Regarding the size of financial institutions, let me go directly to the “too big to fail” institutions. Their contribution to systemic risk is more than proportional to their size. It is not possible for such institutions to be sold, merged or closed down without jeopardizing the economy as a whole. Standard bankruptcy legislation, providing protection from creditors, simply does not work. Given the systemic importance of such institutions, access to creditors is essential. A special resolution framework should be designed in such a way that market participants be confident that it can be activated without generating unacceptable risks for the economy. Finally, the cross-border aspect of financial activity poses some particular challenges arising from the fact that legislation and bankruptcy regimes differ across countries. Moreover, national regulators have, above all, the responsibility to ensure financial stability in their own country. The correct answer here lies with oversight mechanisms being adapted in order to be able to deal with the challenges of globalization, rather than attempting to restrict the functioning of the financial system in order to reflect the limitations in international cooperation. IV. The foreseeable future of the European banking systems: the banking union  Let me quote Tommaso Padoa-Schioppa once more. He wrote that the old way of thinking along the Westphalian concept of nation-states is no longer suited for policy action when dealing with problems that are transnational, such as the financial crisis. For instance, Europe as a whole does not have large external deficits, or a high indebtedness of the household sector.

However, one should not overlook the fact that the single bank resolution mechanism has the advantage of increasing the speed and credibility in addressing banking crises (especially cross-border failures). As regards the single deposit guarantee scheme, the underlying idea is that a larger pool of resources reinforces confidence in the banking system. A caveat is worth mentioning, however: in times of extreme financial stress, the size of potential liabilities may undermine the credibility of the mechanism. Even if this pillar is less urgent than the others, steps in this direction have already been taken. Specifically, the coverage of the national deposit guarantee schemes has been harmonised at the level of EUR 100,000/depositor/institution and measures to simplify protected deposit repayments have been adopted in terms of faster payouts and improved financing. This single protection scheme is designed to ensure an equal treatment of depositors across EU countries, in complementarity with the Single Supervisory Mechanism. From the perspective of non-euro countries, there are some potential negative consequences stemming from the establishment of the banking union in the euro area, which need to be assessed. First of all, the failure to join the banking union could lead to possible changes in the domestic banking structure. Parent banks may decide to turn their subsidiaries into branches. This would be reflected by (i) additional fragmentation of financial sectors across the region, (ii) low availability of information to host-country regulators and supervisors, and (iii) lower capacity at institution and group levels to respond to domestic and regional developments.