisis, the European Commission put in place a number of initiatives to create a safer financial sector for the single market. These initiatives form a single rulebook for all financial players in the 27 EU countries. They include

• stronger prudential requirements for banks
• improved protection for depositors
• rules for managing failing banks

This single rulebook is the foundation for the banking union.

Deeper integration of the euro area banking system

As the financial crisis evolved into the euro area debt crisis it became clear that deeper integration of the banking system was needed for the euro area countries, which are particularly interdependent. That’s why, on the basis of the European Commission roadmap for the creation of the banking union, the EU institutions agreed to establish a single supervisory mechanism (SSM) and a single resolution mechanism (SRM) for banks. The banking union applies to countries in the euro area. Non-euro area countries can also join. Following the accession of Bulgaria and Croatia, the banking union is now made up of 21 countries.

Completing the banking union

Since they were created, the single rulebook and the banking union have contributed significantly to the resilience and stability of the EU banking sector, through enhanced prudential requirements, improved protection of depositors and better rules to manage failing banks. The successful setting up of the single supervisory mechanism (SSM) and the single resolution mechanism (SRM) has played a major role in this respect. The completion of the review of the crisis management and deposit insurance framework also marks a significant milestone. However, the banking union could be further improved, in particular in the areas of increased integration across national banking markets and increased financing across the EU. This would contribute to the further integration of the single market and help make banks more competitive.

In order to address this issue, the Commission completed a targeted consultation on the competitiveness of the EU banking sector. The Commission’s savings and investment union Communication recognises that a stronger, more integrated and more competitive banking sector is essential for a competitive European economy. To this end, the Commission will use the findings from the consultation to prepare a report on the competitiveness of the banking sector in 2026.