POLICY BRIEF 13-17

A Realistic Bridge Towards European Banking Union

by Nicolas Veron, Peterson Institute for International Economics

June 2013

New obstacles to the European banking union have emerged over the last year, but a successful transition remains necessary and possible. The European Central Bank (ECB) gains supervisory authority over most of Europe's banking system in late 2014, but first there must be a rigorous balance sheet assessment that is likely to trigger significant bank restructuring, for which preparation has not started. This step will be more consequential than current discussions about a bank resolution directive and bank recapitalization by the European Stability Mechanism (ESM). The ECB's new authority, accompanied by a later change in the European treaties to establish the legal basis for a union, will serve as a bridge to a sustainable banking policy framework for Europe.

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