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.

In my opinion, it seems that is the case, although a number of opinions highlighting potential problems should not be ignored. In favour of the ECB are its strong expertise in the financial sector, as well as the synergy that exists between banking supervision, on the one hand, and the lender-of-last-resort function and payment system oversight, on the other hand. As the third pillar of the banking union, the single bank resolution mechanism is deemed to ensure a centralised management of banking crises that provides options for dealing with bank failures in an orderly way, with minimal disruptions to the economy. The principles of the resolution should be set out in a single rulebook and they should address the issues of the cost of bank recovery, the fiscal backstop, and the moral hazard problem that may occur. The cost of banks’ recovery or resolution should be borne by shareholders and creditors. Nevertheless, in the case of systemic crises, an explicit fiscal backstop may be required, on the design of which a political consensus will be difficult to achieve. Another challenge to establishing this mechanism relates to the heterogeneous resolution framework at the national level, which calls for significant changes in national insolvency, labour and tax laws. Additionally, if the European Stability Mechanism were enabled to recapitalise banks directly, negative consequences could occur in terms of moral hazard within the single market, as well as unfair competition between participating and non-participating banks in the banking union.