The mainstay of the European Banking Union is the creation of the European Central Bank (ECB) in 1998 and the introduction of the euro as the single currency (it entered into circulation on January 1, 2002, although it was already used as a reference since 1999).
The European Central Bank has two main functions: Determining the common monetary policy and supervising the financial systems of the Eurozone States and of all those belonging to the Union that have requested it.
In order to fulfil this second mission, and with the objective of achieving the banking union, in 2012 the creation of three systems was determined: The so-called SSM (Single Supervisory Mechanism) that came into operation in 2014, the SRM (Single Resolution Mechanism), that began its activity in 2016 and finally an European Deposit Insurance Scheme (EDIS) still pending execution.
The functions of the SSM are to ensure the security and soundness of the European banking system, to promote integration and financial stability and to ensure the coherence of supervision.
This is necessary for the early detection of problems in the financial sector and for avoiding their spread to other financial institutions.
The SRM was created in order to centralize the essential competences and resources that allow managing the bankruptcy of any credit institution. It is a complementary mechanism to the SSM, since it guarantees that, in the event that a bank subject to the supervision of the SSM faces difficulties, it can be dissolved efficiently and at the minimum cost for the taxpayer and the real economy.
The EDIS is the last step for banking integration, and it is still in the creation phase. Its objective is to protect depositors regardless of where they are. This would make it easier to manage systemic financial shocks or crises that exceed national capacities, avoiding the necessity to resort to public money. This system would also allow banks to be separated from national governments, reducing the need for public money in case of crisis.
