The process towards the centralisation of the European financial supervisory architecture: the case of the Banking Union

The evolution of the EU supervisory architecture has demonstrated that it took the risk of a euro break-up to barely overcome the Member States and their supervisors’ political resistances to centralisation. In the two-tier Europe that is emerging after the euro crisis, the integrity of the single market seems today crucially interlinked with the success of the banking union and its attractiveness for non-euro countries. The banking union’s design, without a credible common fiscal backstop, remains however a partial solution to the financial stability issues arising from the fragmentation of the EU financial market in the event of banking crises. Against this background, this work performs an analysis on non-euro countries’ own assessments of the pros and cons of joining the banking union. The analysis aims at showing that until fiscal responsibility for financial stability remains at the national level, regulatory centralisation cannot sever the traditional divide between home and host supervisors.