, the burden for taxpayers could be lightened by requiring that public funds be recouped from the banking system at a later stage, when financial stability is no longer at risk – as envisaged by the ‘ key attributes of effective resolution regimes for financial institutions ’, drawn up by the financial stability board. 6 to conclude, while much has been done to reduce risks, we lag behind on risk - sharing measures, which are their natural complement. even for those already in place, such as the single resolution fund, the path to complete risk mutualization is very long. what are the costs of this unfinished construction? an incomplete banking union is a source of risk in itself. if neglected for too long, it will discourage banks ’ reorganizations and consolidation processes as the cost of funding and capital remain subject to excessive uncertainty, with likely undesirable effects on banks ’ ability to support both investment and consumer spending. in this transitional phase, when banks are still building up adequate loss - absorbing buffers and governments are without their traditional tools of intervention, the risks are even greater. 5 avgouleas e., c. goodhart, 2016, ‘ an anatomy of bank bail - ins – why the eurozone needs a fiscal backstop for the banking sector ’, european economy, 2016. 2., 5 december. 6 financial stability board, 2011, ‘ key attributes of effective resolution regimes for financial institutions ’, principle 6. 5. we should also remember that completing the banking union is a priority per se, and should not be conditional on other interventions. i refer, in particular, to the much debated possible change of prudential treatment for sovereign exposures, which is among the measures called for in order to move forward with the creation of the edis. a draft report presented to the committee on economic and monetary affairs of the european parliaments ( econ ) 7 makes the entry into force of the insurance phase of edis conditional on reducing risks in the banking sector. in this regard, while recognising that changing the prudential treatment for sovereign exposures could help to break the bank - sovereign nexus, i believe that it should not be considered as a pre - condition for, or an alternative to, the completion of banking union. a clear timeline for deposit insurance, as we had for the single supervisory mechanism and the single resolution mechanism, would help reassure markets as to the soundness of the overall banking framework and the willingness of member states to pursue

exposed than before to substantial risks to their individual stability. a common eu deposit guarantee scheme is a crucial component of the safety net and should be set up as swiftly as possible. in november 2015, the commission presented a proposal for a european deposit insurance scheme ( edis ). the idea is to build on the existing national schemes and then gradually move towards a european construction that would be fully in place by 2024. while the introduction of the third pillar is generally accepted in principle, controversy has arisen recently regarding its timing and negotiations are at a standstill due to the opposition of some countries. introducing common deposit insurance is not enough, though. in order to bolster public confidence and to ensure that the banking union has the capacity to safeguard financial stability in adverse circumstances, we also need a common public backstop covering both resolution and deposit insurance. furthermore, it is important to acknowledge that the ability of the new eu resolution framework to counter systemic crises has been somewhat overstated, especially when combined with the european commission ’ s approach to competition and state aid. a recent paper by emilios avgouleas and charles goodhart warns against large - scale, bail - in centred, recapitalizations and illustrates the ‘ danger of over - reliance on bail - ins ’ by providing a very insightful description of the risks involved in triggering the bail - in process when risk is not idiosyncratic. 5 while the bail - in tool is actually well - designed for addressing the crisis of individual banks, in the event of a systemic crisis its use risks exacerbating the threats to financial stability rather than stabilizing the system. in those circumstances, the possibility of temporary public support, without necessarily involving banks ’ creditors, should not only be considered but favoured, to dispel the fear of contagion and prevent the seeds of another crisis from being sown. of course, envisaging public support in exceptional circumstances should not undermine efforts to reduce forms of moral hazard that can lead to excessive risk - taking by banks. the risk of imprudent behaviour still has to be contained but it can be tackled in other ways that are more compatible with safeguarding financial stability, along the lines of what happened in the aftermath of the crisis, i. e. by strengthening the prudential framework, adapting the structure of remuneration schemes to reduce incentives for excessive risk - taking, and by making management fully liable in the event of the failure of an institution. at the same time